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What is an Overage Clause?

Property Saviour » Planning Permission » What is an Overage Clause?

An overage clause is a provision in property contracts that allows you, as the seller, to receive additional proceeds from the sale later. You and the buyer use these clauses to create a mutually beneficial financial outcome.

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How You Benefit from Overage Clauses?

As the seller, if you own underdeveloped land, you might lack the experience and financial resources to handle the planning and building processes yourself.

However, by entering into a legally binding overage agreement with a competent developer, you can benefit from the future uplift without any financial input.

If everything goes well, the net proceeds from the land sale would be higher than in a straight sale.

Overage "Triggers"

Several future scenarios can trigger the overage payment. You should consider these scenarios when making payment decisions. It’s important to understand the potential consequences of these scenarios to make informed decisions.

  • Alteration of the designated use of a specific building – often involving residential, commercial, industrial, or mixed-use development/conversion.
  • Destruction and subsequent reconstruction of a larger structure.
  • Obtaining authorization for vertical or horizontal expansions, additional residences, or other value-enhancing endeavours exclusively.
  • Granting of Permitted Development Rights (PDRs) exclusively.
  • Initiation of a development project solely.
  • In an ascending market, you, as the seller, participate in the appreciation of land value.
  • Disposition of the property or land at an increased value within a predetermined and contractually agreed timeframe.
  • Disposition of the property or land after the satisfaction of pre-planning conditions.
What Is An Overage Clause
As the seller, if you own underdeveloped land, you might lack the experience and financial resources to handle the planning and building processes yourself.

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