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Overage and Clawback agreement

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Overage, clawback and sometimes uplift are all terms used essentially to describe the same which is a requirement by a seller that in certain circumstances at some later stage the buyer is to pay additional sums for the same piece of land.

Commonly overage provisions will require further payments to be made where:-

  • Planning permission is granted for the construction of a further dwelling within the land owned.
  • Planning permission  is granted for demolition and rebuilding of a more intensive development.
  • The property is sold with the benefit of planning permission but further permissions obtained that are more favourable or allow a more intensive development.
  • Full planning permission is granted for change of use.
  • The overage agreement determines what circumstances a payment has been made, when it is to be made and how the payment is to be calculated. Overage provisions are complicated and will require detailed negotiation. Whilst they will secure for a seller the opportunity to receive further monies the negotiations will substantially increase the legal cost connected with the contracted sale.

It is important that in negotiating the terms of the overage that suitable proportions are negotiated so that the buyer of the property continues to be motivated develop land otherwise the existence of the overage will simply sterilise the property.

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