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An overage clause refers to a legal agreement that can be included as part of a land sale or commercial property contract. The seller can use an overage clause to receive extra funds once the sale has gone through, and after a predetermined trigger event. Usually, the trigger event involves a future increase in the land or property value.
Also referred to as overage agreements, overage clauses permit the seller to make a sale at the existing market value, without forgoing a financial share in the future development of the land or property. Overage clauses are often used if a property has the potential for future development, yet the seller would like to sell the property now.
Overage clauses are a popular way for investors to safeguard their profits, when selling properties or land, that are likely to experience significant value growth in the near future.
If you’re buying a piece of land, an overage clause can help you to purchase a property at a reduced price, under the conditions that you’re legally obliged to pay more, if the property gains value.
Glanvilles Legal Services can offer expert legal advice, on drafting overage clauses, and enforcing them. If you need advice about overage clauses, contact our commercial property solicitors today. You can get in touch with us at our offices in Chichester, Fareham, Havant or Petworth. Alternatively, you can fill in our enquiry form, and one of our commercial property solicitors will get back to you.
Our overage clauses solicitors can help you to draft an overage agreement, to protect your interests and rights. We can advise both buyers and sellers on the legal rules and obligations, associated with overage clauses. With our legal guidance, property developers can maximise their profits on projects that will soon benefit from market growth.
As part of an overage cause, there are various conditions which can trigger post-sale payments, for example:
Glanvilles Legal Services can offer expert legal advice for developers, buyers, and sellers. Our commercial property solicitors are highly experienced, so no matter what your part you play in the agreement, we can assist you. Drafting a legally sound overage clause is incredibly important, unless the clause is properly drafted, disputes may arise in the future.
If you’re including an overage agreement as part of your property transaction, the overage agreement should include the following terms:
Our overage clause solicitors can advise you on how to secure overage payments, doing so can prevent overage agreement disputes. Failing to secure overage clause payments can put you in a difficult legal position, which is why it’s crucial to gain advice from a solicitor. There are a few different options for securing overage clause payments, including:
Our specialist legal team can support you with overage clauses disputes. If you have an overage clause in place, and the legal terms were drafted unclearly, both parties might be confused about their obligations. If the overage clause terms are vaguely expressed, sellers can end up losing a large portion of the payment that they were expecting.
Disputes can arise if, for example, the agreement does not clearly state that an overage payment ends the ongoing obligation. Unless the terms are clear, overage agreement loopholes may arise, causing legal issues and financial losses. It is not advisable to draw up an overage agreement, without first seeking the advice of a commercial property solicitor.
At Glanvilles Legal Services, our commercial property solicitors have experience in all manner of overage clause disputes. We can help you to assess your legal position, protect your finances, and negotiate where necessary. To discuss an overage clause dispute today, contact our expert commercial property solicitors.
There is no fixed amount of time that an overage clause can last. If the land or property is likely to undergo short-term development, it’s more likely that the overage clause will last for 5-10 years. Alternatively, if the property development is a longer-term project, an overage clause may be put in place for a 25-year period.
Under most circumstances, overage clauses include a one-time payment, based on the primary development of the land or property. Regardless, it’s important that the payment terms are clearly stated as part of the overage clause agreement.
It is not advised that developers, buyers, or sellers, agree to the terms of an overage clause without first getting legal advice from a commercial property solicitor.
Overage payments are based the uplift value, calculated as a percentage of this increase. If the overage clause was triggered because the buyer has sold the property, and gained profit, the overage payment will reflect the difference between the original price paid, and the amount that the buyer receives.
The buyer and seller agree the percent when the overage clause is drafted, typically the fixed percentage is between 25-50%. Our commercial property lawyers at Glanvilles can support buyers and sellers to negotiate a fixed percentage on overage clause payments.
The majority of the time, an open market valuation is used to calculate the amount. The land is valued with planning permission, and without it, using the same date. Using this method makes it easier to make relevant comparisons, that are not based on inflation.
Glanvilles Legal Services is dedicated to the success of our clients. We have a wealth of experience in various aspects of commercial property, including, agricultural land, commercial leases, leasehold enfranchises, overage clauses, and more. We’ve developed a fantastic reputation over the years, based on our ongoing commitment to excellence.
We understand that, when it comes to commercial property transactions, there’s plenty at stake. To help you protect your interests, it’s crucial that your overage clauses are watertight, and that, you receive expert legal advice to guide your project decisions.
To discuss your overage clause agreements, or any other aspect of your commercial property projects, contact Glanvilles Legal Services at our offices in Chichester, Fareham, Havant or Petworth, or use the contact form, and one of our solicitors will be in touch.