'Overages' on a potential property

[OVienna]

Going to view a house which I discovered after booking the appt is likely to have an 'overage' due to the size of the plot. This means that the owners would retain a financial interest if part of the property was sold to a developer later.

The plot is only .5 acres. Given the fact it's still in a 'town' yes I suppose the plot is generous but the house isn't small and I can't for the life of me envisage a situation where it would make sense to let someone build a bungalow in the back garden. You wouldn't retain the value of the main property that way. I guess a developer could come in and knock the whole thing down but again the price of the land looks stretched in that case.

The whole thing seems bizarre in the context of this house and I'm wondering if anyone has any experience of negotiating this. It's still worth it to go and see it because of the proximity to schools.

I would just think cheeky bastards unless it was owned by the council or a business.

It's no unheard of and I'd definitely still go and see the house. It can be part of the negotiating position ie you'll pay X with an overage clause and a bit more than X without it. If you do have one, make sure that it's not for too long - the seller shouldn't reasonably be able to have it for years on end - 3 years is probably not a bad starting point and won't unduly tie you. If you do have one, you'll also need to make sure that it's properly drafted in your favour (ie that it's clear when overage is payable - is it when you get planning permission or when you implement it - and that the seller's percentage is net of all the costs you incur). Our sellers tried to impose one which I negotiated but in the end our mortgage company wanted to approve it and the sellers dropped the point as they were desperate to exchange and I was losing the plot as I'd just had a premature baby!!!!

Privately owned. I'm thinking that too, TBH. Owners have been there for yonks and the house needs renovation (including central heating - I also noticed later.) It's a bit like - get someone else to do the work for me and I'll still benefit. Who doesn't get around to putting central heating in?

GU24Mum that's really useful. I was thinking 3 years would be about right. When I first saw it I admit I panicked and thought they would want something they'd pass onto their heirs! That's right, actually, sure the mortgage company would play hard ball about that.

iId love the idea of getting a couple of sheep and having them drive past: "No property empire for you, we're living the Good Life on our half acre!"

Overage clauses are beloved of property developers. Have they previously obtained planning permission? It's a bargaining chip. I would say no deal with the overage if you like the house.

Overage agreements are typically anywhere from 10 - 25 years. Developers play the long game.

Wowfudge - dare I say it, 25 years is likely to exceed the lifetime of the sellers. One has gone into a care home (we asked if the sale was probate, but no.) So, this is what I would need to prevent, them being able to agree something that could get passed on. However, I can't see any mortgage company agreeing to that on this site. It's not a separate field, for example, the way a farming family might do it. It's the back garden!

An overage agreement can be capable of assignment or being left to someone in a will! It might be that the vendors want to try to leave something for their children. I would ask the vendors why they have included it. I bet they have said something and it's the estate agent's bright idea.

In fact, the more I think about it with the info you have provided I bet it is to do with leaving something to their children.

Can you imagine trying to sell your house with half a dozen kids by the previous owners sticking their oar in??? Good Lord. Seriously, though, I bet you it wouldn't come to that. We'd be lucky to get the house anyway, I'm surprised it's not sold already given where it is, but this must be one of the reasons. So, I guess they mean business. Will update.

I wonder if they and/or neighbours have already been approached. We get speculative letters every so often but any scheme would be dependant on a number of properties agreeing terms and negotiating planning issues.

That's a good point - quite possible.

Overage agreements are typically anywhere from 10 - 25 years.
I agree. Bear in mind that I don't think you have to own a piece of land to apply for planning. Therefore, you could buy it, and they (or their heirs) could subsequently apply for planning permission. Depending on the contract, this planning permission might trigger a payment due to the uplift in the value of the land.

If you are just planning to live there for the duration, and the contract says payment will only be triggered if you actually realize the increase in value (by building or selling), then I guess the clause won't affect you?

Can you imagine trying to sell your house with half a dozen kids by the previous owners sticking their oar in???
They would have no say, but would just take a cut, should the circumstances occur.

If you are just planning to live there for the duration, and the contract says payment will only be triggered if you actually realize the increase in value (by building or selling), then I guess the clause won't affect you?

Yes - but we'd need a sensible duration. Our family circs are such we could in principle have to move to help a parent, etc. I don't want a noose around my neck which could curtail the number of interested buyers/give a buyer leverage over us if we had to sell. It just seems daft.

Yes, maybe they have been approached already. That could be it.

Quite - what I had in mind was if we sold, not having developed the property, would whomever the current seller gifted the overage to then be negotiating with anyone we sold the house onto?This is what I mean. So the development clause would then apply to any buyer we sold to. If that's not an issue, then there's no problem tbh.

Interesting thread we have a bungalow with a large garden The property behind us is a single house on a double plot and has been approached by a property developer with the view of knocking their house down building 3 houses on the plot and they would require just a part of the back of our garden for some access. When we bought the property the estate agent told us this thinking it would increase the value of the property to us as the rear of the garden was saleable. I can see how our seller could potentially have requested a percentage of any future sale of the garden. If you have no intention of letting go any of it for development I'd sign the clause without worrying too much trying to limit it as much as possible and a low percentage. If you're only planning on staying 3 to 5 years I probably refuse ultimately you don't want to have to sell a property where they couldn't negotiate on this clause.

We bought a house where they wanted to impose this. We called their bluff, and they accepted our offer without it.

Once an overage agreement is signed then any assignment to any other party could potentially have to be agreed by both original parties unless it contained provisions that provided otherwise. If you can avoid it then do so as it may affect future value when you come to sell and there will be additional legal fees involved to deal with it. Just because you think you will be there for x years doesn't mean it is 'safe' to sign such an agreement. Circumstances change and life doesn't pan out as expected.

If you like and want the house make an offer based on not entering into an overage agreement.