Effect of overage on land value/price

Discussion in 'Agricultural Matters' started by Kidds, Mar 17, 2019.

  1. Kidds

    Kidds Member

    Location:
    Warrington
    I had an offer on some land accepted but now the seller has decided to put overage on it. I don’t mind the overage as the possibility of development is so low it just won’t happen, it certainly didn’t factor in the offer.
    Being new to this game I now find that a mortgage would be very difficult as a result of the overage agreement. I don’t need a mortgage to buy it but I assume it also removes my ability to borrow using the land as guarantee. That may matter to me in the future.
    I offered top dollar for the land (18 acres) but now feel this overage makes it worth less.

    That was a long winded way to get to the “how much does an overage clause devalue land?” question.
     
  2. Goffer

    Goffer Member

    Location:
    Yorkshire
    Is there no timescale ? 30 years etc , we have land with overage and made no difference to bank
     
  3. Jackov Altraids

    Location:
    Devon
    A field near me has just come on the market with overage on it.
    They also want £25k / acre.
    I would have thought you should pay near the standard agricultural value with overage or a higher price to reflect any slight potential, without overage.
    I'm not interested when they want both.
    If you were happy with the price I'd say it was fair as long as it was time-limited.
     
  4. Still Farming

    Still Farming Member

    Location:
    Glamorgan Wales
    Any other potential buyers onto it?
    Do you need it?
    Play them at their own game?
    Penny and bun type are they?
     
  5. 7610 super q

    7610 super q Member

    Location:
    Crapweathershire
    OK.........got to ask:oops: What is overage ? Same as uplift ?
     
    carbonfibre farmer, kiwi pom and rob1 like this.
  6. renewablejohn

    renewablejohn Member

    Location:
    lancs
    To a buyer like myself overage land is worthless unless it has less than 20 years before the overage expires. Obviously this defeats the purpose of overage as most commercial builders can easily wait 20 years with land placed in there landbank.
     
  7. Kidds

    Kidds Member

    Location:
    Warrington
    The overage is 20% for 15 years.
    In my opinion the chance of development is so unlikely it's not worth doing at all. The overage itself doesn't bother me, especially as it excludes anything ag related.
    My plan has always been to borrow against it if needed or even sell off a part of it to raise cash. It is the impact on that plan (if any) that bothers me most.

    I suspect they will be such a common thing before long that the banks will ignore them.
     
  8. renewablejohn

    renewablejohn Member

    Location:
    lancs
    Crack on. I doubt whether 15 years would make the slightest difference to a bank if it does than a one off insurance premium would soon rectify the situation.
     
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  9. Kidds

    Kidds Member

    Location:
    Warrington
    Nice one.
     
  10. lim x

    lim x Member

    Location:
    Nottinghamshire
    Yes, same as uplift. Otherwise known as having your cake and eating it.
     
  11. Still Farming

    Still Farming Member

    Location:
    Glamorgan Wales
    Claw back ,penny and bun , second crack etc.etc
     
  12. Crack on. At 20% there is still some cake for you.

    Doubt it will make it useless for collateral, it’s still worth ag value
     
  13. Exfarmer

    Exfarmer Member

    Location:
    Bury St Edmunds
    At themoment, i would be tempted to knock say 5% off my offer as I believe the market is not strong, unless you know there are others interested.
    However I think this will have very little real effect on value, if there is nothing in the offing on this land, in development terms 15 years is quite short
     
  14. Banana Bar

    Banana Bar Member

    Location:
    Bury St Edmunds
    So he accepted your offer on his sale terms, now he wants to change them. I’d offer 15% less as my final offer. Hate people who back out of a deal once it’s been agreed.
     
    Fish, steveR, Two Tone and 16 others like this.
  15. Ask to negotiate a discount if the vendor now wants an overage clause. Your offer that was accepted was the value you put on it for freehold with no overage clause.
     
  16. jorgenbg

    jorgenbg Member

    Location:
    Oslo, Norway
    I have a deal on part of my forest close to town. 60/40 profit spilt. 60 to me and 40 to previous owner. Expires after 20 years.

    Dont see any problem with that. Dont really care. Nor does the bank. You dont borrow against dreams anyway.
     
    chaffcutter likes this.
  17. Still Farming

    Still Farming Member

    Location:
    Glamorgan Wales
    Different deal now on table.
     
    multi power likes this.
  18. What are the terms of the overage?

    We bought this farm as sitting tenants subject to a 25 year 50% overage which transfers with the land if sold and captures 50% of any development value uplift on grant of planning permission (but then extinguishes the overage on the area subject to PP). It halved the value (so we paid around 1/4 of freehold unencumbered value). We had no problem with a 30% mortgage.

    The impact of the overage on value remains until quite close to its expiry after which it tails off rapidly.

    I would expect the overage you mention to have a lower impact being a smaller %age and shorter period.

    If they accepted your offer and THEN imposed the overage I would be revising the offer downwards to take account of the overage.
     
    Jackov Altraids and Kidds like this.
  19. Kidds

    Kidds Member

    Location:
    Warrington
    I should add that it is family I am dealing with, just to increase the nightmare.
     
  20. This is a standard tactic for the sellers solicitor to make himself look useful.
    Either of the above would be my reply...

    AC
     

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