Effect of overage on land value/price

Kidds

Member
Horticulture
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.
 

Jackov Altraids

Member
Livestock Farmer
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.
 

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.
 

Kidds

Member
Horticulture
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.

Is there no timescale ? 30 years etc , we have land with overage and made no difference to bank
I suspect they will be such a common thing before long that the banks will ignore them.
 

renewablejohn

Member
Location
lancs
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.

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.
 

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.
 

holwellcourtfarm

Member
Livestock Farmer
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.
 

acorn

Member
Livestock Farmer
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.
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.

This is a standard tactic for the sellers solicitor to make himself look useful.
Either of the above would be my reply...

AC
 

SFI - What % were you taking out of production?

  • 0 %

    Votes: 79 42.2%
  • Up to 25%

    Votes: 65 34.8%
  • 25-50%

    Votes: 30 16.0%
  • 50-75%

    Votes: 3 1.6%
  • 75-100%

    Votes: 3 1.6%
  • 100% I’ve had enough of farming!

    Votes: 7 3.7%

Red Tractor drops launch of green farming scheme amid anger from farmers

  • 1,289
  • 1
As reported in Independent


quote: “Red Tractor has confirmed it is dropping plans to launch its green farming assurance standard in April“

read the TFF thread here: https://thefarmingforum.co.uk/index.php?threads/gfc-was-to-go-ahead-now-not-going-ahead.405234/
Top