Overage Clauses.... again

[steveR]

Looking at a possible retirement holding yesterday that I thought I might go and look at, as I know the area and considered it might be a possible...

Then I saw the Overage clauses...

OVERAGE CLAUSE An Overage Clause will apply in respect of **********, whereby the Purchaser or his successor in title will be required to pay 40% of any increase in value as a result of planning permission being granted within 30 years for the rebuilding of the cottage, or residential re-use of the site. An Overage Clause will apply in respect of the main steel framed, part-block farm building, whereby the Purchaser or his successor in title will be required to pay 30% of any increase in value as a result of planning permission being granted (including via permitted development) within 30 years, for the change of use of the building to residential usage.

Cheeky sods, as any uplift in value for what would be a total new build, is a cheek IMO. 40% is a total scam, if they reckon it has value, get their own PP was my thought.

Walked away.... Not as if I would want to do anything with the ruin!

 

[Levelsman]

Looking at a possible retirement holding yesterday that I thought I might go and look at, as I know the area and considered it might be a possible...

Then I saw the Overage clauses...

OVERAGE CLAUSE An Overage Clause will apply in respect of **********, whereby the Purchaser or his successor in title will be required to pay 40% of any increase in value as a result of planning permission being granted within 30 years for the rebuilding of the cottage, or residential re-use of the site. An Overage Clause will apply in respect of the main steel framed, part-block farm building, whereby the Purchaser or his successor in title will be required to pay 30% of any increase in value as a result of planning permission being granted (including via permitted development) within 30 years, for the change of use of the building to residential usage.

Cheeky sods, as any uplift in value for what would be a total new build, is a cheek IMO. 40% is a total scam, if they reckon it has value, get their own PP was my thought.

Walked away.... Not as if I would want to do anything with the ruin!

Looks rather strong!

But if vendor gets PP, could be increasing their tax liability on higher sale value now?

 

[Bill Turtle]

You can always make an offer but state that it is an offer to purchase without any overage. The vendor can look at your offer and compare it to other offers with overage.

 

[ISCO]

If everyone thinks like you they may have difficulty selling and be open to negotiation on overage terms.
Overage such as that does reduce current value somewhat.

 

[steveR]

Looks rather strong!

But if vendor gets PP, could be increasing their tax liability on higher sale value now?

Very good point, especially if it is a Sale, following a death.

 

[steveR]

If everyone thinks like you they may have difficulty selling and be open to negotiation on overage terms.
Overage such as that does reduce current value somewhat.

In this case, the sale is by private treaty, so room for negotiation I feel. Get the hay done and I will make a phone call and go and have a look...

From an aerial view, I'd knock down the ruin anyway, and put up a portal frame shed! Maybe with a window or 3.....

 

[steveR]

In this case, the sale is by private treaty, so room for negotiation I feel. Get the hay done and I will make a phone call and go and have a look...

From an aerial view, I'd knock down the ruin anyway, and put up a portal frame shed! Maybe with a window or 3.....

Something like this....

https://i.pinimg.com/originals/12/ca/2f/12ca2f25347fb95c66891bee64bdcb51.jpg

 

[bobk]

Overages are good if the property is cheap , we've got one here ,

 

[Flatland guy]

Forgive my presuming things but if you are looking for a retirement holding, won't you put overage/uplift clauses if you sell your own.
Overage clauses effectively came in because too many often had gotten caught out. But overage clauses still need policing by the vendor. Let's say you bought the property and went and did up the building as you saw fit and blatantly ignored the overage, it would be the vendor running up costs at a solicitor trying to get anywhere and if they live far away etc more potential for things to get overlooked.

 

[ski]

Forgive my presuming things but if you are looking for a retirement holding, won't you put overage/uplift clauses if you sell your own.
Overage clauses effectively came in because too many often had gotten caught out. But overage clauses still need policing by the vendor. Let's say you bought the property and went and did up the building as you saw fit and blatantly ignored the overage, it would be the vendor running up costs at a solicitor trying to get anywhere and if they live far away etc more potential for things to get overlooked.

Overage clauses should be illegal. You buy what you buy on the day with what you know on the day. It is trying to have your cake and eat it.

 

[Flatland guy]

Overage clauses should be illegal. You buy what you buy on the day with what you know on the day. It is trying to have your cake and eat it.

With reference to agricultural land etc, most say for agricultural use, it is only when applying for residential/commercial intentions due they become applicable. The Church of England and The Crown are probably why the took off, theirs are often for 80 years then they become more widely known and where we are today. You do not have to buy the property if they are on or offer to up the purchase price so they are not included.
What are you views on royalties of seed crops? Do you buy any seed because they always want a payment if you grow a crop on from harvest.

 

[ski]

With reference to agricultural land etc, most say for agricultural use, it is only when applying for residential/commercial intentions due they become applicable. The Church of England and The Crown are probably why the took off, theirs are often for 80 years then they become more widely known and where we are today. You do not have to buy the property if they are on or offer to up the purchase price so they are not included.
What are you views on royalties of seed crops? Do you buy any seed because they always want a payment if you grow a crop on from harvest.

You are not comparing like with like. Seed royalties are based on the assumption that effort has gone into breeding the strain in question. Overage clauses are effectively saying, I want to dispose of this asset today and all its liabilities in total, but just in case something beneficial happens to it in planning terms in 20 or 30 years I am retaining a stake, in which case you are not truly selling the freehold, the freehold has a blight attached, namely the overage clause. You probably bought it without one but now feel its right to put one on it. How about the opposite where the land is restricted by some rule that makes it only worth 10% of its purchase value and you were asked to contribute to the devaluing. No, I thought not. It is a question of morality and money does strange things to folk. These clauses were virtually unknown of 60 years ago.

 

[som farmer]

F in Law put overage clause, on farm buildings and land, so much for 15 years, reduced for next 10.

6 big houses there now, he was ecstatic with his cheque, old bugger wouldn't say how much though.

 

[Flatland guy]

You are not comparing like with like. Seed royalties are based on the assumption that effort has gone into breeding the strain in question. Overage clauses are effectively saying, I want to dispose of this asset today and all its liabilities in total, but just in case something beneficial happens to it in planning terms in 20 or 30 years I am retaining a stake, in which case you are not truly selling the freehold, the freehold has a blight attached, namely the overage clause. You probably bought it without one but now feel its right to put one on it. How about the opposite where the land is restricted by some rule that makes it only worth 10% of its purchase value and you were asked to contribute to the devaluing. No, I thought not. It is a question of morality and money does strange things to folk. These clauses were virtually unknown of 60 years ago.

Regarding seed breeding personally I would rather buy a tonne of new seed at £2000.00 and then no royalties. I find it insulting most 'new' varieties are only crosses of older ones and logically the new variety should still be paying a royalty on the parent variety, multiply that up a generation or two and in theory it should be a lot more.
Yes overage clauses were unheard of 60+ years ago but many landowners often tried for planning on some land etc often got turned down, a couple of times probably give up and sell that parcel, low and behold new purchaser often got planning within a year, a case of seemingly who you know and previous landowner felt aggrieved. Let's not forget that the institutions were the first ones using overage clauses in a substantial way. Ultimately most overages are only 50% back to landowner, the other 50% is to the new landowner or whatever the percentages are. You can always tick the clock down on the overage and wait until it expires. Also depending on the wording some are only if sold some upon planning being granted. So the devil is in the detail.
Let's not forget that as a property owner, especially agricultural land that you do not seem to have any rights if a national infrastructure wants to come on your land, you can huff and puff but once that decision high up to go on your land your are snookered other than trying to fight for the best outcome for yourself. As it stands The Monarch can claim any land or property if he/she chooses they may not have enacted the law for a century or two but neither have they abolished the law.

 

[Doing it for the kids]

It’s all relative.

Residual valuation.

Offer them two prices, one with one with out the overage.

Bird in the hand and all that!

40% does seem steep though. The key is when the overage is triggered / has to be paid.

If labour get in good chance of lots more building

 

[Kidds]

Stamp duty is chargeable on overage payments, that rarely gets mentioned yet could be a fair chunk.

eg. buy a field for £150k
Sell it with planning for £1.5m
Instant SDLT bill for £64k

 

[Nearly]

Stamp duty is chargeable on overage payments, that rarely gets mentioned yet could be a fair chunk.

At what point?

 

[Kidds]

At what point?

I edited my post. The overage payment is seen as an increase on what you paid for the land and therefore affects stamp duty.

 

[Kidds]

Stamp duty is chargeable on overage payments, that rarely gets mentioned yet could be a fair chunk.

eg. buy a field for £150k
Sell it with planning for £1.5m
Instant SDLT bill for £64k

Still didn't make it clear.
The SDLT will be because of the overage payment, not because you sold it for more (that is CGT) and My calculation was on 100% overage which obviously wouldn't be a thing. So I made a mistake in my sum but there would still be a SDLT bill. (£24k if I got my sums right this time based on 40% overage and uplift of £1.35m)

 

[Still Farming]

Most probably a way around them.
Lots of County Coucil smallholdings were sold around here in the early 90's and had different conditions but think most sold for mega money thereafter and didn't bother them?