Commercial finance and development
Overage agreement
Legal work to agree overage, also called clawback, so a seller shares in a future rise in land value, with clear triggers, calculation and security.
This work depends on the details, so our team prepares a quote for you, usually within one working day.
Overage can outlast the people who agreed it. Keep the signed documents, plans and valuation evidence safe, and make sure anyone dealing with the land later knows the overage exists.
Overage, sometimes called clawback, is a right for a seller to receive a further payment if land it has sold later rises in value because of a specific event, typically the grant of planning permission or the start of development. It lets a landowner sell at today's price without giving away all of the land's future potential.
Sellers who want to protect future value, such as farmers, charities, public bodies and other landowners, use this service, as do buyers asked to accept overage, often developers. Overage can last for many years, so the drafting must be precise about what triggers a payment, how it is calculated and how the seller's right is secured against future owners.
Overage terms are shaped around the land and the deal, so our team prepares a tailored quote, typically within one working day, once we know whether you are buying or selling. If the overage forms part of a wider sale, mention that too.
What is involved
Overage is usually agreed as part of a sale, although it can be documented separately. Your solicitor typically:
- Clarifies the deal: the overage percentage, how long it lasts and which land it covers.
- Defines the trigger: whether payment is due on the grant of planning permission, the start of development, a sale with planning or a change of use, and which types of permission count.
- Sets the calculation: usually a percentage of the uplift, meaning the difference between the land's value with the new planning and its value without it, less any agreed deductions such as planning, Section 106 or infrastructure costs.
- Deals with valuation and disputes: when values are measured, who values the land and how disagreements are settled, often by an independent expert.
- Secures the overage: through a restriction on the title at HM Land Registry requiring future buyers to sign up to the overage, a legal charge, or by keeping a strip of land the developer will need.
- Agrees releases: excluding sales of finished homes, transfers to utility companies and similar disposals that should not trigger a payment or be bound.
- Completes: dealing with the VAT and SDLT points, registering the security and recording the key dates.
What the legal fee covers
- Reviewing the agreed percentage, period and land covered
- Drafting or negotiating the overage deed or overage clauses in the transfer
- Defining the triggers, the calculation and permitted deductions
- Agreeing the valuation and dispute resolution process
- Putting security in place, such as a restriction or a legal charge
- Agreeing exempt disposals, such as sales of finished homes, and release provisions
- Protecting the overage on the buyer's title at HM Land Registry
Costs you may see on top
- Valuation advice on the current value and the potential uplift
- SDLT or LTT on an estimate of the overage, which the buyer may have to include in its return
- VAT on overage payments, depending on how the original sale was treated
- The cost of entering a restriction or charge on the buyer's title
- Tax advice for the seller on how overage receipts are taxed
- The buyer's or seller's legal costs, where the deal makes you responsible for them
What to have ready
- A plan of the land being sold and any land you are keeping
- The heads of terms, including the overage percentage and period
- Any planning history or likely development use
- The title numbers or deeds for the land being sold
- Details of the buyer or seller and any guarantor
- Your valuer's and tax adviser's contact details
How long it takes
When overage is part of a sale, agreeing its terms commonly adds 2 to 4 weeks to the transaction. A standalone overage deed can often be completed in 4 to 8 weeks.
Negotiations take longer where the triggers, the calculation or the security are disputed, or where the buyer's lender has to approve the overage. Clear heads of terms setting out the percentage, period, triggers and security avoid most of the delay.
Things to watch for
- Sellers: make sure the overage is properly secured. A promise from the original buyer alone may be worth little once it sells the land on, so use a restriction, a charge or similar protection.
- Buyers: check whether the overage will put off lenders or future buyers. A widely drafted overage can make the land harder to finance or sell.
- Define the trigger precisely. If the wording does not clearly cover the type of permission or development that actually happens, the seller may receive nothing, or the buyer may pay more than expected.
- Agree how the uplift is calculated, including the valuation dates and allowable deductions. Disputes often turn on valuation, so the process for resolving them matters.
- Think about tax early. A buyer may need to include an estimate of the overage in its SDLT return, and a seller may face Capital Gains Tax when the payment arrives.
Questions people ask
How is overage calculated?
Usually as a percentage of the increase in value caused by the trigger event. For example, if you sell a field for £200,000 with 30% overage, and it later gains planning permission that lifts its value from £200,000 to £1.2 million, the uplift is £1 million and the overage would be £300,000, before any agreed deductions. The percentage, the period and the deductions are all negotiable.
How long does overage last?
It lasts for the period agreed in the documents. Long periods are common on development land, while shorter ones may suit smaller sites. A longer period gives the seller more protection but makes the land harder for the buyer to finance and sell, so the length is often one of the main points of negotiation.
What security does the seller get?
The most common method is a restriction on the buyer's title at HM Land Registry, which stops the land being sold unless the new owner signs a deed agreeing to the overage. Sellers sometimes also take a legal charge, which gives stronger protection but may conflict with the buyer's lender, or keep ownership of a strip of land the developer will need. The right choice depends on the deal and the buyer's funding.
Is overage the same as clawback?
The terms are often used interchangeably. Clawback is sometimes used for public sector sales or grants, where the seller or funder recovers money if the land is used or sold in a particular way, while overage usually describes a share of increased value after planning. What matters is what the document actually requires, not the label.
Who does the work
Your matter is handled by a law firm regulated by the Solicitors Regulation Authority, the Council for Licensed Conveyancers or CILEx Regulation, or in Northern Ireland by a solicitor regulated by the Law Society of Northern Ireland. At the moment the law firms on our panel act for property in England and Wales, so for property in Northern Ireland we tell you whether a firm can act for you before we pass your details to anyone. The firm confirms who will work on your file, their experience and its terms before you instruct it. How we choose our firms.