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Selling A Property With Potential?

20 January 2020

It is commonly said that property is one of the best investments you could make, but how can you be sure that you aren’t selling a property with lots of potential for much cheaper than it could be worth?

This is often a concern, particularly when selling a commercial property or land that may go on to be developed or sold on for a huge profit. Many individuals or businesses may have this worry and be holding onto a property just because they don’t want to regret the sale at a later date.

The answer to this issue is to include a provision for the overage in your sale. Overage is an additional amount of money that will be payable from the buyer to the seller at a later date after the initial transfer of the property. The overage will be conditional and will be triggered by a certain event. This trigger event could be anything which increases the value of the land such as a grant of planning permission or a further sale at a large increase in value. The overage clause will then state that the seller of the land is entitled to a percentage of the increase in value at the time of that trigger event.

You may be concerned that this will deter potential buyers but the overage will generally be limited to an ‘overage period’. This means that the overage will only be payable to the seller if the trigger event occurs in a specified time frame which could be limited to any amount of time agreed by the individuals involved.

To give further security to the seller that their continuing interest in the property will be recognised, a restriction can be entered on the property’s title register stating that no disposition of the property may occur without the consent of the seller. This ensures that should the trigger event occur, the seller will certainly receive their overage.

Get in touch with a solicitor to ensure that you get complete advice on overage provisions by contacting our commercial property department on 01302 965250.