Example 1: Overage Agreement

Naturally certain details have been omitted for the sake of confidentiality, however the legal essence remains true to the client’s concerns at the time I was able to assist in their decision making. From recollection, the first example was received, researched, written up and returned to the solicitor managing the enquiry within around two hours.

Dear Mr and Mrs ____

The land under discussion contains a restriction on the land register which invokes the application of an overage agreement when triggered.

For clarity, an overage agreement is a right of interest held by the original land owner, and one which provides how any use of the land that falls within the terms set out in the agreement will result in a determinable cost liability on the part of the new land owner.

The trigger for this particular agreement (as is the case in many) comes from a change in use of the land.

The covenant dated ____ defines the change in use as any form of development that:

(i) Requires planning permission and;

(ii) Increases the value of the affected part (that is the area to be built upon) by more than five percent of its current value.

There are exceptions to this, however none of those exceptions allow for commercial use of any kind, yet for further clarification, the overage allows for expansion of the existing residential property by means of extension, or the construction of a separate property, but not those designed to charge rents or from which to derive a profit from private tenancy (which would itself constitute a commercial arrangement).

Again, the focus here is increased personal enjoyment, say from storage of vehicles or provision of sheltered accommodation for extended family or staff, but not from direct financial gain.

The emphasis upon commercial or profit-making changes provides immediate opposition to your plans to convert the use of the land from that of a residential nature to a commercial one (as one would typically expect to receive profits from).

This type of overage is also repeating which means that any applications for planning permission that might follow the first (up to the period of ____) each become triggers for the same payments to the original vendor as described above.

What determines the weight of your payments is naturally the size of each development (or building) that you might choose to erect, while also of importance is whether the commercial use of the land leads to an immediate or even long-term increase in its value (although preliminary research suggests that it does not). 

On this occasion the client indirectly took receipt of my work and was able to effectively calculate the value and associated risk attached to their potential use of the land under title, all of which left them both happy and satisfied with the speed in which their problems were resolved, so as is hopefully obvious to the reader, my ability to help tackle and overcome a complex legal problem demonstrates my effectiveness as an optional legal resource, regardless of the field to which it may relate.

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