Selling a Residential Property Which is Subject to Overage
What is “Overage”?
If land may have future development potential, a seller may sometimes choose to impose an arrangement as part of the sale agreement that entitles them to receive a percentage of the enhanced value if it is subsequently sold after the development has happened or with the benefit of planning permission.
How likely is it that my property is subject to Overage?
Although more common in commercial transactions these arrangements are sometimes entered into for residential properties with large gardens or paddocks/equestrian facilities. They do not affect most residential properties.
Preparing for Sale
If you are selling a property that is subject to overage preparation is key in order to avoid delays which may potentially put you at risk of losing your buyer. Even if no payment is due under the current overage arrangement, your first step should be to locate copies of all relevant documents relating to the overage. This may mean obtaining them from the Land Registry or contacting the solicitor who acted when you purchased the property. Your Solicitor will need to check the details of the overage carefully:
- If it has expired can you get it removed from your title deeds?
- Who now has the benefit of the overage? The previous owner could have sold or assigned the benefit to someone else
- Where are they? If you know them it may be very easy to contact them informally or it could take several weeks to track them down
Once you have contacted them they will often need to get in touch with their own solicitor.
Make sure your buyer is made aware of the overage and the terms of it as early as possible, ideally by the selling agent before an offer is made.
You will need to check the terms of the overage provisions very carefully. Overage provisions imposed some years ago are often no longer acceptable to many residential mortgages and they may need to be removed or varied before any buyer will be able to obtain a mortgage and proceed with a purchase.
In Summary
Taking these steps as early in the transaction as possible and being armed with full information will make the sale process much smoother.
Thompson Smith and Puxon's Residential Property team can help with all of your property matters and can be contacted on 01206 574431 by email at movinghome@tsplegal.com