OVERAGE AND CLAWBACK
Overage or Clawback occurs when a landowner sells their land for its current value and agrees overage or clawback provisions with the Buyer. This is a mechanism whereby the landowner can obtain further money when certain things happen to that land at a point in the future after sale.
These provisions should be included in any contract where the land being sold is likely to increase in value. This could be due to planning permission being obtained by the Buyer or it being combined with other plots in the area and sold to a developer for a healthy profit. These types of events would trigger an overage or uplift payment from the Buyer to the Seller. They are commonly referred to as “trigger events”.
With overage provisions in place, the Buyer is obliged, when a trigger event occurs, to pay the Seller a percentage of the increase in the value of the land. This is often referred to as an uplift payment – as the value of the land has been uplifted.
It is important that the terms of calculating any uplift or overage payments are well-drafted so that both parties understand how much needs to be paid and when.
Complete Property Deal can give expert advice on the terms of any overage agreement and will work closely with you to ensure that the document achieves the best deal for you.
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