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Overage


“I am a housebuilder who has agreed to pay overage to the seller of land. The seller requires a restriction against the title at the Land Registry. How do I stop this affecting plot sales?”

Sellers often want to share in the gain when the value of the land they have sold subsequently increases – for example, when planning permission is granted. They may require an overage – or profit share – clause in the contract. As they will no longer own the land, they will want security for their entitlement to overage.

One of the most common methods of securing overage is a restriction against the title. Land buyers, and their funders, often accept such a restriction. However, if the title restriction is wrongly worded, it can roll over into the subsequent titles of flat or house buyers. This makes it hard for housebuilders too, who will find it very difficult to achieve plot sales unless the restriction is reworded to prevent such a rollover.

There are ways to prevent the restriction rolling over into subsequent titles. It needs to exclude certain dispositions such as plot sales and sales to housing associations, management companies and electricity substations. It should be worded to enable your solicitor to self-certify that the excluded dispositions will take effect free of the restriction.

In the past, different land registries have applied different policies as to whether they would accept self-certification or not. The Land Registry’s policy has recently changed, making it much harder to achieve self-certification.

It now requires evidence of: (a) compliance with the restriction; and (b) why it should not be carried forward to the plot buyer’s title.

Get expert advice on this issue at the outset when buying land. Failure to do so may leave you at the mercy of the seller when it comes to registering subsequent plot sales.

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