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Overage can be secured in many different ways, but some are more effective than others. In practice, imposing a restriction on the title to the property at the LR is the most common method. This will normally say that no disposition (eg long lease) of the land can take place unless the new owner has entered into a deed of covenant with the seller, promising to make the payment.
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A summary of points to watch out for when drafting an overage clause: remember that the seller will retain a lien on the land for sums which may become payable under the overage agreement, unless the seller expressly waives the lien. Such a lien is enforceable against all volunteers (eg donors, and against the trustee in bankruptcy or liquidator of the buyer).
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 Daniel Kidd and Yvonne Hills review a recent case in which
the High Court was prepared to take a more commercial,
common-sense view when interpreting an option.
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In 2003 a landowner signed a contract with a developer, whereby the
developer would get planning permission for the land and then receive a
fee when the land was sold. Not surprisingly, the landowner had to agree
to co-operate and use all reasonable endeavours to assist with the
planning process, as well as act with ‘the utmost good faith’.
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 Landowners should be fully advised of the intricacies of
options before entering into arrangements with a short-term
financial gain, warns Sheonagh Richards.
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 Nick Lloyd reviews a case involving the extension of an option
period with an unexpected outcome.
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In Mannai [1997] the HL ruled that it was possible to cure minor defects
in notices. The end result is that minor defects will not necessarily
invalidate a notice, provided a reasonable recipient, with a knowledge of
the factual and contextual background, would not be perplexed by the
error. Thus, mere procedural errors will no longer be allowed to invalidate
a notice (unless the requirement is statutory, or unless there is a failure
to observe pre-conditions). Generally, the ‘reasonable recipient’ test
means that most obvious errors will no longer be fatal.
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Suppose you have an option, but the other side have already made it
clear that they will not recognise the validity of that option. You then go
ahead and give notice that you intend to exercise the option (knowing
that they will dispute it), but must you also tender the required deposit?
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 Rentcharges are an effective way of making ‘overage’ secure.
Sara Bartolozzi and Carrie Faller give the lowdown on where
such an arrangement might be appropriate
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As we have seen, the problem with overage payments is in making a positive
obligation (ie to pay the overage amount) ‘run with the land’. However,
rentcharges – backed with an equitable charge and a legal right to re-entry –
may not technically make positive covenants run with the land, but they will
make the covenants enforceable against the landowner from time to time.
As such, rentcharges can be a feasible solution.
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Overage (or ‘clawback’) is a promise by a developer to make a future
payment to a seller, so that an additional amount is paid to cover the
increase in land value once the development has been completed. This
relatively simple proposition does, however, raise difficult land law issues.
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 Allyson Colby explains the nature of the penalty clause and
how it is interpreted by the courts.
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A developer was given an option to buy land on the grant of planning
permission for redevelopment. The option was to expire on 31 December,
but was extended beyond that date if a ‘planning obligation’ was required
either as a condition of the grant of planning permission, or where it was
‘otherwise necessary that a development obligation shall be completed to
enable the development to be carried out’.
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An option to buy had to be exercised within the option period, but it could
be deferred pending a ‘decision in respect of a planning application’.
But, what did ‘planning application’ mean? Not surprisingly, it was held
that it meant an application for either a full planning permission or an
outline planning permission; it did not mean an application for approval
of reserved matters in respect of outline permission.
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