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Options/pre-emptions
Options: Cold, hard world begins to thaw
authorsDaniel 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.
Overage – good faith
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’.
What are the options?
authorLandowners should be fully advised of the intricacies of options before entering into arrangements with a short-term financial gain, warns Sheonagh Richards.
Case study: An option with a surprising result
authorNick Lloyd reviews a case involving the extension of an option period with an unexpected outcome.
Option – saved by Mannai
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.
Options - compliance with terms
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?
Overage payments - back in fashion
authorsRentcharges are an effective way of making ‘overage’ secure. Sara Bartolozzi and Carrie Faller give the lowdown on where such an arrangement might be appropriate
Overage – rentcharges
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.
Overage – structures
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.
Options to repurchase: paying the penalty?
Author PortraitAllyson Colby explains the nature of the penalty clause and how it is interpreted by the courts.
Option - planning condition
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’.
Option - 'planning application'
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.
Disclaimer, third parties and overage payments
ImageRichard Anyamene reviews a Court of Appeal case that has provided useful guidance as to how s178 Insolvency Act 1986 applies in relation to overage payments.
Overage - checklist
'Overage' is a form of clawback; it gives the seller a right to get extra money from the buyer on the happening of some future event (eg the grant of planning permission).
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