In practice, a buyer and seller may well agree the fundamentals of a deal, with the seller being entitled to a specific percentage of future development value. But, it is unlikely that they will have worked out the fine detail and it is this that often causes major problems – and can lead to deals collapsing. For instance, how long should the clawback agreement last? What will trigger the clawback payment (a seller will probably want it to be the grant of planning permission or the start of development, whilst the buyer will want it to be on completion of a sale that has the benefit of planning permission)? Likewise, a seller will probably want it to be triggered on the granting of outline consent (or even a resolution to grant permission), whereas the buyer will presumably insist on the grant of a detailed planning permission that is capable of immediate implementation (and after completion of any s106 agreement). What if the buyer does make a payment of overage based on an increase in development value; will that then mean the overage contract is at an end even though the buyer could then go on to get even more development value (eg by getting permission for high-density residential use)? How is the ‘profit’ element to be calculated (for instance, a buyer will probably want to ensure that the costs of obtaining planning permission, plus the costs of unsuccessful attempts, the costs of s106 agreement obligations, are all included – and that they are indexlinked, and that an allowance is given for any value arising from neighbouring land that he already owns)?

Clearly, none of these problems is insurmountable, but what is clear is that this is not an area for the inexperienced. [2004] EG 2 October 76.  © Practical Lawyer