Overage

Overage

A seller may wish to sell land and at the same time reserve a right to receive a further payment if certain events occur. That further payment is known as an “Overage.” Other Commercial Property areas we cover include:

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An example of where an Overage might be used is as follows:

A buyer (B) wishes to purchase land from a seller (S). B has indicated that he intends to build and sell 20 houses on the land. Based on those intentions S and B agree a sale price of £1m. S is concerned that B might actually build and sell more than 20 houses on the land and as a result, S may not have received full market value for his land.


In the above scenario, S and B could agree to enter into an Overage deed which provides that should B build more than 20 houses he will make a further payment(s) to S.


The terms of an Overage deed can vary significantly. Understanding what entitles the seller to a further payment is a fundamental part of the Overage deed.


Whether you are buying or selling it is important that you understand the terms of the Overage deed. Issues can arise if the terms are not sufficiently clear or have been drafted too narrowly/widely.

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