Has anyone purchased land with on overage clause?

[Bellaboo18]

As title really. I've seen an ideal plot of land to buy. The dream is to put the horses on it at first but then one day get planning permission so I can muck out in my pyjamas and spy on them from the kitchen. It all looked too good to be true (location etc.) and then I read the overage clause.

So the clause is for 30 years and is 30% of the uplift on the value of the land when planning permission is granted for anything other than agricultural/equestrian use.

So my question is would you still buy it? Has anyone purchased anything similar?

 

[PoppyAnderson]

Yes but my reply won't be very helpful, as I knew I wouldn't be applying for pp on the land, so I was happy to go ahead.

 

[PoppyAnderson]

I can't work out your double negative either! Do you mean the clause will apply only if you build anything equestrian-related?

 

[Spottyappy]

The uplift seems fairly common here, down south, on land sold.
However, the 30 years and 30% is necogiable, so you can try to get that reduced. 20 years seems more normal round here. The percentage seems to vary, too. Most are betweeen 20-40% for what I have seen, but one was 100%. Needless to say, it ended up being removed from the market!
Mine doesn’t have it, but if I were to sell for any reason, I would definitely have an uplift clause put on it.

 

[neddy man]

As it says "other than non - agriculture / equestrian use" the charges should not apply as it will be for equestrian use, best spend money on a solicitors opinion. Are you a BHS gold member? Talk to them for free if you are.

 

[Bellaboo18]

I can't work out your double negative either! Do you mean the clause will apply only if you build anything equestrian-related?

Oh good point, that doesn't make sense. I'll change the first post.
It should have said - So the clause is for 30 years and is 30% of the uplift on the value of the land when planning permission is granted for anything other than agricultural/equestrian use.
So I can apply for pp for stables and an arena without triggering the clause.

 

[Bellaboo18]

The uplift seems fairly common here, down south, on land sold.
However, the 30 years and 30% is necogiable, so you can try to get that reduced. 20 years seems more normal round here. The percentage seems to vary, too. Most are betweeen 20-40% for what I have seen, but one was 100%. Needless to say, it ended up being removed from the market!
Mine doesn’t have it, but if I were to sell for any reason, I would definitely have an uplift clause put on it.

100%! Crazy! Thanks for your reply, I'll definitely speak to the agent tomorrow and see if there's any room for negotiating.

 

[Bellaboo18]

As it says "other than non - agriculture / equestrian use" the charges should not apply as it will be for equestrian use, best spend money on a solicitors opinion. Are you a BHS gold member? Talk to them for free if you are.

Thank you, I am a member and I'm not sure why I hadn't thought of them.

 

[PoppyAnderson]

Oh good point, that doesn't make sense. I'll change the first post.
It should have said - So the clause is for 30 years and is 30% of the uplift on the value of the land when planning permission is granted for anything other than agricultural/equestrian use.
So I can apply for pp for stables and an arena without triggering the clause.

Oh ok, right, well, buy it, get pp for stables, arena etc, build yard, enjoy for a while and sell it on for a tidy little profit and use the money to buy something else! Not sure where you are but decent little yards sell like hot cakes round here cos it's a beggar to get pp.

 

[cold_feet]

Am I getting this right? You buy land. You sell it for a profit within 30 years, you get 70% of the profit. If you don’t sell it it doesn’t matter. If it doesn’t increase in value it doesn’t make a difference. If it loses value it makes no difference. If you don’t buy it you don’t get the benefit of its use. Or is it more complicated than that?

 

[Bellaboo18]

Am I getting this right? You buy land. You sell it for a profit within 30 years, you get 70% of the profit. If you don’t sell it it doesn’t matter. If it doesn’t increase in value it doesn’t make a difference. If it loses value it makes no difference. If you don’t buy it you don’t get the benefit of its use. Or is it more complicated than that?

No, it's not to do with selling the land. If I purchased it then got planning permission for a house, the land with pp would be valued and I'd pay the original seller 30% of the new value less what I originally paid.

 

[Bellaboo18]

Oh ok, right, well, buy it, get pp for stables, arena etc, build yard, enjoy for a while and sell it on for a tidy little profit and use the money to buy something else! Not sure where you are but decent little yards sell like hot cakes round here cos it's a beggar to get pp.

I really like this idea and am just talking it through with my OH. Thank you. You've given me some hope! I was so disappointed when I saw the clause.

 

[Andrew657]

A further point to consider is Capital Gains Tax if you sell the house you build eventually.

If you own the land for a number of years before you build then its likely that there could be a substantial tax charge on sale.

 

[Bellaboo18]

A further point to consider is Capital Gains Tax if you sell the house you build eventually.

If you own the land for a number of years before you build then its likely that there could be a substantial tax charge on sale.

I wouldn't be surprised if I've got this wrong but I didn't think this would apply if the house was my one and only house and not used for business use?

 

[Andrew657]

It may apply where you've owned the land for more than a year before moving into the house.

The Private residence relief only covers you for the time whilst you're living in the house (plus some allowances for time to move in/out)

So if you owned the land for eleven years built the house and moved in and lived there for nine years. You would pay Capital Gains Tax on half the gain (Amount sold - less costs in buying land, overage, building house)

 

[Bellaboo18]

It may apply where you've owned the land for more than a year before moving into the house.

The Private residence relief only covers you for the time whilst you're living in the house (plus some allowances for time to move in/out)

So if you owned the land for eleven years built the house and moved in and lived there for nine years. You would pay Capital Gains Tax on half the gain (Amount sold - less costs in buying land, overage, building house)

Oh ok that's interesting, thanks. Something I hadn't thought of. Probably a bit silly but I'm not too worried about selling the house. I imagine it'll be our forever home, although I appreciate I don't know what's round the corner.

 

[Mari]

If you buy 2 acres of land (no house/buildings just field) & build a small yard for 2 horses, so equestrian. Then at a later date get pp to construct a house would the 30% rule only apply to the footprint of the proposed house? (Eg. 1/8 acre, & not the whole 2 acres?) what if you included in the equestrian yard an agricultural building for storing agricultural equipment & then realised you could use contractors with their own equipment so didn’t need to store any & applied for pp to convert this building to a house?

 

[1nd1c03]

It is also worth considering whether if you built a house it could be considered incidental to the equestrian use - eg a house for you to oversee your livery yard / stud business.

I’m assuming this overage agreement is new? In which case it should be negotiable - although 30% is fairly standard. You could also negotiate the number of houses on there if they are worried about missing out on large scale development e.g the overage doesn’t apply for a single dwelling.

This is where a good solicitor (potentially one with residential development knowledge) will be key as they will be the one drafting the overage agreement for you. You don’t want to be tied up in knots!

If the overage isn’t new you need to look at when it was created (some are very historic) and the proximity of the owners. Sometimes you can get insurance against them.

 

[D66]

I think this type of clause is only enforceable for 20 years. I’m not a solicitor though.

 

[Bellaboo18]

It is also worth considering whether if you built a house it could be considered incidental to the equestrian use - eg a house for you to oversee your livery yard / stud business.

I’m assuming this overage agreement is new? In which case it should be negotiable - although 30% is fairly standard. You could also negotiate the number of houses on there if they are worried about missing out on large scale development e.g the overage doesn’t apply for a single dwelling.

This is where a good solicitor (potentially one with residential development knowledge) will be key as they will be the one drafting the overage agreement for you. You don’t want to be tied up in knots!

If the overage isn’t new you need to look at when it was created (some are very historic) and the proximity of the owners. Sometimes you can get insurance against them.

This is something I was considering (arguing the house was there for the security of the horses) and will ask a solicitor. I like the idea of the overage not applying to one house. Both really good ideas, thank you. I'll ask the questions and let you know how I get on.
It is a new overage clause.

 

[Goldenstar]

Clauses like this are really common he have one on our woodland when we sell our land I expect we will put on on it .

 

[be positive]

This is something I was considering (arguing the house was there for the security of the horses) and will ask a solicitor. I like the idea of the overage not applying to one house. Both really good ideas, thank you. I'll ask the questions and let you know how I get on.
It is a new overage clause.

Unless you are running a proper business you are unlikely to get planning for an equestrian tied property and even if you did it is likely to bring the clause into play as it will be for human, not equine use.

I have looked into a few places with this and if it was for the purpose you have in mind and in a good area then it could be a good deal for you as long as you build in the 30% when you cost out building the house, it is the difference between the land value now for grazing only and what it would be worth as a plot with planning so while it seems a lot in reality it would be far less than buying a plot that already had planning on it, if you could even find one with grazing attached.
If you got planning for a housing estate the chances are the whole would be covered by the clause unless the vendor has a bad solicitor.

 

[Bellaboo18]

Unless you are running a proper business you are unlikely to get planning for an equestrian tied property and even if you did it is likely to bring the clause into play as it will be for human, not equine use.

I have looked into a few places with this and if it was for the purpose you have in mind and in a good area then it could be a good deal for you as long as you build in the 30% when you cost out building the house, it is the difference between the land value now for grazing only and what it would be worth as a plot with planning so while it seems a lot in reality it would be far less than buying a plot that already had planning on it, if you could even find one with grazing attached.
If you got planning for a housing estate the chances are the whole would be covered by the clause unless the vendor has a bad solicitor.

This is what I'm trying to get my head round, if it's still worth it. If a house is built the likelihood is the house and paddocks would be worth more than its cost to buy the grazing, build the house and pay the overage so maybe still worth a punt.
I think what I'm struggling with is the amount the land with pp is valued at could be anything. Depending on when pp is granted etc. I think the fact it's an unknown figure is a bit scary. What do you think?

 

[be positive]

This is what I'm trying to get my head round, if it's still worth it. If a house is built the likelihood is the house and paddocks would be worth more than its cost to buy the grazing, build the house and pay the overage so maybe still worth a punt.
I think what I'm struggling with is the amount the land with pp is valued at could be anything. Depending on when pp is granted etc. I think the fact it's an unknown figure is a bit scary. What do you think?

It is unknown and potentially scary, one I considered had a 50% clause on the land adjacent to the house already there, I had thought of getting planning and selling, when I worked it out it certainly didn't balance in my favour, I would suggest you speak to a local agent who may be best placed to advise on values as it will be speculative at best if you never intend to sell once you have built the house, so no real way to test the market in the area.

 

[Bellaboo18]

If you buy 2 acres of land (no house/buildings just field) & build a small yard for 2 horses, so equestrian. Then at a later date get pp to construct a house would the 30% rule only apply to the footprint of the proposed house? (Eg. 1/8 acre, & not the whole 2 acres?) what if you included in the equestrian yard an agricultural building for storing agricultural equipment & then realised you could use contractors with their own equipment so didn’t need to store any & applied for pp to convert this building to a house?

Unfortunately in that example the 30% would apply to the 2 acres although things I'd paid for e.g the stables would be deducted from the valuation. I suppose the way around it would be to sell the yard and land (to my mum) and then the overage would only be on the planned house and small surrounding area. I don't plan to do this as I think legally it's getting very dodgy but an interesting idea all the same!

 

[Bellaboo18]

Thanks for all the replys, they're really helpful. I've spoken to the agent and they've said the current owners are adamant the overage clause is non negotiable. I'm going to have a think and get as clued up about it as possible so any more opinions on wwyd are much appreciated.

 

[Orangehorse]

There have been some interesting replies to the above, all should be directed to a solicitor. I think 30 years is stretching it rather, normally 20/21 years. It is usually put in if you sell the land for development. If you were building your own house then it would surely be the value of the building plot, not for the whole area? It might be a chunk of money to find ……………..

If you only want to have the horses there for ever and ever, or until you sold it, then I can't see that the overage would come into play.
Who knows what might change to planning policies?