Ask The Legal Expert - Can I Pursue a Housing Developer For A Dividend After Selling My Land to Them?

"I have been approached by a local housing developer who wants to buy my paddock. I am coming up to retirement and a sale now would help my nest-egg. If the developer is given planning permission to build homes after I have sold to him, would I be able to pursue him later for a further payment?"

You could potentially receive payments after you have passed your land on as long as you have a robust agreement in place to this effect. Overage involves setting up a legal agreement giving you the potential right to a share in the increased value of the property if certain trigger events happen within an agreed time-frame.

The trigger events might include:

• The granting of outline planning consent or detailed planning permission for change of use or development that would increase the value of land
• Sale or lease of property with the benefit of planning permission

Overage is not appropriate in all situations. If the likelihood of development is remote, the cost of negotiating complex payment provisions could outweigh the chances of the overage payment being made.

If you feel an overage agreement is appropriate, then both parties would need to agree on the details of the arrangement and its terms. Overage is complex, and the Court sees frequent disputes relating to overage provisions, with parties not getting what they expected because the overage agreement has not been drafted clearly, so it is important that you seek legal guidance from a professional on this. Both parties need to consider all reasonably foreseeable circumstances, to ensure the overage provisions remain effective for the full overage period.

Here are some of the details you might want to include: 

• A precise description of your agreed overage payment trigger 
• Any expiry date for your overage agreement
• The obligations of both parties. So, for example, you might put an obligation upon the buyer to apply for permission for a minimum size development or by a certain date
• How you calculate the overage payment

There are other methods for securing overage payments, including contractual obligations, a bond or guarantee, a charge or mortgage, or granting a lease with restrictions on development. You should consult a legal adviser for advice tailored to your circumstances.

For more information contact: 03333 208644 or: law@jcpsolicitors.co.uk.

The question posed is based upon a hypothetical situation. This content does not constitute legal advice and is provided for general information purposes only.