Overage – Payments That Go On…And On…And On

Overage describes the situation where a seller takes a share in any increase in value of a property that is realised after the initial sale ie where there is a reasonable expectation that the land may be redeveloped or planning permission obtained in the future.

In the case of Burrows Investments v Ward Homes, a buyer agreed to pay overage on the excess value of each house built on the property which was sold over a certain figure. The overage clause also importantly deal with 'exempt' transactions not intended to be caught by the overage.

Facts

A property company, Burrows Investments, sold land to a development company, Ward Homes. The land had planning permission to be re-developed into residential units. The parties agreed that Burrows would receive overage if Ward disposed of the units at a price exceeding a certain sum per square foot.