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Overage agreements, also called uplift or clawback arrangements, allow a seller to share in any future increase in the value of land after planning permission, development or onward sale. They are quite common where land has potential value for further development after the time of sale.
There is no standard form of overage agreement. Nearly every clause is negotiable, and the right structure depends on various factors including the potential uplift in value, the specifics of land, the planning position, the parties’ funding arrangements and commercial objectives. With so many variables to consider, good negotiation and careful drafting, as well as proper advice from an experienced lawyer, are essential to ensure the document covers the key points such as timing, triggers, valuation, planning obligations, resale restrictions and successor liability.
Our property team regularly advises developers, landowners, institutions and investors on overage arrangements.
What event triggers payment?
How long should the overage obligations last?
Will the overage bind future owners or only the original buyer?
How is the uplift payment calculated?
Will the overage terms be acceptable to any lender for the buyer?
Overage operates alongside the standard property sale contract. The overage provisions will be agreed during the contract negotiation stage, and once contracts are exchanged, the seller and buyer both have obligations to complete the sale and enter into the overage deed. Buyers often need lender approval before exchanging where overage is involved.
At completion, ownership transfers and the overage becomes legally binding. A Land Registry restriction is usually registered to ensure that overage obligations are preserved on any future sales. The arrangement then runs for an agreed period, anywhere from five to thirty years.
Triggers vary widely and must be defined with precision. Common ones include:
Grant of planning permission (outline or detailed)
Implementation of planning permission
Onward sale at a higher value
Completion or occupation of development
Profit thresholds in more complex developments
Planning-linked triggers require clarity on variations, prior approvals and whether permissions must be capable of implementation. Sale-based triggers need clear definitions of “price”, including incentive arrangements or SPV share sales.
Some agreements include planning obligations, such as requiring an application within a set period, pursuing a similar scheme, or appealing refusals. These need to balance the seller’s interest with the buyer’s ability to adapt to viability and planning feedback.
A key question is whether overage should bind future buyers if the trigger event has not yet occurred. This is not automatic, but it is often recommended or preferable, particularly where value may not arise until a future buyer secures planning consent or develops the land.
A practical approach usually includes:
A deed of covenant from new owners – this ensures that anyone who acquires the land steps into the buyer’s shoes and takes on the overage obligations. It avoids gaps in liability and gives the seller direct rights against future owners without needing to rely on the original buyer.
A title restriction preventing sales unless successors are bound – registered at the Land Registry, this restriction stops the land being transferred unless the seller has evidence that the incoming owner has signed the required deed of covenant. It is the main mechanism that makes overage enforceable over the long term.
Simple procedures for parcel-by-parcel disposals – many development sites are sold in phases or split between multiple housebuilders. The overage should include a clear, easy process for binding each purchaser, typically a short-form deed of covenant, so disposals are not delayed and the overage remains intact.
Allowances for intragroup transfers – developers frequently reorganise ownership structures for funding, tax or JV reasons. Most agreements permit transfers within the same corporate group, provided the new entity signs up to the overage. This protects the seller while allowing normal commercial flexibility.
Targeted protection against undervalue sales or SPV share transfers – without these protections, value could be shifted out of the land through discounted disposals or by selling the shares in the land-owning SPV. Carefully drafted anti-avoidance clauses ensure that genuine transactions can proceed while preventing the buyer from sidestepping overage through structuring.
Some deals also include uplift on onward sale to guard against early profit-taking. Where uplift is expected quickly or the parties want maximum simplicity, it may be appropriate for the overage to apply only to the original buyer.
Most overage arrangements fall into one of the following models, and choosing the right one depends on how and when value is likely to be realised. Each has different implications for risk, cashflow and complexity.
Percentage uplift on planning - A calculation based on the difference between the land’s value with and without planning permission. Useful where planning is the main driver of value, but depends on agreed valuation assumptions such as the terms of a section 106 agreement. Popular for strategic and greenfield land.
Per-unit payments - A fixed sum payable for each residential unit (or sometimes each square foot/metre) permitted or delivered. Simple, predictable and lender-friendly. Works well where density is broadly predictable, and avoids valuation disputes. Needs thought where affordable housing or tenure mix might change.
Lump-sum payments tied to defined planning outcomes - A one-off payment if a specific event occurs, for example, securing consent for a minimum number of units or a particular use. Best suited to binary outcomes. Clarity is needed on what happens if the final outcome is just above or below the threshold.
Profit-based arrangements - A share of the actual development profit once the scheme is built out or sold. Useful where remediation, infrastructure or abnormal costs make the uplift uncertain. Requires careful agreement on allowable costs (e.g., finance, preliminary investigations, professional fees), evidence requirements, and whether profits/losses can be pooled across phases.
Each structure has its strengths and weaknesses. Choosing the right one is often a question of matching the mechanism to the land and the development strategy.
Issues and potential legal disputes can arise from:
unclear valuation assumptions
vague or overly broad triggers
uncertainty around deductible costs
successor provisions that are impractical to operate
restrictions that interfere with funding or disposals
no process for resolving disagreements efficiently
Good drafting avoids these issues and ensures overage operates smoothly over many years.
If you are negotiating an overage agreement, or considering buying or selling land where future uplift might arise, our specialist property lawyers can help you structure a clear, enforceable and commercially aligned arrangement.
Contact us to discuss your project or request tailored advice.
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