Understanding Overage Clauses in UK Property Contracts

Overage clauses, also known as "clawback" clauses, are provisions in property contracts in the UK that allow the seller to claim additional payments from the buyer if certain conditions are met after the sale. These conditions typically involve the future increase in the property's value, often linked to obtaining planning permission for development. For instance, if a buyer purchases land and later obtains planning permission for residential development, significantly increasing the land's value, an overage clause would entitle the seller to a portion of the increased value. This mechanism protects the seller from losing out on potential future gains that could arise due to changes in the property's use or development potential.

Common terms in overage clauses include the trigger event, which is the specific condition that activates the clause, such as obtaining planning permission or selling the property at a higher value. The payment method specifies how the overage amount is calculated and paid, often as a percentage of the increase in value or a fixed sum. The duration of the clause, known as the overage period, typically ranges from 5 to 25 years.

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