Liquidators disclaiming contracts containing overage
Produced in partnership with Carolyn Jones, consultant
Liquidators disclaiming contracts containing overage

The following Restructuring & Insolvency guidance note Produced in partnership with Carolyn Jones, consultant provides comprehensive and up to date legal information covering:

  • Liquidators disclaiming contracts containing overage
  • What is overage?
  • When might the issue arise?
  • What is disclaimer of onerous property?
  • What is an unprofitable contract?
  • Does overage make a contract unprofitable?
  • Consideration by the courts of the effects of disclaimer by liquidators of contracts containing overage

This Practice Note considers the disclaimer by liquidators of contracts (often a sale agreement or transfer) containing overage provisions, in the context of disclaimer of onerous property under section 178 of the Insolvency Act 1986 (IA 1986). It provides a summary of what overage is, the disclaimer of onerous property by a liquidator and whether overage can be considered ‘onerous property’ so that it is something that a liquidator can disclaim. It also considers the application by the court of the effect of the disclaimer of contracts containing overage in the case of Groveholt Ltd v Hughes.

For more detailed reading on disclaimer of onerous property by a liquidator generally, see Practice Note: The process of disclaimer by a liquidator or trustee in bankruptcy under sections 178 or 315 of the Insolvency Act 1986. For the procedure to be adopted by a liquidator on disclaiming onerous property, see Practice Note: Checklist and timeline for disclaimer—checklist.

What is overage?

Overage, in this context, generally refers to a mechanism whereby the seller of a property imposes an obligation on the buyer of it to make an additional payment to the seller commensurate with an increase in value of the property following the sale. This is typically where, for example, planning permission is obtained or the property re-developed resulting in an increase in value