Overage—advice to clients
Overage—advice to clients

The following Property guidance note provides comprehensive and up to date legal information covering:

  • Overage—advice to clients
  • At the outset
  • Once the overage deed has been agreed

Overage is a covenant or contractual obligation by the buyer to make an additional payment to the seller in the event that specified events occur. It is important to stress to clients that any such payments are not certain. For example:

  1. the specified trigger events may not occur within the overage period

  2. the local authority's development plan for the site or other circumstances surrounding the property may change over time

  3. even if the trigger events do occur, the buyer may simply fail to make the payment to the seller

  4. the buyer may become insolvent in the intervening period

At the outset

At the outset (ie when heads of terms are circulated) consider whether overage is appropriate for the transaction. Is it likely that the overage will be triggered during the overage period? If it is a near certainty then should the price be adjusted instead? If the overage is simply to cover the ‘what if?’ scenario then is it worth spending the time (and money) negotiating what may be a complicated overage agreement? Consider and suggest alternative solutions. It may be the case that your client’s interests would be better served by agreeing a conditional contract for the sale of the property rather than an outright sale with overage.

If acting for a seller, point out that, despite any good faith