Overage—protecting entitlement
Overage—protecting entitlement

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

  • Overage—protecting entitlement
  • Protection by legal charge
  • Restrictive covenants
  • Ransom strip
  • Restriction on title
  • Guarantee or bond
  • Freehold right of re-entry
  • Estate rentcharge
  • Seller’s lien
  • Exclusion of airspace

When a solicitor is instructed to draft and negotiate an agreement that includes receipt of overage payments, those instructions include an obligation to provide mechanisms to protect entitlement to those payments. A positive obligation to pay overage in the form of a covenant will not automatically bind the buyer's successors in title. Failure to protect against this can lead to a claim in negligence, with damages based on loss of opportunity.

Protection by legal charge

It is possible (and fairly common) to secure entitlement to overage by way of a legal charge on the land that is subject to the overage. It secures any overage payment as and when it arises. If the overage is not paid, the chargee can exercise its power of sale and take the overage out of the sale proceeds. However:

  1. if the buyer wishes to raise finance against the property then it is likely that a deed of priority will be required to regulate the priorities of the respective charges

  2. a lender with priority (whether because its charge was registered first, or under an express priority agreement) can sell free from the charge protecting the overage

  3. the charge does not ‘bite’ until the trigger event for overage has occurred

  4. a charge is not appropriate security for ‘second bite of the cherry’ overage where the seller