Q&A - Can I retain a financial interest in land I am selling in case it is ever developed?

Q:    I have been approached to sell someone a piece of land I own that is currently classed as green belt. They say they want it to graze ponies, but as there are several small building projects currently starting in the area, on what also was previously green belt, I am suspicious. If I sell the land, could I somehow claw back more money if planning permission for development is granted in the future?

A:    Your solicitor can include a clause in the Contract for Sale which would allow you to ‘claw back’ a specified amount or percentage of any uplift in value, should your buyer seek permission to develop the land. Such a clause is known as an Overage Clause, and it would trigger your right to the claw back upon the granting of planning permission.
 
The length of the ‘clawback period’ would be open to negotiation but is often between 10 and 30 years. The percentage can be whatever you and your purchaser agree, but if for example you agreed 50%, then the uplift payment may be the value of the property with qualifying planning permission minus the value of the property without qualifying planning permission, multiplied by 50%.  

The overage clause can also be drafted to include details of how and when any future payment is made. You, the seller, can also ensure that any future owners of the land are bound by the clause by imposing a restriction in the title to the property at the Land Registry to the effect that no transfer of the land can take place unless the new owner has entered into a Deed of Covenant with you, the seller, or by imposing a charge on the property. You should tell your solicitor exactly what you want to achieve, so that the best contract can be drawn up to suit your specific circumstances.

Article 06/08/2021

This question has been answered by Sêra Henderson-Jones, a Chartered Legal Executive with GHP Legal.  If you would like to speak to someone about this or any other legal matter it is still possible, and we are doing everything we can to ensure that we continue to offer our high levels of service to our clients.  In accordance with government guidelines, some of our lawyers are currently working remotely which means you may not now receive a response as promptly as you may expect. Please kindly bear with us and we will respond as soon as we are able.

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Sera Jones

Sêra Henderson-Jones

Chartered Legal Executive

Part of our Property team in Oswestry.