Overage agreements are widely used in commercial property and development deals, especially where land or buildings have future potential that is not fully reflected in the sale price today. They can be a sensible way for sellers to share in value uplift later on, while giving buyers the chance to acquire a site at a viable initial price.
But they also create fertile ground for disputes, often years after the original transaction.
An overage dispute usually appears when development activity begins or planning permission is secured and the seller believes a payment has been triggered. The buyer may disagree. In some cases the dispute is about whether the trigger event has actually happened. In others it is about what the overage should be worth, how deductions are treated or whether the obligation is enforceable against the current owner.
Because these agreements can involve substantial sums, the stakes are high for both sides. This guide explains what overage is, how it works in practice and the early dispute points commercial owners should watch out for.
What is an overage agreement?
Sometimes called clawback or uplift, overage is a contractual right that allows a seller to receive additional payment after a sale if the buyer later increases the value of the property. This is most common where development is expected, such as land sold without planning permission, buildings likely to be redeveloped or sites capable of a more profitable use.
A typical overage agreement has fou r core parts.
- First, it defines the trigger event. This is the future situation that causes overage to become payable.
- Second, it sets out how the uplift is calculated. Some agreements link to land value at the trigger date. Others are based on net profit from development or sale proceeds after certain costs.
- Third, it explains when payment is due and how notice must be given.
- Finally, it includes security to ensure the obligation can be enforced, even if the buyer sells on. Common security mechanisms include restrictions on title, legal charges, rent charges or guarantees.
Overage is often used by landowners, estates, charities or public bodies who want to avoid underselling land that could later become far more valuable. Buyers accept it because it can make the upfront purchase price workable, provided the terms are clear and commercially fair.
Common trigger events
Most disputes start with the trigger wording, because everything depends on whether the trigger has happened and whether it falls within scope.
Common triggers include the grant of planning permission, the implementation of that permission, the start or completion of development, the sale of the land or units at a profit or a change of use that increases value. Some agreements allow overage to be triggered more than once if value rises in stages through multiple permissions or disposals.
Even when the parties thought the trigger was obvious at the time of sale, the reality years later can be less clear. Planning permissions may be altered, development may be phased or disposals may be structured in ways that raise questions about whether the trigger has genuinely occurred. That is why tight drafting and early advice matter so much.
Why overage agreements lead to disputes
Overage agreements are often negotiated when a site’s future value is uncertain. Years later, once planning is granted or a scheme progresses, the parties may see the wording very differently. What felt like a simple safeguard at the sale stage can become a high value disagreement once real money is on the table.
Most disputes fall into a handful of familiar categories…
Disagreement about whether the trigger has happened
This is usually the first battleground. A seller may believe a trigger event has occurred as soon as planning permission is granted. On the other hand, a buyer might argue that the permission is outside the scope of the agreement, is not viable or has not been implemented in the way the contract requires.
The same happens with development based triggers. A seller might say that work on site counts as commencement. A developer might say early enabling works are not “development” under the agreement, especially if they are trying to manage cash flow or avoid triggering payment too soon.
Disputes also arise where the property is sold on. Some agreements treat any disposal as a trigger. Others only trigger if value has increased or if the disposal is to a third party rather than a connected company. Corporate structures can make this particularly complex.
Disputes over definitions
Overage drafting relies heavily on defined terms. If those definitions are loose, litigation risk grows.
Common examples include:
- What counts as planning permission for overage purposes
- Whether a revised permission is included
- What qualifies as implementation
- How “commercial” or “residential” use is defined
- What is excluded from the trigger
A small ambiguity can become expensive if it affects whether a multi million pound payment is due.
Disputes over the calculation
Even where everyone agrees that overage is triggered, the next question is how much is payable. This is another major source of conflict.
Calculation clauses often deal with:
- The valuation method used to measure uplift
- The date on which value is assessed
- What costs are deductible before uplift is calculated
- Whether deductions include professional fees, finance costs, infrastructure, planning contributions or build costs
- Whether deductions must be “reasonable”, “properly incurred” or capped
If the agreement is unclear, a seller may feel the buyer is stripping out too many costs. A buyer may feel they are being asked to pay overage on value they have not truly realised.
Avoidance behaviour and “loopholes”
Some overage disputes involve deliberate structuring to avoid a trigger. Sellers may argue that buyers have acted in bad faith by arranging a disposal or development route that technically sidesteps overage while still capturing uplift.
Examples include:
- Transferring to a group company rather than selling externally
- Delaying formal commencement while advancing the scheme in practice
- Building a different mix of units to reduce uplift
- Using option agreements or phased disposals that try to avoid the trigger wording
Good overage drafting usually includes anti avoidance clauses, but where it does not, the argument becomes harder and more expensive.
Security and enforceability issues
Overage is only valuable if it can be enforced.
Problems develop when security is weak or has not been properly registered. If the buyer sells on without a binding restriction or if the overage deed does not clearly apply to successors, the seller may be left trying to recover money from a party they did not contract with.
This is why security is as important as the trigger and calculation clauses. Without it, even a strong claim can turn into a practical dead end.
What happens once a dispute arises?
Overage disputes often start with a demand or notice from the seller. The buyer may respond by challenging the trigger, requesting clarification or disputing the calculation.
At that point the resolution process usually involves:
- Exchange of documents and accounts
- Valuation or planning evidence
- Input from surveyors on uplift or trigger interpretation
- Negotiations between solicitors
- Mediation if agreement is close but stalled
Because these disputes tend to arise years after sale, good record keeping is critical. If planning documents, cost evidence or communications are missing, the dispute becomes harder to resolve.
How to protect your commercial interests
For sellers, the best protection is in the drafting.
Clear triggers reduce arguments later. A precise calculation method prevents disputes about costs and valuation. Strong information rights allow you to monitor planning and development activity. Anti avoidance wording can close off loopholes before they are exploited. Robust security ensures the obligation survives future transfers.
For buyers and developers, protection comes from clarity and fairness. You need triggers that fit the intended scheme, deduction rules you can actually work with, realistic timeframes and a clear route to releasing overage once paid. Keeping detailed records from day one helps avoid surprise disputes later.
Both sides benefit from early legal advice. Most overage litigation is the product of loose wording agreed in a rush at heads of terms stage.
Protecting value when uplift comes into play
Overage agreements can be a smart commercial tool, but only if they are clear, enforceable and properly managed. Disputes usually come down to three things: unclear triggers, disagreement over uplift calculation or weak security.
If you are entering an overage arrangement or you believe an overage payment has been triggered, early advice from commercial property experts can protect your position and prevent expensive litigation later on.
Let’s talk about your case
Please note that this article is solely for informational purposes. It’s not a substitute for legal advice. We encourage readers to contact Osbourne Pinner for case-specific guidance.
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