Land-sale overage

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In the context of land sales, an overage (also called “claw back”) is used to describe a sum of money in addition to the original sale price which a seller of land may be entitled to receive following completion if and when the buyer complies with agreed conditions.

Overage is often written into a contract of sale where land or property is being sold at an undervalued rate, or there is a clear process which can be undertaken to improve the value of the land over and above the cost of the process to improve the value. Planning permission is often an example of a process which can significantly enhance the value of land over and above the cost of gaining the permission.

Overage does not solely relate to land and property and could be written into any contract for a sale of goods. Therefore if an old classic car in poor condition was to be sold to someone with the intent of refurbishing it and then selling it on, the original seller may choose to sell the car at a very low value and contract to receive a percentage of the uplift from the next sale as well.

Example[edit]

A typical scenario would be: On completion, a buyer pays a given price for a piece of land and the seller is aware of the buyer’s intention to develop the land. Overage provisions are negotiated into the contract of sale to ensure that once planning is obtained, the seller receives a proportion of the increase in the value of the land.