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Purchasing an overage agreement

What is an overage agreement and why should you invest in one?

An overage is a term often used in land sales to describe a sum of money in addition to the original sale price which a seller of land may be entitled to receive once the land has been granted planning or development permission.

If you were to compare the price of land without planning permission to land with planning permission, you would expect to see a difference of around 60-70%, so you will often find an “overage agreement” of anything from 25% to 50% and for a varying period of time, say 25 to 100 years.

With an overage of 25%, if the land was valued at £25,000 without permission and is then valued at £125,000 once permission has been granted, there has been an increase in value of £100,000. The new owner of the land would then owe the overage holder 25% of this increase in value (in this case 25% of £100,000 being £25,000).

By purchasing an overage agreement, you would be entitled to the same terms as the original seller and this payment would be due to you directly. Overage agreements therefore have the potential to provide a significant return on investment.

Click on the overage tab on our main menu to see what we have available.

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