Overage…

[Kelvin]

So they are asking for a shedload of money for a plot of land that might not achieve planning? 

[Johnnyt]

Ask for the overage wording in the legal pack.

You'll get conditions for trigger and percentage of uplift.

Land near me often sells with 50% over a 20 year term as these were the conditions ICI put on their farmland and others when they divested.

 

[ProDave]

46 minutes ago, smart51 said:

I think it worth giving a few more details.  It is a suburban site that once housed two buildings.  The larger of them was demolished over 20 years ago.  The smaller building remains.  We would build a house and I would keep the current building as a workshop.  The site was split in two a little over 20 years ago.  The other part was given planning permission and 6 bungalows were built on it.

So it is quite likely to get planning permission but for some odd reason the owner has chosen not to apply for permission?

 

I still maintain they must be selling it as a potential development site, for less than it would be worth with PP hence the overage clause.

 

You could always make any offer you like on your terms, like this is how much I offer and the offer is conditional on the overage clause being removed.

[Tom]

2 hours ago, smart51 said:

We're making enquiries into buying a plot.  I've noticed that tucked away on the brochure there is a clause "The vendor reserves the right to receive a future Overage being a percentage of the net increase in value created by planning consent over and above the base purchase price or part thereof". 

 

We bought our site with an overage of 25% over 20 years, risk was on us but we got PP and more than happy to pay only 25% of the uplift in value. Just be careful with the wording of any overage clause and make sure you run it past a solicitor who knows what they are doing. In the example you quote above "above the base purchase price" would mean you paying overage not just on the uplift in value from getting PP, but also on the increase in base value of the land which will happen anyway, because, well, they're not making any more of it. Usually the caluclation is based on the day PP is granted and you mutually employ a surveyor to value the land on that day with and without PP, and pay a percentage of that.

[smart51]

1 hour ago, Tom said:

 

We bought our site with an overage of 25% over 20 years, risk was on us but we got PP and more than happy to pay only 25% of the uplift in value. Just be careful with the wording of any overage clause and make sure you run it past a solicitor who knows what they are doing. In the example you quote above "above the base purchase price" would mean you paying overage not just on the uplift in value from getting PP, but also on the increase in base value of the land which will happen anyway, because, well, they're not making any more of it. Usually the caluclation is based on the day PP is granted and you mutually employ a surveyor to value the land on that day with and without PP, and pay a percentage of that.

Are you sure about the base value?  I read it as a percentage of the 'increase above the purchase price' i.e. not on the base value, just the increase.  I will check with a lawyer of course.

 

On the rest of it, a surveyor can value the land both with and without PP?  I'm struggling with that. The value of goods only being what someone will pay, valuation is a guess.  I don't think I like the guess of their surveyor.

[Tom]

The land will accrue in value over time, with or without planning permission. So you don't want that to be factored in to any uplift in value that you have to pay a percentage of - hence why the uplift in value is calculated on the day PP is granted and based on the value of the site on that day if it did or didn't have PP.

How else do you expect the site to be valued other than by a surveyor? Put it on eBay?

[smart51]

7 minutes ago, Tom said:

.How else do you expect the site to be valued other than by a surveyor? Put it on eBay?

Not quite.  Having seen estate agents value houses I wonder how much knowledge and skill they apply.  The last one we used seemed to look on Rightmove for the highest price anything had sold on our street, added 10% then round it up to the next £10k.  We had several offers equal to the highest previous price on our street.  The estate agents valuation was just fantasy.

 

Back to the matter in hand, You had the land valued on the day PP was granted, where does the 20 years come in?  Is it the case that you only have to pay the overage if you sell within the 20 year period?

Edited September 15, 2022 by smart51

[Tom]

No, any PP granted on the land in a 20yr period will trigger the overage clause. Payment is made a short while after each overage is triggered.

Re valuation, this is why you mutually appoint a surveyor: you need to find someone who has some knowledge of the specific market and some expertise in the field. Not just a fat tie and too much aftershave!

[scottishjohn]

my guess is they are wanting a claw back if you build more than one house  on the plot 

EG if inten years time you decide  to divide the plot and build more houses they are wanting a cut of the .

Ilooked at one plot where they wetre wanting an uplift of 30%  ofr every other house buiilt  on the the land within 10years

 my answer has simple "no way  jose"

 

[smart51]

I've just spoken with an adviser from Potton, a firm that offer self build services.  Their opinion is that the land is valued as if it has planning permission.  They thought that the price should be for sale around £50k without planning, perhaps with an Overage clause.  One suggestion they made was that we could ask for a conditional contract.  One where both sides agree to sell the land for the agreed price if planning is granted but agree not to sell the land if planning is rejected.  He said that might be difficult with a sealed bid sale and a fixed date.

 

I asked about getting pre-application advice from the council which he said would be a good guide, but we might not get a reply before the sealed bid date.  He also suggested paying for an independent valuation both with and without PP.

[Kelvin]

I think most of us had already worked that out! The likelihood is you will get planning permission but it’s still a risk especially given it could accommodate more than one house and the plot next door built multiple houses. You’d be paying for land at a  price as if it had planning before you get planning. I personally wouldn’t take the risk but your appetite for risk might be greater. All the books tell you to not buy land at extortionate prices without at least outline planning. 
 

Looking at it from the sellers pov, ask yourself why haven’t they sought to get outline planning? It’s relatively cheap to do and would lock in the value of the land etc. They must think there is a risk too as if they apply and it fails they then have to go through a lengthy appeals process so all they are doing is trying realise the full value with none of the risk and then have a second bite at it should you succeed in achieving planning. I can’t see many people running towards making that deal. It’s too one sided. 

[Ferdinand]

On the seller motivation for not going for Outline:

 

1 - it may be the cost of getting outline. Applying for PP for a potential 6 or 8 bungalows is not cheap. Quite a few thousands. It could also take 6-12 months.

 

2 - It may be an elephant trap in the plot that is not in the sales literature reducing the probability of getting PP, and the same could be the reason for going to auction. 

 

Could be a former use of one building requiring expensive land investigations, or services or drainage being difficult, or a mineshaft, or a former oil leak from a heating system, or made ground, and so on.

 

Do some digging (research, not literal 😁). Have you spoken to the people in the bungalows on the other half? 

 

3 - Has it been marketed before? What happened if so?

 

4 - Or it could just be a quick sale required for any number of reasons. Death, divorce etc.

 

In situations like this you need more information to allow you to trade off part of the risk.

 

F

[JohnMo]

The site we purchased the seller had taken about 6 years to get planning approved, due to special circumstances on our plot.  They spent loads of money also.  You could be in the same boat and still have to pay the seller a bunch of money at the end. 

 

Make an offer with the condition removed, even offer over the asking price if required and you want it badly enough.

[Ferdinand]

8 minutes ago, JohnMo said:

The site we purchased the seller had taken about 6 years to get planning approved, due to special circumstances on our plot.  They spent loads of money also.  You could be in the same boat and still have to pay the seller a bunch of money at the end. 

 

 

Correct, or you may not.

 

Which doubly reinforces the point that you need to use your skill and judgement, plus advice you think appropriate.

 

And be sure where your appetite for risk is on the scale, and that you will still be standing if you buy this relatively-less-expensive opportunity and it goes tits-up. 

 

[smart51]

34 minutes ago, Ferdinand said:

Could be a former use of one building requiring expensive land investigations, or services or drainage being difficult, or a mineshaft, or a former oil leak from a heating system, or made ground, and so on 

 

The site used to house a church.  It was demolished after an arson attack.  One of the questions I've asked (but not had a reply) is if the foundations were removed or just covered over

Edited September 16, 2022 by smart51

[JohnMo]

Also are there any graves?

[smart51]

11 minutes ago, JohnMo said:

Also are there any graves?

No

[Ferdinand]

10 minutes ago, smart51 said:

No

 

You hope... :😇

 

[twice round the block]

Normally applied to plots when there is only a 50/50 chance of obtaining planning permission, and even then it can be a hard slog to get it granted.

Hence the plot is normally fairly cheap.

 

Sounds like the C of E is selling this place ( they are the biggest land owner in the UK) bigger than the royal family. 

[Temp]

You may also be hit with a planning condition requiring an Archealogical survey. These can be rather open ended.