Advanced Search
Your search results

When Do Clawbacks Come into Play? Exploring Trigger Events for Development Clawbacks/Overage Clauses

Posted by RELD on September 24, 2023

When Do Clawbacks Come into Play? Exploring Trigger Events for Development Clawbacks/Overage Clauses

As you embark on the journey of moving to a new home, you might encounter terms like “development clawbacks” or “overage clauses.” These clauses are designed to ensure sellers benefit from any increased value resulting from developments made by buyers after the initial sale. But when exactly do these clawbacks come into play? In this blog post, we’ll dive into the trigger events that activate development clawbacks/overage clauses, providing specific examples that shed light on this aspect of property transactions.

Understanding Development Clawbacks/Overage

Before we explore trigger events, let’s briefly recap the concept. A development clawback/overage clause is a contractual provision that entitles the seller to a share of any increase in a property’s value due to post-sale developments initiated by the buyer.

Exploring Trigger Events

Trigger events are the specific conditions or actions that activate a development clawback/overage clause. Here are some potential trigger events and examples that illustrate when these clawbacks come into play:

  1. Residential Development:

Trigger Event: Obtaining planning permission for residential development on the property.

Example: You purchase a property with the intention of converting a portion of the land into residential units. Once planning permission is granted, the development clawback could be triggered, requiring you to share a portion of the increased value with the seller.

  1. Commercial Development:

Trigger Event: Initiating commercial development activities on the property.

Example: You buy a property and establish a commercial complex on the premises. If the property’s value appreciates significantly due to the commercial development, the overage clause could activate, entitling the seller to a portion of the uplift.

  1. Additional Structures:

Trigger Event: Constructing additional structures on the property, such as extensions, outbuildings, or annexes.

Example: After purchasing a property, you decide to add an extension to accommodate a home office. If this addition substantially raises the property’s value, the development clawback could be triggered, requiring you to share the gain with the seller.

  1. Lifting Onerous Covenants/Occupancy Conditions:

Trigger Event: Successfully lifting onerous covenants or occupancy conditions that previously limited property use.

Example: You purchase a property with restrictions that prevent certain uses. Later, you successfully negotiate the removal of these restrictions, allowing for more lucrative property use. The development clawback could come into play if the property’s value increases as a result.

  1. Change in Land Use:

Trigger Event: Changing the land’s use from one category to another, such as converting agricultural land into residential or commercial land.

Example: If you buy agricultural land and later obtain permission to convert it into a residential neighbourhood, the overage clause could activate, considering the substantial value increase due to the change in land use.

Final Thoughts

Understanding the trigger events for development clawbacks/overage clauses is essential when navigating property transactions. These events vary based on the nature of the property and the intentions of the buyer.

Leave a Reply

Your email address will not be published.

  • Advanced Search

    £ 0 to £ 8,000,000

    More Search Options
Shopping for your new Home?

Compare Listings