In the context of Property Law, an Overage is an additional sum that the Buyer agrees to pay to the Seller if a particular event (usually the increase in the value of the Property) occurs after the completion of the sale of the Property. An Overage payment is usually to be paid at a later date and addition to the Purchase Price already paid.

Examples and Duration of an Overage

A common example of an overage is where a Property with extra land is sold and at the time of the sale the extra land has not been built on or developed in any way. Without developing the extra land, the Property is worth less than it would be should the extra land be developed. It may be that the Seller does not want to go to the bother and expense of obtaining planning consent and developing the land, however he does not want to miss out on the increase in value should the land be developed by the Buyer. To ensure that the Seller benefits from any increased value achieved by the buyer after they have developed the land, the Seller will come to an overage agreement with the buyer whereby the Property is sold in its undeveloped state and current market value and if the buyer develops the land and this increases its value, the buyer will make a further ’Overage’ payment to the Seller reflecting the increase in the value of the land achieved by the development. This type of agreement is known as an ‘Overage Agreement ’or simply an ‘Overage’ and may apply, amongst other uses, to a change of use of a building ( for example, a derelict pub converted to flats) as well as to development of land (for example, the building of a houses on the land).

An Overage can range from a simple agreements for one-off Overage payments or more complex agreements linked to the profits achieved by the developer when they come to sell the properties that they have built on the land. The duration of the Overage may be linked to a set period of time, for example, development within the next 15 years; or be purely linked to the happening of the ‘trigger’ event (i.e. the actual development of the land or on the grant of planning consent). However under the rule against Perpetuities it is unlikely to be enforceable after 80 years.