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Reasons for precise drafting of overage provisions highlighted
06 October 2017

The importance of well thought out and precise drafting of overage provisions was reinforced by the recent High Court decision in Sparks v Biden [2017] EWHC 1994 (Ch) which implied terms into an overage agreement which had been prepared in respect of a transaction involving the sale of development land.

The Court was asked to determine a dispute concerning overage payments due to a landowner by a developer following the sale of completed units.
 
The overage provisions did not dictate a timetable for the sale of the completed units and the owner objected when the developer occupied one of the houses and let the remaining units which meant that the completed units were not sold and no overage payment was due.

The landowner argued that, despite the absence of express terms requiring the developer to market and sell the units, those terms were implicit and should be implied by the Court.

The Court decided in favour of the landowner and held that it was necessary to imply a term into the overage provision that required the newly developed units to be marketed and sold within a reasonable time after they had been completed in order to give effect to what the Court determined was the intention of the parties.

Overage provisions can vary significantly from one transaction to another and can often be complex and subject to lengthy negotiation between the parties and their advisers. In this case the landowner (and his solicitor) were very lucky and there is no guarantee that a court would imply a similar term to rescue the overage in another case. The need for careful, clear and concise drafting of overage provisions therefore remains paramount.

Boyes Turner’s Development & House Building Team advises a variety of developers, land traders and land owners in respect of wide range of overage, clawback and variable price mechanisms and is familiar with the pitfalls and key ingredients needed for a successful drafting of these terms.   

For further information on this issue or to discuss how the Development and Housebuilding team can help you please contact Derek Ching or Will Nassau-Lake on [email protected] or [email protected].

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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