Mithun Rabheru and Bill Bidder explore the various types of overage agreements and their clauses.
An overage agreement is an agreement whereby a purchaser of land agrees to pay the seller an additional sum of money, on top of the original purchase price. The agreement follows the occurrence of a specified event in the future enhances the value of the land. It allows the seller of the land to share in the enhanced value following the sale and so overages are sometimes referred to as a ‘clawback,’ ‘uplift’ or ‘anti-embarrassment’ mechanism in property transactions.
For this reason, overage agreements are popular with sellers of land with development potential. They also enable buyers to purchase land for a lower initial purchase price. However, there are strings attached. The buyer must pay fur...