Overage and restrictive covenants – an unhappy marriage

Various tools have been used to protect an agreement between a seller and a developer in that if the developer somehow improves the value of the property after the sale (eg. by obtaining a planning consent), the seller is entitled to more money.

A method that has been employed in the past has been to impose a restrictive covenant on the property (which is enforceable against future owners) preventing certain uses which might increase the value.

However, the widely reported case of Cosmichome v Southampton City Council [2013] (in which Hamlins acted for the successful party) highlighted the fact that restrictive covenants are not a good tool to use for these purposes. Restrictive covenants will usually be enforceable if they:

  • are restrictive of the use made of the land and not restrictive of the person who uses the land
  • benefit the land retained by the seller and continue to benefit that land at the time it is enforced

Overage is best protected by deeds of covenant or by a legal charge. For more information please contact Antony Perlmutter  – aperlmutter@hamlins.co.uk