What is an overage agreement in a property sale?
Overage, also called clawback, is a promise by a buyer to pay the seller an extra sum if the property's value rises because of a future event, usually planning permission. It lets a landlord sell now while keeping a share of any development uplift later.
Read more in our guide: Selling a property portfolio
Typical overage terms
| Term | Typical range |
|---|---|
| Trigger | Grant of planning permission, or sale with planning |
| Share of uplift | Often 20% to 50% |
| Period | Often 10 to 25 years |
| Security | Restriction on the title, legal charge or positive covenant |
| Tax | Overage receipts usually form part of the sale for CGT |
When landlords use overage
Overage suits properties with development potential the seller cannot or does not want to pursue: a large garden plot, a house that could be converted into flats, an outbuilding, or a site near a likely planning change. It bridges a gap where the seller thinks the potential is worth more than the buyer will pay today.
How it is structured
The agreement sets the trigger, how the uplift is calculated (usually the increase in value with planning minus value without it, less agreed costs), the seller's share and how long it lasts. It must be secured, typically with a Land Registry restriction preventing a sale without the overage being paid or the next buyer signing up to it.
The downsides
Overage reduces the number of buyers and often lowers the upfront price. Badly drafted clauses invite disputes about valuation or allow avoidance, for example by obtaining planning just after the period ends. For most rental portfolio sales, a clean price is simpler. Overage is usually kept to individual sites with clear potential.
Tax
An overage receipt is usually extra consideration for the original disposal, so it is charged to Capital Gains Tax. Where the amount cannot be known at the time of sale, special rules apply to how the right to future payment is valued. Take tax advice when the agreement is drafted.
Official Sources and Further Reading
- HM Land Registry: restrictions and the protection of third-party interests (practice guide 19)
- GOV.UK: planning permission
General information for landlords in England, checked against official sources in October 2026. It is not tax, legal or financial advice: speak to a qualified accountant or solicitor about your own circumstances.
Frequently Asked Questions
Overage, also called clawback, is a promise by a buyer to pay the seller an extra sum if the property's value rises because of a future event, usually planning permission. It lets a landlord sell now while keeping a share of any development uplift later.
Not if it is drafted properly. The buyer can sell, but the next owner must take on the overage or it must be paid.
It can if the agreement says so, for example a change of use from a family house to a large HMO.
Not very. It is usually limited to one or two properties with clear development potential.
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