A Henry Stewart Briefing

Selling and Buying Land Subject to Clawback, Option Rights and Overage Payments

Speakers
John Trustram Eve, Consultant, GVA Grimley
Christopher Jessel, Partner, Farrer & Co
Jeanne O’Dell, VAT Manager, RSM Robson Rhodes
Chris Roman, Tax Partner, RSM Robson Rhodes
John Samson, Partner, Nabarro Nathanson
Nigel Thomas, Barrister, Maitland Chambers
Ted Totman, Consultant, Olswang

The Issues
• Purpose of clawback/overage
• Distinction between them
• When should they be used?
• When they should not be used
• Who should use them?
- Need to sell
- Difficult sites
- Long term prospects
- Skills and experience
- Keep to core business
• Need for security
• Government policy
• Costs of setting up and administering
• Raising funds on the security of conditional rights
- What can be achieved?
- The value of the result of such a contract

Securing Full Value – The Concepts
• Tenders
• Options
• Conditional contracts
• Sales with overage/clawback
• Forward funding agreements and “kickers”
• Relative advantages between conditional contracts, options and sales with overage

Overage Sales – The Points to Watch
• Clearly identified events
• Liability of successors in title
• Timing of payment
• Calculation provisions
• Planning issues (the judicial review problem)
• Notification, negotiation and conflict resolution
• Alternative events and frustration
• Security

Options – The Traps
• Certainty (land, price, trigger events)
• Effective exercise
• Perpetuity
• Registration
• Pre-emption issues

Security for Overage (1)
• Easements
• Covenants and their deficiencies
• Ransom strips
• Determinable leases
• Reservations of air space

Security for Overage (2)
• Mortgages
• Second mortgages with limited postponement
• Repurchase options/contracts
• Land Registry restrictions

Tax: Who is liable? When will they have to pay? How much will they have to pay?
• Income tax
• Corporation tax
• Stamp Duty Land Tax
• Inheritance tax
• Capital Gains Tax
• VAT
• Valuation issues

Alternatives to Security
• Duties of care and disclosure
• Good faith
• Agency retainers
• Directors’ covenants

Getting the Drafting Right
• Case histories and the views of the Court on different approaches

Ensuring the Structure and Documentation Cover the Involvement of Special Parties
• Government
• Charities and institutions
• Rural landowners
• Public authorities
• Developers
• Property investors
• Current use occupiers
• Lenders enforcing security