My neighbour wants to buy my two acre paddock. I'm happy to sell the land as I'm not currently using it, but I have a suspicion that he may want to sell it as a housing plot at a later date and make a significant profit. If that happens in the future could I secure any of that profit?
You may be able to, and it depends on how strongly you feel about it, as there is a lot of legal work that has to go into your hope and expectation of sharing in the possible profit. Because there is so much legal work, for something that may never happen, you have to weigh up very carefully whether you are prepared to go through the extensive and expensive legal work in order to secure it.
You can request that your neighbour buy the paddock with a deed of covenant or overage in place. Overage is a term used to describe a sum of money which a seller may be entitled to be paid, on the fulfilling of certain conditions by the buyer, usually development of land. You are therefore going to sell the paddock with the hope and expectation that, if the buyer develops the land, you will have a share of the enhanced value of the land if planning permission is granted. This share is based on a percentage of the enhanced value, which can range from 5% up to 50%. There is also a defined time period for which the overage lasts, which again can range from 5 years to 50 years.
Factors you must consider before you impose an overage on the paddock are whether your neighbour will ever get planning permission to develop the paddock and also, if that is developed, will this have an adverse effect on your home in the future. If you decide you are going to impose an overage, then you should take solid advice as to time period and percentage uplift. The time period must be practical. If it is for too many years then, in practice, when the time comes for the overage to possibly be implemented it could be very difficult to locate you or your successors in title to actually implement it thus frustrating the agreement altogether.
Although in theory you can secure some of your neighbours potential profit, in practice it is not as easy as that. You should take advice from your solicitor as to the feasibility of imposing an overage.
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