Earlier this year, I gave a talk about overage to a group of local commercial property surveyors. Those of you who were there may remember my focus on getting the heads of terms crystal clear between the parties. My aim was to explain why overage arrangements can become very complex and lengthy once lawyers get involved – it is because the stakes are high, and the devil is in the detail.
One point I made was regarding the very wide statutory definitions of “Development” and “Planning Permission”- something absolutely crucial in terms of overage or any other property transaction where a change of use is going to be the key driver or trigger for payment. These are the first definitions I take my red pen to when acting for a purchaser or developer.
A recent case regarding the “Development” of a farm caught my eye and demonstrates the point perfectly.
In Fishbourne Developments Ltd v Stephens  EWHC 932 (Ch) the High Court was asked to interpret a written option agreement for the purchase of a farm. The drafting was very loose and the party with the benefit of the option sought to use this to their advantage, in order to acquire the entire 117-acre farm at a discount price. To activate the option to purchase, they simply needed to demonstrate that they had obtained “planning permission granted by the Local Planning Authority permitting any development of the Property”.
I imagine that the intention of the landowner was to catch a scenario where the claimant had invested significant time and effort in obtaining permission to change the use of the farm; by way of a residential or commercial new development perhaps. However, the claimant took the wording at face value and claimed the option had been triggered by the grant of planning permission giving consent for a new roof on an agricultural building.
On the face of it, this was certainly accurate. Permission was granted for material alterations, even if it had not been implemented by the works being started. The trigger was any development, even if this was over a tiny part of the farm! The permission only needed to be granted, and it was accepted that the claimant never had any intention of implementing the permission anyway!
Luckily for the landowner (as the defendant), the Court found in its favor and dismissed the claim. However, this was not before significant time and effort (not to mention legal costs and bad feelings) were expended to get to the bottom of it. The Court had to look past the broad drafting and impose its own interpretation, applying commercial common sense where the legal documents lacked such clarity.
This underlines our belief that any commercial deal should be carefully planned out, with all terms being made crystal clear at the outset. In this case, careful thought should have been given to the specific type of development that would trigger the option, whether it applied to whole or part of the farm, and if it needed to be authorised by the grant of planning permission; or the physical implementation of it.
It is also a timely reminder to carefully consider definitions in other property contexts, such as whether to add the words “or any part of it” after “Property” when referring to easements, restrictions, rights or provisions relating to a property. To do so might have unintended consequences.
Involving your lawyer when heads of terms are agreed can avoid costly litigation down the line. Our Real Estate team has years of experience dealing with all kinds of unusual and complex property matters, so please get in touch if we can help you.