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Conditional Sales, Options, Overage and Pre-Emption

In commercial land and transactions, there is often a situation or deal that involves a sale that is conditional upon an event which at the outset has not been determined, such as the granting of planning permission or a secondary acquisition.

The question for the parties is then whether the buyer will sign a conditional contract or be granted an option. If the parties have negotiated that the land sold will be subject to a further payment to the seller within a specified period of years in the happening of a future event that increases the lands value, the payment is a claw back/overage.

A conditional contract means that once signed, the entire deal is under contract and both sides are bound subject only to the conditions being met.

An option places the option holder (usually the buyer) in control of the situation and the deal.

A conditional contract provides a more certain situation in that the land owner knows he has sold subject only to the condition being met.

Overage is a property or land seller’s right to receive additional payment(s) from a buyer at a future date. That date is usually after the sale of the property or land to the buyer. The trigger for this right to receive payment is usually when some event happens that increases the value or condition in the sale contract is satisfied.

Pre-emption is the right granted to another of first refusal to buy when you sell or part with your property.

If you need any help with this area of land law, please contact our specialist property team which is led by Michael Morgan. We can help clients to find resolution in the most complex of cases. Michael is a senior property /land law solicitor now specialising in land and property dealings of this sort. Contact Michael on 01204 377632 or at michael.morgan@afglaw.co.uk

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