The 5 Crucial Clauses Every Developer Must Negotiate
Poorly drafted overage agreements are toxic for development finance; mortgage lenders and debt funds will refuse development loans if clawback terms drain cash flow.
Clause 1: Inflation Indexation: The base value (e.g. £500,000) must increase compound annually. If a site takes 8 years to secure planning, a static base value forces the developer to pay clawback on pure inflationary growth.
Clause 2: Full Expenditure Netting: Overage must be calculated on NET development value uplift, not gross value. Every pound spent on EIA reports, planning appeals, Section 278 highway bonds, and archaeological digs must be deducted.
Clause 3: Developer Profit Hurdle: Clawback should only attach to 'super-profits' after the developer achieves an industry-standard 15% to 20% profit on cost.
Clause 4: Single Trigger vs Multiple Triggers: Ensure the deed specifies that overage is paid once only. Avoid 'rolling' overage clauses that trigger on successive planning permissions.
Clause 5: Payment Timing: Never agree to pay upon the planning grant date. Align payments to the receipt of plot sales cash proceeds.