Analysis of the 3 Primary Overage Triggers
The choice of trigger event profoundly affects development cash flow and project risk:
1. Planning Grant Trigger: Favoured by sellers. The payment falls due within 20 to 28 working days of the planning authority issuing the decision notice. Danger for developers: If market conditions turn and building is delayed, the developer owes substantial cash before securing development finance.
2. Implementation Trigger: Favoured by lenders. Payment is due within 28 days of commencing development under Section 56 of the 1990 Act. Developers can secure planning and market the site without triggering overage until construction starts.
3. Disposal / Realisation Trigger: Favoured by developers. Overage is paid out of actual plot sales revenue as individual houses or commercial units are sold and legal completions occur.
| Trigger Mechanism | When Payment Is Due | Advantage to Buyer / Developer | Risk to Buyer / Developer |
|---|---|---|---|
| Grant of Planning Permission | 20 working days post planning notice | Fixes liability early; clear planning gain | Severe cash flow risk if finance is delayed |
| Implementation (Section 56) | Upon digging foundations / site start | Can hold planning permission without paying | Trench digging triggers debt before sales |
| Disposal / Sales Realisation | As completed homes are sold | Zero debt risk; paid from actual sales cash | Requires ongoing open-book accounting with seller |