Registering Overage Agreement

A buyer will not always be happy if overheated payments are mandatory for his rightful holders. After paying for overruns on the basis of a building permit that he obtained for a given development, the buyer may wish to have the opportunity to sell on the land to a third party free of overruns. However, the seller might wish that the overrun provisions remain in effect after the buyer has sold the land with a building permit, if the legal successor to the buyer, instead of implementing the building permit obtained by the buyer, then obtains the building permit for a higher use value system or for the development of a larger area of the land. The over-payment and calculation clauses can be very complex, so it is absolutely necessary that the formula and wording be correct and clear, since failure to do so correctly means that the overpayment payment is incorrect and could lead to very costly litigation. Overtaking agreements are therefore strongly put in place when they are not clear or lead to uncertainty, but, if treated correctly, overtaking is a benefit for all homeowners who wish to participate in the benefits of the future development of real estate. There will also be an in-depth debate on development costs, which can be deducted before the overcharging is paid. It is not unreasonable to deduct certain costs, since a developer accepts them to obtain the higher value or income that the former owner wants to benefit from. However, the costs that can be deducted and those that decide on these costs must be carefully reconsidered. If a developer is granted the freedom to deduct costs at their sole discretion, there is a risk of including certain costs that were not essential to achieving the increased value. It is therefore necessary to agree on a mechanism for the recipient company to limit or approve eligible costs, to verify accounts and invoices to ensure the validity of costs, or, at the very least, to ensure that “reasonable and properly incurred” costs are taken into account in the calculation. The buyer may wish that certain assignments would be excluded from overtaking – for example, the purchase of individual land after the completion of the houses (provided that the buyer had also paid the seller for obtaining or executing the building permit for the construction of the houses). This article is for real estate investors and developers who want a better understanding of the conditions under which the over-operating agreements apply.