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anonguest

Uplift Clauses On Land

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A couple of questions relating to uplift clauses imposed on sales of land that, at present, have no planning permission for residential or other development - included in sale agreements so as to protect the vendors interests and ensure they get a slice of the financial pie if and when said land ever does get approval for development.

1) Is there any typical rule of thumb 'formula' that is commonly accepted in respect of specifying the percentage of value increase the vendor can claim AND the time duration applicable.

Consider the following from a plot for sale:

"....should planning consent be granted upon the site, this would trigger a claw back payment to our vendor clients of 50% of the uplift in value, with a time limit of 21 years."

Presumably the 'value' being that of the land AND new property erected on it?

Or is it something that, just like deciding on what your car is worth in your own mind regardless of what everyone else may well be selling the same model for elsewhere, is entirely at the whim/greed of the vendor - and thus open to haggling/negotiation between buyer and vendor. For example offering greater than the asking price in return for a reduction of either/both uplift percentage and duration, is not unreasonable?

2) Presumably a vendor selling land with a conditional clause such as the above attached to it is unlikely to oppose any speculative application for planning permission, as it would not be in their financial interests to do so - but of course they reserve the right to oppose if the development applied for is, in their minds, to garish or unacceptable.

BUT.....once said period had elapsed and no permission been granted or deliberately not been applied for at all during that time, and the buyer THEN applied for permission from local authority....the vendor could, vindictively, oppose any such development?

3) Consider a large plot of, say, 2 acres. Obviously a house erected on a 2 acre site would result in a new valuation that would be significantly higher than the same house being erected on a 1/4 acre site in the same area?

Thus....could the buyer, in an attempt to get one up on the vendor and ensure only having to pay the smallest uplift possible to the vendor, deliberately have the plot 'subdivided' into smaller plots? Then, whilst still being the legal owner of all the individual new plots, build on just one of these smaller plots? The new valuation, as per the terms of the uplift clause, would only apply to that new smaller plot? BUT.....the buyer continues to 'enjoy' the benefits of the use of the remaining adjacent land?

4) What IF, as and when such a clause may be 'triggered' the land buyer (and now developer) does not have the funds to actually pay the agreed percentage, in cold hard cash? Presumably the worst that the vendor can do is seek to have a 'charging order' placed on the property, to ensure receiving the money one day in the future, rather than actually force the sale of the property to get the funds there and then?

Edited by anonguest

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A couple of questions relating to uplift clauses imposed on sales of land that, at present, have no planning permission for residential or other development - included in sale agreements so as to protect the vendors interests and ensure they get a slice of the financial pie if and when said land ever does get approval for development.

1) Is there any typical rule of thumb formula that is commonly accepted in respect of specifying the percentage of value increase the vendor can claim AND the time duration applicable.

Consider the following from a plot for sale:

"should planning consent be granted upon the site, this would trigger a claw back payment to our vendor clients of 50% of the uplift in value, with a time limit of 21 years."

Presumably the 'value' being that of the land AND new property erected on it?

Or is it something that, just like deciding on what your car is worth in your own mind regardless of what everyone else may well be selling the same model for elsewhere, is entirely at the whim/greed of the vendor - and thus open to haggling/negotiation between buyer and vendor. For example offering greater than the asking price in return for a reduction of either/both uplift percentage and duration, is not unreasonable?

2) Presumably a vendor selling land with a conditional clause such as the above attached to it is unlikely to oppose any speculative application for planning permission, as it would not be in their financial interests to do so - but of course they reserve the right to oppose if the development applied for is, in their minds, to garish or unacceptable.

BUT.....once said period had elapsed and no permission been granted or deliberately not been applied for at all during that time, and the buyer THEN applied for permission from local authority....the vendor could, vindictively, oppose any such development?

3) Consider a large plot of, say, 2 acres. Obviously a house erected on a 2 acre site would result in a new valuation that would be significantly higher than the same house being erected on a 1/4 acre site in the same area?

Thus....could the buyer, in an attempt to get one up on the vendor and ensure only having to pay the smallest uplift possible to the vendor, deliberately have the plot 'subdivided' into smaller plots? Then, whilst still being the legal owner of all the individual new plots, build on just one of these smaller plots? The new valuation, as per the terms of the uplift clause, would only apply to that new smaller plot? BUT.....the buyer continues to 'enjoy' the benefits of the use of the remaining adjacent land?

Never Never buy land with a uplift clause and only ever buy freehold,they are ether selling it or keeping it.Uplifts are pure greed from people needing cash flow and running out of life,do not encourage them.

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Never Never buy land with a uplift clause and only ever buy freehold,they are ether selling it or keeping it.Uplifts are pure greed from people needing cash flow and running out of life,do not encourage them.

I actually agree with you on the 'greed' point of view. An uplift clause has always struck me as petty vindictive jealousy by someone seeing what was once theirs suddenly take on greater value, solely through the enterprise and risk taking of the person buying it.

A crude example could be me selling a little used movie camera to a bloke, who then uses it to film some 'world event' (e.g JFK assasination, etc) that results in him making a lot of money from selling the film rights - but me imposing an 'uplift' clause at the time of camera sale so that I can get a share of any money that bloke makes from making good use of said camera.

This is why I have posed some of the questions I have - as they are clearly an exploratory of possible ways one can mitigate/reduce the effect of an uplift clause and so in effect, stick your finger up at the greed of the vendor.

Edited by anonguest

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Nothing useful to add - but I'm inclined to agree. I've seen some pretty ridiculous stuff around here eg 40 year clauses for 40% of any uplift. I assume they're negotiable, but if any landowners are watching - it's really offputting. I just assume you are a greedy **** who can't be ****ed to do any of the work yourself and therefore it's pointless entering into a negotiation.

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Nothing useful to add - but I'm inclined to agree. I've seen some pretty ridiculous stuff around here eg 40 year clauses for 40% of any uplift. I assume they're negotiable, but if any landowners are watching - it's really offputting. I just assume you are a greedy **** who can't be ****ed to do any of the work yourself and therefore it's pointless entering into a negotiation.

I'm particularly curious to find out how 'enforceable' in practice they are. As mentioned in original post at top. Buyer buys land, buyer develops land (i.e build house on it), buyer does not have cash to pay the vendor the agreed sum due. What CAN the vendor do about that?

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...

Consider the following from a plot for sale:

"....should planning consent be granted upon the site, this would trigger a claw back payment to our vendor clients of 50% of the uplift in value, with a time limit of 21 years."

...

So it's only the planning permission being granted, not the actual cashing in that triggers the clause? It's possible to apply for permission on land that you dont own and have no interest in?

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So it's only the planning permission being granted, not the actual cashing in that triggers the clause? It's possible to apply for permission on land that you dont own and have no interest in?

Good point. Re-reading the blurb again it does indeed suggest that. One assumes (hopes!) that this, though, is not was is actually intended - but rather is just sloppy wording by the EA ?

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I'm particularly curious to find out how 'enforceable' in practice they are. As mentioned in original post at top. Buyer buys land, buyer develops land (i.e build house on it), buyer does not have cash to pay the vendor the agreed sum due. What CAN the vendor do about that?

I would have thought it would be a case of the county courts and then a charge being placed on the land/development

Are these clauses written into the freehold just like a charge in the first place though ?

Edited by long time lurking

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I would have thought it would be a case of the county courts and then a charge being placed on the land/development

Are these clauses written into the freehold just like a charge in the first place though ?

That's what I am assuming - and that the land vendor would not actually be able to force the, short of cash, buyer and developer from selling the now more valuable site (by virtue of the fact there would be a house on it),in order to raise the funds to pay his obligation?

BUT, IF the vendor is limited, at worst, to being able to place a charging order on the property then it could be decades before the property is voluntarily sold on the open market again. The owner, 'defaulting' on the uplift clause, could outlive the vendors? Would the owner be able to just 'pass on' the property to his children/relatives as an inheritance and still not result in the property being forcibly sold? or would a straightforward inheritance be treated as a change of ownership in the same way as a sale where money changes hands? In other words could paying the charge be postponed for so long as to be irrelevant to the original buyer and even possibly those he in turn may bequeath the property to?

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Never Never buy land with a uplift clause and only ever buy freehold,they are ether selling it or keeping it.Uplifts are pure greed from people needing cash flow and running out of life,do not encourage them.

Completely agree with this. You can absolutely guarantee a world of pain if you sign one of these, even if you never intend to build on the land.

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That's what I am assuming - and that the land vendor would not actually be able to force the, short of cash, buyer and developer from selling the now more valuable site (by virtue of the fact there would be a house on it),in order to raise the funds to pay his obligation?

BUT, IF the vendor is limited, at worst, to being able to place a charging order on the property then it could be decades before the property is voluntarily sold on the open market again. The owner, 'defaulting' on the uplift clause, could outlive the vendors? Would the owner be able to just 'pass on' the property to his children/relatives as an inheritance and still not result in the property being forcibly sold? or would a straightforward inheritance be treated as a change of ownership in the same way as a sale where money changes hands? In other words could paying the charge be postponed for so long as to be irrelevant to the original buyer and even possibly those he in turn may bequeath the property to?

ALSO.....does the nominal value of a charging order warded by a court to a vendor rise with time? OR would the court simply award it at the level that it may be at the time of default? IF the latter then time would be the defaulting buyers best friend and ally?

For example, buyer gets planning permission. New value of property results in the buyer having to pay, as per terms of uplift clause, £50,000. Buyer refuses, either through choice or inability to pay. Charging order for £50,000 is granted by courts to the vendor. Buyer doesnt even bother to contest it.

Buyer subsequently, in his old age 40 years later, eventually sells the property for vastly more than it was worth when it was built. The £50,000 still due would, through inflation, be a relative pittance in purchasing power terms - and he gladly pays it to the vendor (or their descendants).

End result? Buyer gains land 'on the cheap' to build a home to live in for duration of the bulk of his life - and greedy vendor never really gets to see the windfall they hoped for.

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,unless

ALSO.....does the nominal value of a charging order warded by a court to a vendor rise with time? OR would the court simply award it at the level that it may be at the time of default? IF the latter then time would be the defaulting buyers best friend and ally?

For example, buyer gets planning permission. New value of property results in the buyer having to pay, as per terms of uplift clause, £50,000. Buyer refuses, either through choice or inability to pay. Charging order for £50,000 is granted by courts to the vendor. Buyer doesnt even bother to contest it.

Buyer subsequently, in his old age 40 years later, eventually sells the property for vastly more than it was worth when it was built. The £50,000 still due would, through inflation, be a relative pittance in purchasing power terms - and he gladly pays it to the vendor (or their descendants).

End result? Buyer gains land 'on the cheap' to build a home to live in for duration of the bulk of his life - and greedy vendor never really gets to see the windfall they hoped for.

ALSO.....does the nominal value of a charging order warded by a court to a vendor rise with time?

If it was £30k today it would still be the same in 50 years from what i know ,unless it was chared at a % of value ?

A relative had one placed on a piece of land in the early seventies by the council (removal /disposal of a dangerous fence) for 2k , they paid it a couple of years ago when they sold it and it was still 2k

Edited by long time lurking

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,unless

If it was £30k today it would still be the same in 50 years from what i know ,unless it was chared at a % of value ?

A relative had one placed on a piece of land in the early seventies by the council (removal /disposal of a dangerous fence) for 2k , they paid it a couple of years ago when they sold it and it was still 2k

Now THAT is uber interesting to hear! IF, and I say IF, charging orders are 'fixed' (i.e the nominal value does not change) then this could indeed be a way to reduce the eventual impact and effectiveness of these greedy uplift orders to, potentially over a long enough time frame, negligible levels.

Indeed EVEN IF some 'percentage with time' adjustment was appended to such a charging order, e.g such as CPI......well we all know how badly these price inflation indexes understate inflation and loss of purchasing power!

I am seriously tempted to pay for professional legal consultation on this matter to determine if the odds are that this would indeed likely be the outcome - and IF so then take my chances and buy such a plot and ignore the resulting uplift charge and court order.

Edited by anonguest

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I am seriously tempted to pay for professional legal consultation on this matter to determine if the odds are that this would indeed likely be the outcome - and IF so then take my chances and buy such a plot and ignore the resulting uplift charge and court order.

Been there and done that. The lawyer I used said that, if I was running it a business then, sure, just treat it as another business risk/cost but that, if I was planning on it being my home then to turn and run. If you're dealing with the kind of people that would require the charge in first place you can absolutely guarantee that they're going to be ruthless b*stards who will hound you for as long as it takes. The upside is entirely with them and all the downside is yours. The best analogy I can come up with is that you're actually giving them a free call option. Only a mug would do that.

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Been there and done that. The lawyer I used said that, if I was running it a business then, sure, just treat it as another business risk/cost but that, if I was planning on it being my home then to turn and run. If you're dealing with the kind of people that would require the charge in first place you can absolutely guarantee that they're going to be ruthless b*stards who will hound you for as long as it takes. The upside is entirely with them and all the downside is yours. The best analogy I can come up with is that you're actually giving them a free call option. Only a mug would do that.

"who will hound you for as long as it takes"

Provided they stick within the law and accept the limitations of a charging order, then I couldn't care less what they think or say of me - and can go f**k themselves as far as I would be concerned.

IF they engaged in activity that crosses the line and indeed begin to 'hound' me....then that amounts to harrassment? and all the consequences that they would suffer from me in return. I mean if even payday loan lenders, etc get warned about 'harassment' then I cant see why such vendors wouldn't suffer consequences too IF they engaged in 'hounding' the defaulting land buyer.

Edited by anonguest

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Been there and done that. The lawyer I used said that, if I was running it a business then, sure, just treat it as another business risk/cost but that, if I was planning on it being my home then to turn and run. If you're dealing with the kind of people that would require the charge in first place you can absolutely guarantee that they're going to be ruthless b*stards who will hound you for as long as it takes. The upside is entirely with them and all the downside is yours. The best analogy I can come up with is that you're actually giving them a free call option. Only a mug would do that.

"Been there and done that."

Forgot to ask you to elucidate/expand on that particular comment a bit more. Did it apply to such a 'residential development' scenario, as described here? Or was it something somewhat different?

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"who will hound you for as long as it takes"

Provided they stick within the law and accept the limitations of a charging order, then I couldn't care less what they think or say of me - and can go f**k themselves as far as I would be concerned.

IF they engaged in activity that crosses the line and indeed begin to 'hound' me....then that amounts to harrassment? and all the consequences that they would suffer from me in return. I mean if even payday loan lenders, etc get warned about 'harassment' then I cant see why such vendors wouldn't suffer consequences too IF they engaged in 'hounding' the defaulting land buyer.

Your call, but continual court summons over a prolonged period are really not something I would want to live with.

edit:goddam apostrophes

Edited by TheBlueCat

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Your call, but continual court summons over a prolonged period are really not something I would want to live with.

edit:goddam apostrophes

I understand entirely. BUT.....IF charging orders are civil court matters what's the worst that they can do?

So you go to court. So what? Court demands you pay. You show openly that you genuinely aint got the cash. You had enough cash to build the house, but things didn't work as expected and now....you aint got the rest you thought you would have. Court assigns a charging order. You walk out and back to your home. End of.

I mean, the court can't force me to take on a mortgage to pay the debt to the vendors?!

Repeated court summons? Why? On what grounds? To achieve what, once a charging order had been placed?

Just so happens I am out of the country a lot of the time and the post just piles up on the floor below my letterbox. I get home from an extended trip away and see, oh dear oh dear what a pity, I missed an invitation to attend court. What a shame. ;)

Edited by anonguest

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Repeated court summons? Would that happen? On what grounds? To achieve what, once a charging order had been placed?

A half decent lawyer will always find grounds to get back to court - just ask anyone who's been through a problematic divorce. I would guess in this case, all it would need was the slightest evidence that your financial situation had changed to trigger it. If you are out of the country all the time then, even if it's the small claims court, then you'll have to pay a lawyer to go and represent you.

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I mean, the court can't force me to take on a mortgage to pay the debt to the vendors?!

Actually, I wouldn't assume that at all. A judge can, in theory, order anything he/she wants to order from what I recall from my law lectures (back in the 80s so that might be misremembered or out of date or both).

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A half decent lawyer will always find grounds to get back to court - just ask anyone who's been through a problematic divorce. I would guess in this case, all it would need was the slightest evidence that your financial situation had changed to trigger it. If you are out of the country all the time then, even if it's the small claims court, then you'll have to pay a lawyer to go and represent you.

"If you are out of the country all the time then, even if it's the small claims court, then you'll have to pay a lawyer to go and represent you"

Is that an actual fact?

As for change in financial circumstances......Consider the following not unreasonable hypothetical.

Bloke 50 years of age with modest cash pile. Naively buys plot of land on the cheap, fully aware of uplift clause.

Proceeds to obtain planning permissison to build a home on said plot. Then uses remaining cash to build a house, with intention to obtain a modest mortgage on the completed property only to the value of the uplift charge then due.

BUT....to his complete surprise (well I did say he was naive) he is declined for a mortgage for any one of a number of reasons. Perhaps, naively because the house is of 'unconventional' construction or such like. Or maybe because of his age and/or low earnings, etc.

None of those circumstances will change and so his financial circumstances will not change (certainly not as he approaches and passes retirement age).

Of course the bloke fully sympathises with the land vendors and offers to make good the payment WHEN the property is eventually sold, as per terms of the likely charging order a court would impose.

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Actually, I wouldn't assume that at all. A judge can, in theory, order anything he/she wants to order from what I recall from my law lectures (back in the 80s so that might be misremembered or out of date or both).

You're kidding right? OK. SO a judge order me to apply for a mortgage to obtain the money. I apply and am declined. So what does that achieve. (he says shrugging his shoulders)

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