Landowners who sell off part of their land to housebuilders are often concerned about the sold off land being overdeveloped.  

The basis of the landowner’s concern is usually as follows: (1) will the local village and its services cope with the additional people in the area? (2) will the local village lose its character if too many houses are built? (3) will the roads and infrastructure have sufficient capacity for the additional houses? (4) will this prevent the landowner obtaining planning permission in the future to put houses on other parts of its Estate; or (5) could the landowner have got a better price if it had factored in the additional houses?  

Landowners do have a couple of tools at their disposal.

Firstly, if the landowner continues to own adjoining land, they can put a restrictive covenant on the title to the land being sold. This can restrict the housebuilder from building more than a set number of houses on the land. This will not only bind the housebuilder, but also anyone to whom they sell the land. However, a restrictive covenant is not watertight. The housebuilder (or their successors in title) could apply to the Land Tribunal for the restrictive covenant’s waiver, discharge or modification.

Secondly, a landowner could ask the housebuilder to enter into an overage agreement. This could be structured in the following ways: 

• If the housebuilder’s profit from the plot sales exceeds an agreed amount, then the landowner is paid a percentage of the profit exceeding the agreed amount.  
• If the sale price was determined on x number of houses and the housebuilder then obtains planning permission for y number of houses, then the landowner is paid a percentage of the resultant increased market value of the land. 

Overage is a contractual commitment and will not automatically transfer to the housebuilder’s successors in title. The most common way of protecting overage, is to procure a contractual commitment from the housebuilder not to dispose of the land without its successor entering into a similar agreement. This is then protected by way of a restriction on the title, preventing the Land Registry registering the transfer of the land, without this obligation having first been complied with. However, overage is complex and there are a number of bear traps which landowners will need to avoid. 

If you are agreeing to a sale of a parcel of land on your Estate and are concerned about keeping some control over the number of houses built on the sold parcel of land, we would be happy to discuss this with you further.