A recent Chancery Division case emphasised that, when advising on an agreement for sale with overage provisions, it is important to ascertain whether future development of the land is likely.
In Francis v Barclays Bank plc [2004] EWHC 2787 (Ch); [2004] 51 EG 88 (CS), the defendant bank had provided loan facilities to a company that had been secured by a charge over assets, including property owned by the company. The company went into liquidation, owing money to the bank, which appointed a firm of surveyors as receiver. The receiver found a purchaser for the property and negotiated terms upon which a “seller’s share” would be paid to the bank if, within 10 years of the agreement date, the developer disposed of the site with the benefit of planning permission or such a permission was implemented.
The purchaser approached a partner of the receiver, offering to make an immediate payment to the bank if it agreed to a variation of those overage provisions that would cap the further payment to the bank. The receiver recommended acceptance of the offer and the deed of variation was executed.
A few months later, a draft of the local plan was published that included the property in an area allocated for possible residential development. The purchaser subsequently applied for planning permission and sold the property.
The bank issued a claim seeking damages for negligent breach of duty in respect of the advice that the receiver had given in connection with the deed of variation. The claim was upheld.
Those advising landowners should make all necessary enquiries of the local planning authority to ascertain the likelihood of planning permission being obtained for development that might realise further profit from the site than the existing authorised use. Such enquiries should ensure that all appropriate evidence is obtained with regard to the land’s status in order to refute any future claim.
Gill Castorina is an associate at Paul, Hastings, Janofsky & Walker (Europe) LLP
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A recent Chancery Division case emphasised that, when advising on an agreement for sale with overage provisions, it is important to ascertain whether future development of the land is likely.
In Francis v Barclays Bank plc [2004] EWHC 2787 (Ch); [2004] 51 EG 88 (CS), the defendant bank had provided loan facilities to a company that had been secured by a charge over assets, including property owned by the company. The company went into liquidation, owing money to the bank, which appointed a firm of surveyors as receiver. The receiver found a purchaser for the property and negotiated terms upon which a “seller’s share” would be paid to the bank if, within 10 years of the agreement date, the developer disposed of the site with the benefit of planning permission or such a permission was implemented.
The purchaser approached a partner of the receiver, offering to make an immediate payment to the bank if it agreed to a variation of those overage provisions that would cap the further payment to the bank. The receiver recommended acceptance of the offer and the deed of variation was executed.
A few months later, a draft of the local plan was published that included the property in an area allocated for possible residential development. The purchaser subsequently applied for planning permission and sold the property.
The bank issued a claim seeking damages for negligent breach of duty in respect of the advice that the receiver had given in connection with the deed of variation. The claim was upheld.
Those advising landowners should make all necessary enquiries of the local planning authority to ascertain the likelihood of planning permission being obtained for development that might realise further profit from the site than the existing authorised use. Such enquiries should ensure that all appropriate evidence is obtained with regard to the land’s status in order to refute any future claim.
Gill Castorina is an associate at Paul, Hastings, Janofsky & Walker (Europe) LLP
Related article: Surveyor negligent, rules High Court
