The purchaser of a £7m Ilford property has failed in an appeal against a ruling that it must pay £750,000 under an overage agreement.
Developer Lincoln & Ilford Ltd (L&I) had challenged an order for summary judgment made against it by the High Court, under an overage agreement that formed part of the terms on which L&I purchased Arodene House, Perth Road, Ilford, London from Sovereign Property Holdings for £7.35m in 2016.
L&I bought the eight-floor property with a view to carrying out residential redevelopment of office space, and a key clause in the overage agreement stated: “If a First Trigger Event occurs after the date of this agreement but before the expiry of the Overage Period the Buyer will pay to the Seller the sum of Seven Hundred and Fifty Thousand Pounds (£750,000).”
The definition of the first trigger event, under a subsequent deed of variation, was the receipt of a prior approval under the Permitted Development Order for the development of a minimum of 60 residential units.
In April 2016, Sovereign submitted an application for prior approval of 60 residential units, which was granted by the local planning authority (subject to conditions in relation to the transport and highways impacts) on 4 July 2016.
Sovereign claimed that, on that basis, the first trigger event had occurred within the overage period and so the sum of £750,000 became payable by 30 August 2016.
However, L&I ignored three demands for payment and, following a statutory demand served on it in October 2016, denied liability.
Lord Justice David Richards said: “L&I’s case, shortly stated, is that while the planning requirements were satisfied, the prior approval was given for 60 flats, not all of which could in fact lawfully be built. The construction of the full number of 60 flats would contravene provisions of the Building Regulations. It was integral to the occurrence of the First Trigger Event under the terms of the Amended OA that the 60 flats should be capable of being constructed.”
However, dismissing L&I’s appeal, and upholding the award in favour of Sovereign made by the High Court, he said that “the regime for planning and development consent and the regime surrounding building regulations are entirely separate in their purpose, legislation and enforcement”.
He said that the triggers for overage payments under the amended agreement were “clearly and expressly concerned with planning and development consent”, with the first trigger event “expressly concerned with change of use”.
He continued: “The trigger is the receipt of a Prior Approval, defined by reference solely to prior approval under the Permitted Development Order.
“There is no mention in the original agreement of compliance with Building Regulations or with any other requirements that might need to be satisfied before the Residential Units could be constructed. If it had been intended that the First Trigger Event should require any such compliance, it is in my view almost certain that the parties would have spelt it out. Both parties are experienced developers.”
