New research has revealed how including overage and clawback provisions in property deals can put off buyers and dent sale prices.
The study by Melissa Hutcheson from City University, supported by Capita, showed that 68% of the private sector firms polled have not bid or bid less on property owing to these provisions being attached. The main reasons cited for this were an under-appreciation of developer risk and the possibility of a future payout.
Of the respondents, 53% had had either a legal dispute or financial issue through overage and clawback provisions being included in property deals.
The expected proportion of overage and clawback provisions made in the past five years that will result in additional money being received by the original landowner is 35%.
Paul Clark, development director at Capita, said: “There is a well publicised increase in pressure on the public sector to release land, yet equal pressure to ensure maximum returns. As such, this is an opportune time to explore how overage provisions are contributing to the needs of the public sector and how they are viewed by the private sector.”
