Pride and overage: A cautionary tale for landowners and their advisors  

How to lose millions: A chilling tale for landowners and their advisors on the importance of obtaining specialist property law advice.

It is a truth universally acknowledged that a gentleman in possession of land that is subject to an overage agreement must be in want of a specialist property lawyer.  

Ignore these words at your peril, for there follows here a cautionary tale which should serve as a warning about what can happen when a property agreement isn’t thoroughly examined. The names and locations have been changed, but the account you are about to read is based on real events. 

Our tale begins  

Sir William Darcy, the great great great great grandson of the charming Elizabeth Bennet and the dashing Colin Firth is the present owner of the Pembury Estate, which has been passed down through the family for two hundred years.  

The local land agent, Mr Browning, of the well-regarded firm, Browing Partridge, has come to advise Mr Darcy that part of his estate, several miles distant from the Manor House, presents a valuable development opportunity.  

“It is something that I myself have been thinking of,” said the esteemed landowner. “It is 2015. The world has moved on, and I have no wish to remain wedded to the past. The grounds are too large to manage, and the income is barely sufficient to cover the children’s school fees. Lady Darcy fears that we may have to send our youngest three children to a state school next year.”  

“I had not realised that straits were so dire, Sir William.”  

“Regrettably, it is so. The only thing that concerns me is that our family solicitor, Mr Dombey, has often made mention that Cowbell Meadow is subject to… what did he call it? An overage agreement? I believe it is in favour of the Pembury and Newcastle Coal Board.”  

“Such agreements are common in these parts, Sir William. When your great grandfather, the honourable Captain Horatio Darcy, acquired the land from the Coal Board, it was just pasture for his growing herd. He paid barely anything for it, but he promised to pay the Coal Board 25% of the increase in the value the land should it ever be developed. It was a fair deal, given the use of the land at the time.”  

“And Mr Dombey advises that the obligation to pay that sum has passed to me with the inheritance of the estate.”  

“We must defer to Mr Dombey’s learned opinion on that point. As your land agent, all I am able to do is report to you that the development value runs to perhaps £10 million.”  

“As much as that? But I would have to pay £3 million of it to the Coal board?”  

“Perhaps only £2.5 million, Sir William.”  

“Why, that is even better. After all, those school fees will not pay themselves. Lady Darcy shall be delighted!”  

And so it was that Cowbell Meadows became a desirable executive housing development. And Sir William’s seven children were able to complete their education at an adequate public school, whose fees were now just within the means of the family.  

The tale continues, with a twist  

But that is only half our tale. The rest was related to me by my dear friend, the delightful Miss Emma Woodhouse, the renowned Real Estate solicitor, at Messrs Gunner and Cooke. In the development of Sir William’s land, Miss Woodhouse represented the interests of the Coal Board. Her professional discretion is, as I’m sure you’re aware, second to none, and she has sworn me to secrecy, so what I am about to tell you must be held in the strictest confidence.  

Mr Dombey, solicitor to the Darcy family, is of course, as sincere a gentleman as you might hope to meet. But he is not a property lawyer, is not versed in the intricacies of that field. He had seen the reference to the overage agreement on Sir William’s title, and bless him, had simply advised that the £2.5 million be offered open-handedly to the Coal Board. 

What went wrong  

Mr Dombey failed to check whether the burden of the overage agreement was enforceable against Sir William. Miss Woodhouse tells me that her own advice to the Coal Board was that, because of the way this particular overage agreement had been drafted, and the manner in which the land had been inherited, Sir William was not liable for the overage.  

The law on overage agreements  

The reason is intriguing. In English law, the burden of an overage agreement is a personal obligation. It doesn’t bind future landowners in the way that many people think it does. When land is transferred, the person who entered into the overage agreement remains liable for ever, and so he takes an indemnity from the new owner. And when that new owner transfers the land, he does the same thing. This creates a chain of indemnities which allows the person with the benefit of the overage to get the development premium from whoever the current owner may be, regardless of how many hands the land has passed through. There were other methods available to the Coal Board for protecting their overage agreement, such as the imposition of a restrictive covenant, but they had not done so on Cowbell Meadow. 

In this instance the estate of Captain Horatio Darcy remained liable, but Mr Dombey didn’t realise that he had to check that the chain of indemnity had passed to Sir William. Miss Woodhouse did check, and she could see that the chain had been broken, and that the Coal Board was in no position to demand a penny from Sir William.  

So, Sir William handed over £2.5 million that he didn’t have to. And to this day he is none the wiser. But imagine the fine education that could have been had by the Darcy children if only the family had engaged a specialist real estate solicitor.  

Take aways:  

1. For landowners – This isn’t just about overage agreements. Many aspects of property law are more complicated than most solicitors realise. There are hidden traps everywhere. 

2. For lawyers – Don’t dabble in what you don’t know. Reach out to a property specialist.  

3. For everyone – To avoid costly mistakes, always get your property agreements checked by a specialist property solicitor.  

For specialist advice, or to talk through initial strategy ideas, contact Kamran here.