Overage payment: request to appoint an independent expert must be made within a reasonable time

Care needs to be taken when drafting the triggers for payment and the dispute resolution mechanism in overage clauses. The High Court has considered in Bastholm and others v Peveril Securities (Dalton Park Retail) Limited and others [2013] EWHC 438 (Ch) the provisions of an overage deed of May 2000 between a consortium of shareholders and a development company concerning the development of land at Dalton Park in County Durham. The deed, which was valid for a period of 15 years, provided that the consortium was entitled to payment of the open market value of “phase 2” land after deduction of certain development costs and subject to a minimum threshold, once development of the land had taken place. Development excluded infrastructure works but not permanent car parking. Any dispute under the deed was to be determined by an independent expert. Development of the phase 1 land commenced in 2002. Some work to construct car parking took place on the phase 2 land between April and mid-May 2002 but the principal development works only commenced in May 2015, outside the 15-year period. The consortium had sought the appointment of an independent expert in May 2014 to determine its entitlement under the deed. The first defendant disputed the validity of the appointment arguing: i) that the consortium rights were joint and this was not satisfied since the trustee in bankruptcy of one member had taken a neutral stance to avoid any cost liability; and ii) that the appointment was out of time since works to the phase 2 land had commenced in 2000. Was the appointment valid? The court determined that as a matter of construction all members of the consortium were required to apply for the appointment of an expert. Since the trustee in bankruptcy did not consent to being a party the request and the appointment were invalid. Development for the purposes of the deed included the car park works in 2002 but at that time the open market value of the land was not sufficiently high to trigger a payment. The main development took place after expiry of the relevant 15-year period. For limitation purposes the request to appoint an expert must be made within a reasonable period to be valid and is then capable of being enforced by court proceedings for 12 years from the request. The reasonable time had not elapsed after April/May 2002 or by the time of the request in 2014 since both were within the 15-year period. However, it had long since passed now and the consortium could not bring a fresh application. Louise Clark is a property law consultant and mediator