Summary

The purchaser of property was entitled to a declaration that, on the proper construction of an overage clause in the sale and purchase agreement, the vendors were not entitled to an additional sum in respect of each flat subsequently constructed on the property.

Facts

The claimant (W) sought a declaration concerning the proper construction of an overage clause in a contract for sale of property. The defendants (K) owned a hotel and had obtained planning permission to construct holiday cottages at the rear of the hotel. By a conditional sale and purchase agreement, K agreed to sell their interest in the land to W. The price to be paid by W was conditional upon certain matters, including the obtaining of planning permission for the construction of flats for permanent residential occupation. Under the agreement, planning permission had to be obtained by a certain date, "the longstop date", or such later date as K approved. By the time the longstop date was reached, W had been refused planning permission on three occasions, and W applied to extend the period. The ensuing dispute led to the issue of legal proceedings against K, which were compromised under the terms of a consent order extending the longstop date. A clause under the consent order provided that if W obtained planning permission to develop the property as residential flats, and carried out that development within a certain period, then W would pay K an overage payment in respect of each flat. The sale and purchase of the land went ahead, although W was never granted planning permission for the development sought. Instead, W was granted planning permission for a development to be used for holiday accommodation only. A dispute arose concerning whether K were entitled to payment under the overage clause. W contended that K were not entitled to an overage payment, since planning permission to develop the property for holiday apartments did not qualify as permission for its development "as residential flats", and sought a declaration in those terms.

Held

By describing the flats to be covered in the overage clause as "residential flats" rather than simply as "flats", the parties had clearly intended to delimit the type of flats that would be covered by that clause. The most obvious dividing line, in context, that the parties appeared to have intended was that between flats available for full-time residential occupation, for which W had originally sought planning permission, and flats limited to holiday accommodation, for which planning permission already existed. The expression "residential flats" referred to flats that the occupier would regard as their residence, which would not be a natural description of a holiday apartment. In those circumstances K were not entitled to any overage payment in respect of the development of the property for which W had obtained planning permission. A declaration would, accordingly, be made in those terms subject to the parties' agreement as to the appropriate form of order.

Declaration granted in favour of claimant