Definition 1
Net Zero Overage means a sum to be paid by [Party A] if [Party A] fails to meet its Net Zero Objectives. This will be calculated in accordance with the formula in [clause OR schedule ●].
Definition 2
Net Zero Objectives means [all of the following]:
(a) maximise the proportion of housing in the Development that meets Level 6 of the Code for Sustainable Homes [or any successor or equivalent standard];
(b) use construction materials with the lowest Embodied Carbon reasonably available;
(c) maximise the generation of renewable energy on the Development;
(d) minimise the use of heating and hot water technologies that use Hydrocarbons or produce Greenhouse Gases;
(e) establish a programme to produce and sell renewable electricity generated by the Development to residents or third parties;
(f) maximise carbon sequestration and storage through nature-based solutions (afforestation, soil carbon enhancement) and engineered approaches (direct air capture with storage), ensuring permanence and additionality;
(g) use Offsetting for the Development as a last resort;
(h) minimise the use of energy by the development using smart grid, demand side energy management and other technologies;
(i) prioritise the use of electricity from Renewable Energy Sources over all other types of fuel on the Development;
(j) maximise the use of Electric Vehicles within the Development including by installing a substation with sufficient capacity to be able to support the related charging requirements; and
(k) connect into existing district heating schemes where possible.
Drafting notes and guidance
An overage clause is generally included in a commercial property or land sale contract by the seller so that the seller is entitled to receive additional funds post-completion if a ‘trigger event’ takes place.
In this case, the trigger event is the buyer’s failure to meet the net zero objectives (as defined) post-completion.
Rory’s Clause (Net Zero Land Promotion Agreement) uses this definition to do both of the following:
- discourage buyers from failing to meet the net zero objectives set in the sale agreement
- allow landowners to influence the climate impact of a development.
Option 1
The specific method used to calculate the Net Zero Overage will need to be determined by the contracting parties. However, any Net Zero calculation used should follow scientific principles, which may include consideration of the following:
- additionality: only counting emission reductions that would not otherwise occur;
- permanence: accounting for the risk of reversal in natural carbon storage methods;
- leakage: addressing emissions displacement to other locations or sectors; and
- measurement uncertainty: including confidence intervals in carbon calculations.
Option 2
If using this definition, consider which of the net zero objectives need to be included in your agreement and tailor the menu accordingly.