Element references and the elements they reference cannot have the same properties expressed directly on them.
However, they should be able to override the properties that are inherited from the default properties surrounding the global element decl.
But this error message, from the overlap check, is clearly saying it is looking at a SchemaDocument:format annotation, and complaining about overlap with it.
This is not correct. The overlap check should not be considering the default format of any schema when determining the overlap.
TODO: create a public test case that reproduces this error. Right now it came up in an FOUO schema that is not publicly available.