Does anyone have experience of restrictive covernance?

(42 Posts)
ozzia Mon 28-Sep-15 20:16:20

We're 99% of the way through the process and our locum solicitor messed up, not telling us not to contact the covenentee so I did - he knew I was planning to. Now our solicitor is back and can't get us indemnity insurance. Does anyone have experience of just extending houses without telling the company with the covernance?

I'm really angry with the locum solicitor

wowfudge Mon 28-Sep-15 22:31:49

Okay - so what is the restrictive covenant exactly? Who holds the covenant - a company, an individual? Does the covenant interfere with your plans for the house or might that be the case in the future?

As for the locum - presumably you have told your solicitor what has happened? Do you have any documented evidence that the locum knew you planned to approach the covenant holder, but didn't advise you against it?

ozzia Mon 28-Sep-15 22:38:10

The covernance is owned by a company. It interferes with all our plans for the property (loft and rear extensions). They are trying to charge a stupid amount of money for the letter to say the work is OK.

Yes my solicitor knows, he tried to stop me but it was too late. He has seen the emails

busyboysmum Mon 28-Sep-15 22:43:38

Don't quite understand the problem here. If there's a person with the benefit of a covenant who needs to grant consent then they need to be approached if you've not yet done the work. How can you get indemnity insurance for something that has not happened yet?

mandy214 Mon 28-Sep-15 22:55:59

Do you mean the freeholder / management company? For example, our house is leasehold and we are required to seek permission for structural work (ie extension) from the freeholder. It is fairly common. As you said, the freeholder / management company then gives you permission in a letter. Is this what you mean?

If you extend in breach of your lease (without permission) they could in theory end your lease. You would then lose the house. More likely is that they can force you to take it down or force you to seek retrospective permission from them which is likely to be more expensive than seeking it upfront.

If you don't want the house if you cannot extend it then you obviously need to know the likelihood of getting permission before you start.

Imperialleather2 Mon 28-Sep-15 22:56:12

Presumably it's,the original builder who has the benefit of the covenant?

How much is a ridiculous amount?

busyboysmum Mon 28-Sep-15 23:04:02

It's not necessarily the original builder. A lot of the freehold titles of these leasehold properties subject to consent restrictions have been bought up by companies who then charge the earth for giving consent.

busyboysmum Mon 28-Sep-15 23:05:01

It's best that you are aware of this before you buy. Not sure what the locum has done wrong.

Fizrim Mon 28-Sep-15 23:11:10

You have extended a house that you own and are currently trying to sell, or you are planning to have the work done on the property you already own? The covenant would have been pointed out to you when you bought the property and it is quite common for them to charge more when they know you need their permission to sell the property, unfortunately!

Why did you contact the covenant holder now - is it because the work is being done or you are selling?

wowfudge Tue 29-Sep-15 06:17:18

Okay - OP, it's a covenant, not a covernance. Small point and sorry to be pedantic wink.

Mandy a restrictive covenant is not the same as a requirement to obtain the freeholder's permission. The OP's new house may be freehold and still be affected by a restrictive covenant. For example, my first house was freehold and affected by a restrictive covenant which stated I could not brew and sell alcohol on the premises.

What would the indemnity have provided you with OP? What you need to decide now is whether you want the house as it is now or only if you can do a loft conversion/extend. I don't know if your plans were in order to make the place work for you now or much further down the line - what you would like to do rather than what you need to do.

What does the covenant holder charge to waive the covenant in order for you to have this work carried out? A ridiculous amount means different things to different people. You also need to weigh up the cost of carrying out such work (including the covenant holder's charges) against the increase in value with the work completed. Is the covenant holder the builder, a neighbouring land owner or a company which has bought the benefit of the covenant? The reason for asking is because it can make a difference in how they approach things.

As for the issue with having contacted the covenant holder, it sounds as though you maybe emailed the locum stating you were going to contact the covenant holder and no one stopped you in time rather than you asked would it be a good idea to contact the covenant holder and waited for a response. What did happen?

Ultimately if it makes things unaffordable then don't proceed with the sale. If that is put to the vendors they may want to act to ensure the sale goes through - you could possibly negotiate a reduction in the sale price.

wowfudge Tue 29-Sep-15 06:19:01

Fizrim - the OP is buying the property which is why an indemnity policy had been suggested in relation to the covenant.

Imperialleather2 Tue 29-Sep-15 06:36:06

Op I find it very unlikely that you would actually be able to get insurance if the person with the benefit of the covenant is an active company.

If you had already done the work and it had been in place for 12 months then you could get an instant issue policy.

In your situation you sound as though you want a pre planning offer of cover. In order to issue the insurance company would investigate very carefullyvwhi has thw benefit and if readily identifiable then it is very unlikely you could have got cover.

Also remember Insurance won't protect you against a load of hassle just the costs of defending an action for example.

Personally I'd be looking for a price reduction and deal with the issue,properly.

ozzia Tue 29-Sep-15 08:23:29

The amount of money is 1500 initially and then a percentage of the increase of the value of the property.

I'm assuming it will end up at around the £5000 mark.

My solicitor is sure that I would have been able to get indemnity insurance had I not contacted them but no one said not to.

Sorry for using the wrong word, I don't even know what it means really apart from the fact it's making my life incredibly tough

ozzia Tue 29-Sep-15 08:24:01

Oh and as it is the house is not of interest, we would be doing the work immediately

rumbelina Tue 29-Sep-15 08:30:38

Yep this is the same as an indemnity for missing building regs - if you contact the council and there aren't any regs then you can't get an indemnity policy as you have already alerted them to the issue.

We also had it with sewers under the house - the house had been there for 100 years but we had to get an indemnity policy in case the water company ever wanted access. They'd have had to knock down 20 houses so it was never going to happen, the policy was about £25. If we'd contacted the water company we wouldn't have been able to get indemnity or our mortgage!

I'm not surprised you're fuming. The locum should have known that!!

rumbelina Tue 29-Sep-15 08:32:06

(Sorry that doesn't answer your original question but you have my sympathy)

ozzia Tue 29-Sep-15 08:56:20

What I dont understand is how they can judge what the increase in value is. Because as we do the work we will be putting in a new kitchen and updating the house, adding value. Seeing as we're allowed to make the house nicer without permission it all seems really odd

wowfudge Tue 29-Sep-15 09:01:44

Is it worth seeing whether the covenant holder would agree to a payment higher than £1500 initially but lower than your estimated £5000 in order to release you from the obligation to pay them a % of the uplift in value at a later date?

Also, is the additional % payable when the works are completed or at a future sale date? What are the arrangements around valuation and is it worth taking the hit now rather than later? Once you have that information I would look into renegotiating the sale price unless the house was priced accordingly.

It really depends how good a deal you are getting on the house. If £5000 is a relatively small proportion of the value of the house when extended then maybe you just need to consider it as another cost of moving.

If you would need to borrow £5000 more to make the purchase viable then there are ways to improve the LTV in order for you to achieve this and get the vendors their sale.

unadulterateddad Tue 29-Sep-15 09:02:08

Sadly those sorts of covenant are just a license to print money and have no real logic to them. I've dealt with a number of the in the past and it's just a matter of trying to agree a figure with them.

Turning to the insurance point, as your solicitors say, you would have been able to get a policy, but now that the company are aware you are very unlikely to be offered any cover.

atticusclaw2 Tue 29-Sep-15 09:05:43

I am a solicitor and the solicitor is not necessarily at fault. As wow has said if you contacted the solicitor (locum or not is irrelevant) and said "should I contact the covenant holder?" and he/she said "yes" then they have advised you badly. If you just went ahead and sent an email to the solicitor stating your intention but didn't wait for them to come back to you before contacting the holder then you are at fault I'm afraid for proceeding before you'd obtained advice. We can't always answer every single email immediately they pop up in our inbox unfortunately.

wowfudge Tue 29-Sep-15 09:07:57

You need to know how they will be judging that - will it be their chosen surveyor deciding and what is the process? - and making sure it is only the uplift attributable to the extension of the house/increase in living space, not other improvements. Surveyors will work from a table of improvements and increases to value or accepted industry % increases to work from. You would want to see the surveyors report. Check who pays for the valuation too.

ozzia Tue 29-Sep-15 09:17:02

I don't know what to do now, whether to just pull out or what. We love the house and what the house could be. I think actually the additional rooms would only add around £10,000 of value but the refurbishments at the same time will be what adds the value.

I said to the solicitor I was planning to contact them, he sent me the name of the company and I waited for his response to me saying I was going to contact before doing so.

I know they are busy busy people I just feel like he has cost me possibly the house we love.

ozzia Tue 29-Sep-15 09:18:57

Unadulterated do you think they would negotiate the amount. Realistically we could afford £2,000.

unadulterateddad Tue 29-Sep-15 09:21:02

you can always say £2K is your max, see what they say - at least if they say no you'll know where you stand

mandy214 Tue 29-Sep-15 09:22:46

wow I was just giving an example of how a restrictive covenant may work (and how it's works in our case).

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