Developer's permission to remortgage/sell house needed - Is this normal??

[Piscis2017]

We have recently learnt through neighbours that the property we bought a few years ago has a restriction where we need permission from the developer to remortgage or sell the house.

We were never told this by our solicitors and the paragraph where apparently says that is so difficult to understand that it is not actually clear what it says (obviouly done purposely by the developer) None of us the neighbours knew at the time of buying the house but some learnt this when trying to remortgage.

We are baffled that this can be even legal but it is so socking that we are trying to understand if this is a thing (this is our first property in the UK)? The main issue here is the developer, who is completely an unethical person and we have all been having problems with him for one thing or another, we are considering very seriously taking legal action against him. Where does a clause like that in a contract leaves us? That they can basically do whatever they want and you have to take it for fear or them not givin us permission to sell the house?? If we need permission from them, the house is not basically not 100% ours.

So it's the solicitors (or rather their insurers) you need to speak to. I'd suggest contacting the SRA if the new solicitor can't offer any helpful advice. (Check that none of the old solicitors are at the new solicitors).

I think we would need to see a copy of the restrictive covenants on the transfer as it’s almost impossible to advise otherwise.

It is quite common to have clauses like this on the title deeds that read along the lines of “no disposition of the registered estate without the written consent of X” and it’s usually put in to ensure any obligations towards X (for example, making sure all service charge is paid up to date) have been complied with before the owner is allowed to sell.

It's normally when the developers are still building/selling on the development as they don't want potential buyers seeing loads of new builds already up for resale as it suggests that there are issues with the properties. A local estate also stipulated that for sale boards couldn't go up until the developers had moved to their next development for the same reason. After they were finished with the site they had no interest in enforcing those clauses.

Have a look at the report your solicitors sent during the conveyancing process. If this clause wasn't mentioned and you wouldn't have bought the house if you had known about it, go after those solicitors.

Do you have to pay a service charge (eg for communal land/private road?) if so as someone mentioned above it might be to ensure that any debts are settled by the seller and the buyer has also agreed to pay. We have this clause on our house as we have a private road and commitments towards communal land.

Private road with service charges, yes.
The problem is that this is now disputed as the developer now says that he won't deal with something from the communal property that he has dealt with until now. This has became a nuisance for him and he has unilaterally decided that this has now to be managed by us (after paying for the service fees corering the whole of 2024).

I understand that you must have paid all the fees before paying but note that my neighours had to get permission for a remortgage, what has to do with the service charge fees?

Your land registry record changes/updates when you remortgage as well as it’s just to ensure that’s all kept correct I guess and the clause carries over. It does seem overkill though.

I will post the clause either this evening or tomorrow, I dont have access to it now and I am at work

Does anyone know if I have to start a new thread if I want to post this on legal or is there a way to move to that board?

Ask @mnhq to move it

I think you might be confusing something from what I have read in subsequent posts. When we bought our house, we had to get permission from the management company (it’s a freehold, they just are paid a tiny amount annually for upkeep of grassed areas). However the ‘permission’ wasn’t actual permission, it was as others have said to do with them needing to be notified so they were billing the correct people. The ‘permission seeking’ was only that they had to be notified. Once they were notified, the clause in the covenant was satisfied and this was their ‘permission granted’. They don’t actually have the right to have any actual say or refuse anything. It’s to do with notification for the billing purposes.

With this in mind, I didn’t actually even know this until over a year later when we hadn’t been updated as the current owners. It turned out our solicitor had missed this clause and hadn’t notified them, so it couldn’t be registered.

I know all of the above because my first extremely panicked reaction was WTF, we have bought it, mortgaged it and lived in it for a year, what if they say no?! The solicitor who deals with complaints was then involved and took the time to explain all of the above to me - and indeed as soon as the form was sent, that was the end of it and the registration was completed. There was no wait for any ‘approval’.

I hope this puts your mind at ease a bit!

@Throwaway1234567890000000 there is nothing else that I wish more for and it is to be mistaken.
However, one of our neighbours had to ask for permission and he actually told us yesterday that they made things a bit difficult for him and it took a while. Surely if it was just notify them, an email would be enough and no need to get anything back from the developer.

I believe the notification may have to come via the solicitor involved in the purchase/sale/remortgage and that may be why?

I really don't think so...
The land registry papers show the restriction from our lender and this other restriction from the developer. To make sure they will be billing the right person they could put a clause on the contract requesting this, I see no reason why this has to show on the land registry.

Why would they need this to just bill the correct person if it is a remortgage? They still will billing the same people

You need to know if it was the developers solicitor you used, you seem unsure as to if it was. Irrespective of who took over them when they closed, they may still work for the devloper, so the advice is to go elsewhere to get an independant appraisal of the covenant situation.

You say it is a ridiculous clause - it is not, such clauses are used especially on new builds with multiple phases of builds.

Unfortunatley, it is caveat emptor when buying, so you should have read the legal paperwork and asked questions if your solicitor did not highlight what it actually meant. It is harsh I know but you signed the contract to purchase including this covenant.

Do not let other issues with the developer impact on how you deal with this issue, also deal with your title deeds, rather than taking information from your neighbours.

Finally, unless you are selling now and need the permission, I would by all means seek legal clarification of what the situation is, but would not do anything until you need to move. You may find everything has settled down with the developer and or they have moved on and couldn't care less about the covenant, so would give permission without any hassle.

The wording of the restriction is key here - I’m assuming it’s a restriction on the title rather than a covenant from what you’ve said. I’ve certainly come across restrictions on small developments saying something like no disposition [ie mortgage or sale] of the property without a certificate given by the management Company that the provisions of a particular clause have been complied with. Does this sound similar? … it’s used for example to make sure a freehold property isn’t sold without settling arrears due to the management company. If in this case the developer retained responsibility for maintenance of common areas, then I could see they might include a similar restriction.

I've checked and our solicitors weren't their recommended ones.

It is ridiculous (it is my opinion and anyone else can have another opinion) that an unfair clause can be put in a contract because the developers are building more and want to control the prices of the houses, efectively they can stop you selling, that is not fair and I don't think most people agree with this.

I think the advice of trying this not to affect the other issues is good advice but when you have huge issues with the developer and thinking very seriously about taking legal action, learning that he has this power and that we need a certificate from him to do whatever is not great. I want to think that he cannot actually deny us the certificate without a reason but he certainly can make things difficult for us, as I know it took a while for my neighbour to sort and this was even before we all start having issues with him.

I would suggest that you contact your MP and bring it to their attention but also write to Lee Rowley MP who is the person in charge of construction. You also need to make a complaint to The new Homes Ombudsman.

I'd urge to consider the land tribunal. They are literally there to consider this sort of thing. I believe it cost about a couple of £k IIRC

It is probably a clause requiring their consent/management company's consent but in reality all they want is a new purchaser to enter into an agreement to pay the service charges and comply with the terms of the original transfer between you and the developer.

Basically all estates that have estate service charges have them.

I am owed a lot of money by a guy and have been advised that I may need to put a charge on his property after getting a court order.
Did a search on Land Registry for his property and found a covenant that showed he is not allowed to sell or have a third party place a charge unless he gets permission from a major oil company! Makes no sense, any ideas?

@Norfolklad please start your own thread. Nearly every answer is going to address the original poster.

Follow the advice above anonymising your details and posting your paperwork.