Restrictive covenants help

[Roowig2020]

Hi,
Can anybody give advice on restrictive covenants? We're in the process of selling our house. One of the enquires flagged up by buyers solicitor was something in our deeds we did not know about. We've lived in this house for 14 years.

We extended last year and got planning from local council, building regs, party wall agreement for the works.

We did not, as has been flagged up get 'Covenant consent'. Can we get this retrospectively? Should we be worried?

It also talks about not erecting outbuildings without consent of the corporation- we built a shed 12 years ago- does this count as an outbuilding.

Any advise would be appreciated! My solicitor wasn't available when I call this PM.

Yes the were FTB. I think we're going to put it back on the market tomorrow and try and get advice on how to deal with this Covenant issue (which my solicitor wasn't worried about but obviously my buyers were!). In the meantime scope out if we could get a let to buy mortgage on current house and use equity to buy the new one. It all sounds so complicated and scary!

I have read the thread but I can't believe your buyers pulled out because of a shed built in contravention of the RC? Is that correct? If so I think their must be something else going on. The insurance policy solution is entirely standard and the risk is almost non existent. Their solicitor will have advised them of that.

Is it the case that they are planning to extend or build an outbuilding and they are worried about that. Sorry you're having all this stress.

Sorry - just reread and think you mean you needed consent for the extension as well. Again, such a common issue and I'm surprised they've pulled out. I'd be surprised if you had the issue again with your next buyer.

The age of the covenant tends to be a good indication of risk. For example ours were imposed on the first transfer of the house in 1937 when the estate was built. Insurers would consider that a low risk. If the insurer wouldn't provide cover (eg a more recent covenant) that's a good indication there is still a risk that the covenant may be enforced. Modern housing estates tend to use them as a way to keep the development uniform, and also to make money as they charge for consents eg for a conservatory.

Yes it was for the new extension. House was built in 1930's so I really don't even know if this Covenant can even be enforced?
Insurance company happy to provide indemnity cover and solicitor was confident they would cover a bespoke insurance- we were just waiting on quotes . Buyers talked about wanting to convert the attic but as this is internal I don't think the Covenant would even apply here.

I can't believe they pulled out but they are ftbs. We have covenants from 1953 when the house was built and I dont know how they would ever be enforced. The developer doesn't even exist anymore!

Without wanting to be too technical, RCs sit with the land rather than the individual. So say for example your neighbour sells you a bit of their garden. You've said you only want to use it for extra garden. There is a RC in the transfer that says this. 20 years later both you and the neighbour have moved on. The new owner of your house decides they want to build an outbuilding on the land. The new neighbour can enforce the covenant as they own the land that has the benefit of it. It runs with the land as is not personal.

The land that benefits with estate covenants is usually either the rest of the estate, or of it was sold off from a big manor which remains it could be that land. The chance of enforcement is very low, and insurance is a good solution. Maybe they will take some more advice from their solicitor and change their mind? Good luck

Thank you for the replies.

I think the buyers have 'overthunk' and they won't change their mind. Need to think about best way forward for future sales.

Does anyone who if it matters who the landowner was? For example if the land owner and those that granted permitted development are the same corporation does that mean anything positive?

Hi @Roowig2020
Sorry to hear that!
I have to say that either they weren't that sure about the house and this was a good excuse, or they are planning on doing work themselves that would need permission and don't want to rely on an indemnity policy.
In terms of options I would definitely look at Let-to-buy to bridge your gap, it really isn't complicated.
I would ask your solicitor to do some discreet research on who has the benefit of the covenant, if they are a local solicitor they can ask other firms if they have any info. I would purchase an indemnity policy anyway, so that if the house goes back on the market the policy is available.
I would knock on my neighbours' doors, ask if anyone has ever applied to have the covenant removed, and how much it cost, you may find someone who went down that route.

And with no criticism of the op this is a reminder that......

when you do anything to a property it's not just building regs and planning you have to consider, you need to check the title as well.

Listen to what your solicitor tells you about the property when you buy, and keep the paperwork.

Use a local solicitor, they usually know whether a covenant is likely to be enforced, or whether others have had them removed.

We had one house with a covenant and the covenant was sold on to another company, I found it hard to get any information on it myself tbh.

Thanks everyone for advice. The covenant holder is the local council who we applied to for the permitted development when we built the extension. As a lay person this just seems crazy that one arm can agree to it and not communicate with another.

We will not be making this mistake again! It's a huge learning curve for us. Solicitor is very surprised that it came to this in terms of buyers pulling out and do not think that this will be an issue again. We can get the indemnity policy in now but solicitor said we don't need to? I thought this might reassure future buyers if they know this is in place, though obviously we would still need to get future buyers they're own policy.

I think you were unlucky and these people were probably getting cold feet generally and would probably have pulled out over some random thing before completion. This issue might have just been the trigger to what was already brewing.

As others have said, this is so common as an issue and solicitors are constantly arranging indemnity policies (big market in itself now) to cover these things.....few purchases seem to proceed without needing one or two.

So don't let this result in you losing perspective about the nature of the 'issue' - it really should be very minor.

You don't need the policy upfront. Any buyers solicitor will want to be involved in confirming the policy chosen is acceptable so need to be involved. You pay for it when you complete on the house and pay the solicitor for everything. If it falls through you don't purchase the policy as the policy takes effect on the day of the sale.

Mortgage companies do have to accept the indemnity but again, they are so common and the quick and easy solution to lots of equiries that solicitors have to raise but don't really amount to much of an issue.

The people who get anxious about these things is usually FTB. Their solicitor should be working hard to show them the indemnity is good enough but T the end of the day it is the buyers choice and whether to proceed. Most will understand the difference in the end between a serious concern raised by a solicitor which means they should pull out or seriously look into the issue and those like the multiple restrictive convenants of historical origin which will not be an issue.

Agree with @WombatChocolate although you do mention getting their own policy for future buyers. It's worth knowing that the policy is usually passed from owner to owner by assignment, so any future purchaser will be able to do that when they sell on. Because the issue is bound to the land the insurance effectively is too. We have policies in place when we bought our house for a couple of title issues and I keep them with our mortgage pack and solicitors report.

The policies all have standard wording, and are in perpetuity, so not like a normal insurance policy.

Thank you everyone. I hope we get a less nervous buyer next time. It's back on the market this afternoon and have a viewing booked for the weekend.

When? (Should?) We say anything to next buyers or let their solicitor raise it in enquires. We don't want to get so far down the line and this happen again.

OP are you sure the property is freehold? Just that we're in a 1930s house with a long lease (999 years) with similar restrictive covenants, owned by Road Name Corporation. We paid £150 a few years ago for permission to extend.

Just wondering if it's leasehold and the FTBs don't understand long leasehold & it's another reason why they might have pulled out?

@Africa2go plenty of freehold properties have covenants like this.

@Minniemountain I understand that, I was just picking up on lots of pp's suggestion that there may have been something else (as well as the RC) which has put off these buyers - hence the question about leasehold.

Sounds like either they wanted an excuse to pull out, or they had terrible advice / didn't listen to advice from their solicitor/FTB fears.
I would just remarket as-is, don't worry about putting anything in place yet. A more reasonable buyer will not be put off.

Yes, no need to raise it at all. Its not a big issue nor one that’s likely to put the vast majority of buyers off as there are easy ways round it as mentioned earlier.

Sometimes there are things about a property which will cause almost every buyer to pull out unless the price is extremely low.....very short lease, serious and expensive work definitively required. It’s why properties are marketed as ‘renovation project’ or ‘short lease’ so people make offers knowing those things.

Your ‘issue’ isn’t in this category at all and will barely be an isssue if any significance to most buyers and to pretty much all buyers when their solicitor points out the easy fix.

Remember when people pull_out, they feel they must give a reason. What they say often isn’t the real reason and they don’t feeel they can mention the true reason.....they just decided they didn’t like it, they’ decided to stay put, they saw another house they like better, they realised they couldn’t afford it etc etc. It’s often easier to focus on a minor negative of the property. Of course sometimes people have been put off by the minor negative, but usually this triggers the withdrawal which was already brewing for all kinds of reasons.