<sigh> Restrictive Covenant on Forever Home

[sophienextdoor]

Wasn’t sure whether to post this on the legal section or here. Anyway, myself, DH and DD have found our forever home, a beautiful period villa in Southampton.

To cut a long story short the searches have returned a restrictive covenant which states.

“WITH the intent of binding himself and successors in title the Purchaser HEREBY COVENANTS with the vendor for the benefit if the land namely:

(iv) That he will not make or cause to be made any alterations to the existing dwellinghouse and buildings without the Vendors’ previous consent in writing and will pay the Vendors’ fee for approval of plans for such alterations.”

The covenant is dated 1979 and from what I can see the original vendor (a company) has now dissolved sometime in the 90’s.

I’m so confused!! Does this mean we cannot change anything inside the house?

We want to completely change the layout inside and need to move nearly all the walls, it will definitely require planning permission but we had already made considerations for that.

Feeling a little heartbroken and deflated with all this.

Can anyone offer any advice and confirm the covenant is as “literal” as it reads?? Or does anyone have experience with a similar issue?

*This is my first post, so Hi!

Thanks @HintofVintagePink

This is the exactly the type of answer and information which I had expected to get from the specialist conveyancing firm I just spent the money on!

And is why I wondered if I’d been ripped off.

You are very welcome. Sorry I can’t definitively answer as it honestly would take hours of work and research!

Honestly though...loads of houses have restrictive covenants. 1930s semis are classics for this as developments were often constructed on land that was formerly part of an estate. And most new builds have something along these lines, albeit sometimes time-limited. People mostly don't seem to register them. It was/is often designed to ensure uniformity and so ensure that nothing is done to undermine the value of the development.

You could ask for the seller to reduce the sale price to cover an indemnity policy. No harm in that. My buyer did about 3 years ago and we went 50:50. As previously advised though, do not approach anybody who might have benefit of the restrictive covenant if you intend to go down the insurance route.

How reliable is indemnity insurance where a covenant has been broken?

I have read quite a few threads about this and a lot of homeowners seem to not really know the actual details of their insurance with comments such as:

“we have it in place but it’s probably not worth the paper it’s written on / probably wouldn’t hold up if the landowner ever tried to sue etc.”

Also makes me wonder what happens if the insurance company went bust. Would our indemnity insurance then be void and we’d be at risk.

The solicitor in her response said we ”would need the sellers to confirm various assumptions which are included in a standard breach of restrictive covenant indemnity policy.”

I really don’t have the foggiest what this means. Perhaps this indemnity insurance could be an option, I’m just not sure why a lot of comments on other threads seemed to make it out as such a band-aid solution.

I can't speak for the quality of indemnity policies as I don't know of anyone that's actually had to use them, but you don't need to worry about insurers going bust - they have really stringent regulations to prevent that happening.

The solicitor in her response said we ”would need the sellers to confirm various assumptions which are included in a standard breach of restrictive covenant indemnity policy.”

I really don’t have the foggiest what this means. Perhaps this indemnity insurance could be an option, I’m just not sure why a lot of comments on other threads seemed to make it out as such a band-aid solution.

My guess would be that this refers to the stipulation that no steps must have been taken to alert whoever has the benefit of the covenant that you may be about to breach it. As @HintofVintagePink said, no insurer wants to take on that risk.

I don't think I'd want to rely on indemnity insurance for such a big project, and I would not want to shell out several thousand for an opinion from counsel, which ultimately is nothing more than an opinion (and would quite possibly say don't do it). I'd stand by my previous post - I wouldn't buy it until the vendors have sorted it out to my satisfaction.

Between this headache and the amount of work you are proposing to do, is this particular house really worth it?

@sophienextdoor is it a Collins house? We used to own a Collins house and they are long leasehold (999+years) with a freeholder who had the same covenants.
The freehold company then dissolved, the freeholds sold and bought by a company of all the leaseholders. Because it was a conservation area the responsibility for approving alterations is now the council planning but before it became a conservation area the covenant protected the area from unwanted or unsympathetic changes. We just wrote to the freehold company to inform them of plans and that we had sought planning approval.
You need a good solicitor to make sense of it! Good luck, if it is a Collins they are lovely houses.

@sophienextdoor
The indemnity policy doesn't mean that you would get to keep any alterations you made to the house if the person with the benefit of the covenant to exception to the breach.
The policy would pay the costs of putting it right.
If the insurer's lawyers thought the enforcement could be challenged the insurer might take legal action to have the action to enforce the covenant overturned.
If the insurer's lawyers thought that the enforcement of the action for breach was watertight then the insurer would simply pay for the house to be put back to the position were it wasn't in breach.

You could get an indemnity to cover you for actions the seller has done, as long as the seller can answer some questions.

I'm not convinced you will get an indemnity policy to cover you for the work you are planning to do.

Unless the insurer is convinced that the person with the benefit of the covenant is genuinely no longer in existence, why would they charge you a few hundred pounds and take on the risk of the cost of rebuilding an entire house?

Your solicitor should be asking the indemnity insurance companies for a price for a bespoke policy for this.

The insurer's willingness to provide cover and how much they charge is a pretty good indication of how likely the covenant is to be enforced.

But at the end of the day the policy only covers the cost of enforcement action and remediation.

Unpopular people locally were running a business from their home. They lived in an area in which houses had a covenant prohibiting businesses being run from the 1930s when many of the houses were built. The residents’ association took them to court and they were forced to close their business.

This property didn’t happen to be in Chandlers Ford, did it? We went to view a house with an almost identical restrictive covenant but dated 1978 I think. We decided against it as neighbour had asserted that he had benefit of the restrictive covenant and was opposing any external modification. I am not sure he was right either that the benefit had definitely passed to him or that it was as restrictive as asserted but who wants to start in a new house contemplating legal action with an unhappy neighbour? If in your case however, it’s a dissolved company who had the benefit then case law is pretty clear from what I’ve read that the restrictive covenant ends when the company dissolved unless the conveyance specifically states otherwise. Your solicitors should be able to advise you on this or get Counsel’s opinion if they are uncertain.