Will restrictive covenant on house we're buying put paid to our mortgage offer?

[dholl1]

Place we're buying has split titles, one for house and another for most of the garden (purchased off farmer in 90s), the garden title has a restricted covenant that basically says we can't legally claim loss of air or light if the farmer builds on his land. This has only come to light a week before exchange, and our lender is Nat West. Is this likely to mean check mate for our mortgage offer (and the whole chain) or is there some chance that either our solicitor will mitigate it in some way when they report to the lender or the lender will take a fair approach? Any thoughts / experiences much appreciated :-)

Has a survey been done as part of the mortgage? If so, what did it say?

As far as we know NW did a valuation only, we have separately done a level 2 survey which said its findings were based on the assumption of no title issues etc (I imagine the lender's valuation would be along similar lines)

I think this is an Ask The Solicitor job because no one knows how much of the value of the house is based on the land + view. I’m not sure how enforceable that covenant is - if the farmer applies for planning permission for a whole estate of houses, or builds a grain silo directly behind your back garden I would assume you can still object to planning - I’m not sure how the covenant would work in that scenario.

Of course any house you buy with an unspoiled view/garden isn’t guaranteed to stay that way.

Thank-you, I think you're right it would not stop us objecting but that's moot anyway as the back of the garden adjacent to the farmland is wooded and there is no view to be affected (its a very standard sort of covenant for local land sold on by farmers). It is not the covenant itself that bothers us as its immaterial we reckon, what we're worried about is the lender's view and the mechanics of how these things are dealt with in practice at the point of reporting / completion (is it likely something that either solicitor or lender would miss etc.) bit wary of raising it with our solicitor but that's probably paranoia as we've been working towards this move for a year, need it to come off as does the whole chain :-/

If it's only the garden it's probably not an issue. It may be possible to get insurance against it but don't know how much that would cost

It doesn’t sound like it’s something that will devalue the property, therefore I wouldn’t think you’d need to worry.

Asking your solicitor ‘Is this the sort of thing that holds up completion or would affect my mortgage’ shouldn’t be a problem. I do think you’re being a bit paranoid!

I’d be very surprised if the lender withdrew the mortgage offer over this. All the lender cares about is whether they can get their money back from a repossession sale if they need to. If they’re lending 90% they might be a little concerned but, assuming you have a decent deposit, then that would cover any drop in value in the unlikely scenario that you default on the mortgage and the farmer also builds.

I’d be surprised if the lender’s lawyer is bothered. But ask your lawyer asap. If the lender is bothered, there will probably be insurance you can buy to cover the risk. I got hugely stressed in our house purchase when our lawyer said that the only road access to the house goes over a small strip of unregistered land and no one knows who owns it are and if an owner turns up and disputes access this then the house would have no road access. I was 😱😱😭😱😱 until the solicitor told me you can buy insurance to cover that situation. Think it cost £40. Kinda wish the lawyer had mentioned that earlier.

Where you could fall foul is if the land is still class as agricultural land and your lender deems it commercial property.
We considered a property with exactly that situation. The vendors said they had encountered the problem when they bought and had to pay cash for the land and not include it's title with the mortgage.

We had a similar (ish) thing. On the day of exchange(!) the solicitor informed us that the house and a bit of garden was on one title, and the majority of the garden was on a different one! ... it didn't make any difference to the mortgage company (there were also covenants but to do with letting the neighbours water drain into our garden, which sounds awful but in reality it's just rainwater off run). . BUT ... the solicitor then said he'd have to allocate some of the purchase price to the garden, (title 1), and some to the house (title 2) in theory even that was fine, didn't cause any issue with stamp duty ... in later months once we're settled in, the new neighbours said they couldn't believe what a bargain house we'd bought. (It was £600k), but shows on sold prices as £400k, !!! .... the £200k for the "land" is no-where to be seen... you have to order the land registry docs to see the title of the land and price paid. In reality I doubt it makes a bit of difference but I'm always a bit mindful that when we come to sell, let say for £900K as that's probably what it's now worth after being renovated, people will be saying "but they only paid £400 for it 6 years ago" and it may put them off.. whereas in reality we paid £600.. sorry, that was far longer post than I imagined. .

My house is on one title deed, and my garden/drive are on four separate deeds, due to previous owners buying odd bits of adjoining land at different times. The land registry entry for the house shows the total price I paid. There was no mortgage involved though, wonder if that makes a difference?

This.

We had some weird, and some important covenants on our 100+ year old property, including right of accesss. The insurance for this (indemnity?) was about £150 when we bought 12 years ago.

Very grateful for all the comments, we would be happy to buy the insurance, and will mention to the solicitor (didn't want to on Friday as she's still recovering from finding out about the split titles so close to completion-it's an insane schedule!)
Very good tip about the land use, I guess this would be a case of an enquiry to council
Our LTV is 75% but that's based on a very suspect desk valuation on behalf of lenders, the level 2 survey we did suggested asking price/our offer was spot on hence 68% LTV but little time to be quibbling
We had thought about asking to buy the land separately but only concern there would be if it invalidates the valuation for house sale, not sure how that pans out as a conversation (whether original valuer gets involved)
We'd be a bit more trusting if our broker (who is tip top and worked for Nat West for 20 years) says they're awful for this kind of thing, absolute villains (!) and they'd have some reason to not want us to redeem our rate for the top up part of the mortgage which is about 4.2%
Sorry for all the rambling, until tmoro morning it's all we can do :-)

You can apply to have the titles all merged into one, it takes about 3-4 months but maybe worth doing for everyone who has different titles.

Just makes selling and the future sales easier.

I'm going to do this in six years time - one of the land titles is possessory at the moment, as soon as I can apply for it to become absolute I'll merge them at the same time.

I can’t imagine this being a problem for your mortgage.

We had some issues with information that needed to be passed to our mortgage provider - it's a very very long story.

But the part that's potentially interesting for you is that I was told by another solicitor that only very specific information HAS to be passed to the mortgage provider. There's a handbook that specifies which information must be passed over - you could double check with your solicitor whether the covenant is something which is specified as information that they are obliged to divulge to your lender? They should be able to quote the part of the handbook which covers this type of information.

I'm with everyone else though - I doubt that it would affect your mortgage but lenders are being particularly difficult at the moment, so if you don't need to divulge it, I wouldn't.

We had a restrictive covenant on our property - different to yours, ours was ex-council and limited things we could do and building work etc - we didn't have to pass this info to our lender.

Now that IS interesting, thanks, I would have thought anything of this nature (title) would have to be reported but maybe not if the solicitor can vouch for it in some way. There are 'certificates of title' and various forms online relating to individual lenders which seem to show how the solicitors have to report and they are quite comprehensive but maybe there is a bit more to it than meets the eye

Follow up: solicitor dug up the deeds and the covenants looked a lot less scary when we went through detail, they said the lenders wouldnt give a

We brought using a NatWest mortgage last month. We had a title deed issue, different situation but the kind of thing that was unlikely to be an issue ever and needed indemnity. We had to go back to Nat West and they insisted on another valuation with the new info. It took about another 3 weeks to process but came back as fine and all went through. 🤞🤞