My flying freehold property is on the market.

Richard_Webster

I has taken a few days but our legal advisor states that the covenants outlined in the property conveyance are legal and binding, and carry foreward to any future owner.

So the law has been changed without me knowing about it!

Negative covenants may be binding - but they are not the ones that matter here - they will be positive covenants to maintain and repair so as to support and protect the other part of the building. It is the enforceability of equivalent covenants by the other property owner that is the issue.

Where is the property? Firstly it is England/Wales? Otherwise most of this thread is nonsense.

It isn't in Hebden Royd parish in West Yorkshire is it? There is legislation that only applies in that parish that goes some way to deal with the non-enforceability of positive covenants against successors in title issue.

1093frank

Thank you for taking the time to reply again Richard.

The property is in Oxfordshire.

I see a little of what you mean about positive covenants. "Equity cannot compel an owner to comply with a covenant entered into by his predesessor without contradicting common law rule"

Today I received a copy of the Conveyance and Land Registry. The same covenants written into the conveyance are duplicated in the Land Registry.

Does this make a difference ? If it does not wording like. " the purchaser and his successors in title" really mean nothing.

I am sure you are correct in this, but I am using a large legal company and have been told the covenants are ok by a number of partners.

wuls

The situation is complicated by two factors:

1. % of flying freehold and therefore marketability
2. Legal position

On 1, I can say with authority, for example, that 25-30% flying in central London, with overhangs only (i.e. not above anyone's residence just passageway), is acceptable to 90% of the high street Lenders (and the private banks). Barclays is the standout, as are some of the smaller building societies.

You might want to ask why? Marketability - this is the valuer's key test - is the location/demand and physical arrangements such that there is acceptable demand for the product. In London, the answer is Yes (Satander lent on a Knightsbridge house with 50% flying because the demand is good), of an Old Mill outside of a valuable city centre with a large portion flying over regularly used property, the valuer probably doesn't think so.

2. Richard is right on the legals, your original Deeds might have all rights of support, access for entry and repair. This is enough for many lenders and even Santander (Santander does not require a scheme of mutual covenants - the CML handbook is clear on this). But in truth, most buyers and most lenders want a new Deed relating to positive covenants for larger flying situations unless the valuer/underwriter consider the proposition so good in any respect (i.e. Central London)

Richard_Webster

Santander re Flying Freeholds:

Santander does not require a scheme of mutual covenants - the CML handbook is clear on this

CML Handbook extract for Santander:

5.6.1 If any part of the property comprises or is affected by a flying freehold or the property is a freehold flat, check part 2 to see if we will accept it as security.

5.6.1a Does the lender lend on flying freeholds?

Yes, provided the title to the property incorporates (or will incorporate prior to completion of the mortgage) satisfactory and enforceable rights of support, shelter and repair, together with appropriate rights of entry. Indemnity insurance as per the third bullet point of 5.6.2 is not acceptable.

5.6.2 If we are prepared to accept a title falling within 5.6.1:

the property must have all necessary rights of support, protection, and entry for repair as well as a scheme of enforceable covenants that are also such that subsequent buyers are required to enter into covenants in identical form; and
you must be able to certify that the title is good and marketable; and
in the case of flying freeholds, you must send us a plan of the property clearly showing the part affected by the flying freehold.
If our requirements in the first bullet under 5.6.2 are not satisfied, indemnity insurance must be in place at completion (see section 9).

They are not enforceable unless there is a scheme of mutual covnenats therefore in my view Santander do require this.

Successors in title can now take the benefit of positive covenants but cannot be saddled with the burden of them without the successors executing a fresh deed to bind them, so i cannot see how any sane solicitor can say that the covenants are enforceable against successors.

wuls

Richard. I simply don't agree. And indeed the language used in their Part 2 is similar to other lenders who require "adequate rights of support".

Viz Yorkshire BS.

Though only Santander will be able to tell us the answer for certain.

First, read the Part 1.

"the property must have all necessary RIGHTS of support, protection, and entry for repair.."

clearly distinct from the following part of the sentence "as well as a scheme of enforceable COVENANTS that are also such that subsequent buyers are required to enter into COVENANTS in identical form"

They are two separate requirements. One applies to RIGHTS and one to COVENANTS. Their language, not mine.Reading an indemnity policy too and one will also see they are separate requirements that are indemnified.

Then read Santander's Part 2

satisfactory and enforceable RIGHTS of support, shelter and repair, together with appropriate rights of entry

As you know RIGHTS of support, protection and entry for repair can be in an original Deed, carried forward with no intervention and are RIGHTS (not covenants). Hence I can have a right of support, shelter, a right to enter and repair a part subject to flying freehold. They are enforceable, through the courts if necessary. They are RIGHTS, and are enforceable. Santander is asking for RIGHTS.

They are, of course, not mutual COVENANTS, which would require one party to keep in good repair (different from a RIGHT of SUPPORT), if not that you can repair and chargeback and vice versa.

But Santander's language is not asking for COVENANTS.

Richard_Webster

Interesting point, wuls.

What you are saying is that the specific wording of Santander's Part 2 which only talks about rights overrides the Part 1 wording below it:

the property must have all necessary rights of support, protection, and entry for repair as well as a scheme of enforceable covenants that are also such that subsequent buyers are required to enter into covenants in identical form

I can see what you are driving at, but I wonder whether if asked, anyone at Santander would be able to confirm that your interpretation is correct, i.e have they really thought through what they are saying?

wuls

That's right Richard. I agree that they might not be sure what they asking for, but that said, they may be satisfied with the RIGHTS they require and no indemnity policy/deed of covenant rather than No RIGHTS or COVENANTS but an indemnity policy.

If I was underwriting risk, I would think Santander's approach is more sensible (as I see it) than an indemnity policy alone in most circumstances.

They aren't alone, many of the Part 2's 'confuse' the Part 1 clauses. I take the Part 2's as their specific instructions as to the minimum they require, and then refer back to Part 1 to see if things need to be topped up.

I suspect that over the next few years, the passage or not of "Land Obligations" into UK law will determine the treatment of lending. I think if it does happen, many flying freeholds could be resolved positively once and for all.

wuls

The more I think about it, I believe Santander probably is replicating the Yorkshire BS model (and what many used to have as their requirements) I.e. they are setting a minimum level of rights, which Santander says is better than an indemnity policy with no rights. Yorkshire are saying they need the rights too at a minimum, but I would read their Part 2 so they would still require indemnity without a deed of covenant.

"Yes, provided only part of the property is affected by a
flying freehold and you confirm that the title to the
property incorporates (or will incorporate prior to
completion of the Society's mortgage) satisfactory and
enforceable rights of support, shelter and repair
together with appropriate rights of entry"

Richard_Webster

They aren't alone, many of the Part 2's 'confuse' the Part 1 clauses.

Oh yes.....

This getting a bit technical for OP - but don't get me going on how many of them just don't answer the first part of 5.7.5 about propertyman's bogey - the "shared freehold".

1093frank

Well, a lot of reading both for me and others who my have this situation.

I would consider the marketability of this property as fairly high. it is quite large, some seven beds (or however you wish to use them) in good order with a wealth of old beams, standing on a two acre plot with paddock and stables . Rail links to central London now 40mins, property 15mins from station.
The downstairs below us is 70% storage space (not garage) and the other 30% is a spare bedroom used only a few days per year, I understand this could change with new owners.

The last buyer never got to a valuation stage with Santander, they required three previous years accounts and two projected, although I am sure the figures added up, why did it take three months + for a rejection.

The property is valued some 20% below what would be its stand alone price because of the f/f. when it was on the market last we had a buyer within three weeks and a lot of interest from buyers not yet in a position to make an offer. I feel If a buyer came along with a good mortgage track record together with a hefty deposit 50-60% which I would expect from purchasers at this level (we put down 70%) then we may have a more positive result.

There would not be any problem renewing the covenants with the owners of the other part of the property, they now have some idea of the selling problem and will wish to sell themselves at some stage.

I have read about the "land obligations" whether it will even get a reading in this Parliment is anyone's guess.

I will post again when or if there is news.

My thanks to all.