Restrictive covenant - seller won't pay for indemnity insurance

Redminster

Hi all,

Reading some of the other threads on the forum, hopefully someone will be able to help with my specific problem.

We are close to completing on a 1930's house which we are purchasing from a developer. There is a restrictive covenant which was put on by the original builder in the 1930's which requires any owner to obtain consent to make any alterations to the property.

The vendor bought the house in summer 2011 and knocked a wall down to create one large room from 2 smaller ones, removed an existing lean-to and has built a conservatory. All of which has obviously taken place less than 12 months ago.

Now that the solicitors have identified this problem, the vendor is refusing to pay for an indemnity policy. We have also so far refused to pay for one as we don't think it's our issue that he did not obtain retrospective consent or an indemnity policy. There are a number of houses which were built as part of this development in the 30's and many of them have modern conservatories or extensions - what will they have done to combat this issue?

From my internet research though, it looks like you can't obtain an indemnity policy when the breach is less than 12 months old.

It appears we are a bit stuck then? Any advice gratefully received!

G_M

Who on earth do you think is going to enforce this 70 year old covenant? The beneficiary is presumably the freeholder who sold the land to the original developer......

bionic_banjo

Ask your solicitor who can enforce this restrictive convenant, and the odds of it, as you will probably find that that odds that anyone will bother enforcing it are very small.

A few years ago I purchased a bungalow which had a similar restriction as your situation. It had a conservatory on the back - in breach of the restriction. Having previously worked for a homes developer, I knew that the developer had no intention whatsoever of enforcing the covenant as it had just been inserted as part of the development scheme standard conveyances when the place was built. At this development co, we used to charge £250 plus admin costs to relase the covenant when we used to get these desperate letters in from solicitors...same story...holding up the sale etc etc.. - and the monies we got in went to our Xmas party fund!

To legally enforce a restrictive covenant, your solicitor will advise that the developer either has to retain ownership of land directly joining the house youre buying (so they can benefit from the covenant being in place - and this is unlikely as developers dont like to be left with antything at the end of a scheme); or they set the restrictive covenant as part of a scheme to benefit the enire housing scheme - so there would have to be a joint action by the owners of the homes on the same estate (who benefit from the covenant being in place) to enforce the restriction - so they would have to show a court how their homes are losing value due the the fact your house has a larger room made out of 2 knocked together and you have a conservatory....Yep youve guess it...there is no loss...and so the court action would be an expensive waste of time.

With respect to my bungalow, I had a poke around the neighbourhood when we came to this hiccup in the transfer. I saw that half the other bungalows on the development had conservatories and other additions. The developer was long gone and there was no way any neighbours were going to form some action group to take me to court about a conservatory, that didnt affect them or the amenity of their dwellings. I bought the place, and had no trouble selling a few years later.

Remember solicitors are there to get things right for you - and they are nit pickers by nature, which is a good thing. But how things happen in reality are not always as technical as the letter of the law. Good luck.:)

G_M

Thanks for correcting me (I'm always happy to be corrected!), and advising the OP of this.

AND for not once going off on a tangent on one of your (two) hobby-horses Timmy!

Stick to nice informative posts like this and we'll get on just fine!

rrf494g

The simplest approach would be to find another property to buy. There is no shortage of properties for sale - why take on any house that could cause problems. Even a small risk of a big headache may not be worth it.

good luck

Redminster

timmyt wrote: »

Good luck OP

Thanks.

Timmyt - isn't there an issue with the breach being under 12 months old i.e. I won't be able to get indemnity insurance anyway? My solicitor doesn't seem to have considered this......yet.

My knowledge of the subject to date is at best sketchy, as you can see above.

Richard_Webster

OK it is very likely that the covenant won't be enforced, but the difficulty is always proving that it can't. A cash buyer can take a view on this but his lender is unlikely to do so.

If the 1930s covenant required the consent of specific person or company, then proving the company no longer exists or that the person is dead gets you off the hook and a policy isn't needed.

Alternatively it may be possible to obtain a policy for work done less than 12 months ago, but it will be a bespoke policy and more expensive than a standard one that can be taken out of a looseleaf folder or completed on line by a solicitor.

Redminster

Thanks Richard and timmyt.

I don't believe our solicitor has realised the implications of under 12 months as she's quoted us £75! So it seems the policy she would produce if I instruct her would not be worth the paper it's written on.

The covenant requires the original seller (builder) to be notified, they are named on the deeds and I will try and track down myself whether that company still exists via Companies House etc.

Richard_Webster

The covenant requires the original seller (builder) to be notified, they are named on the deeds and I will try and track down myself whether that company still exists via Companies House etc.

The useful online information at Companies House only goes back to sometime in the 1990s, possibly late 1980s. So if you enter in the search field for existing companies the name of the company X Limited you may not find it - you may not find it under dissolved companies or those that have changed their name because the dissolution or name change could have happened before computerisation! So not finding it listed doesn't completely prove it doesn't exist because it could have changed its name before computerisation.

If you know the unique company number then you can search under that and it will show the new name if it exists or has been dissolved in the last 20 yaers or so. So you may have to request a paper search through the old records to check if it X Ltd that was around in the 1930s still exists. This will cost a bit - I don;t know how much this is as I haven't done this for many years.