Restrictive Covenants

Scaredy_Cat_3

Does anyone know about restrictive covenants please? We are approx 10 days away from completion and only now does our solicitor send us documents informing us that there are restrictive covenants on the property we're buying.

It's Saturday as I type this - we have this morning received the documents from the solicitor but there is no-one there to answer questions. They have not sent us the full details of the covenant, but in their letter they say no shed or hut can be erected, or extension done without first getting permission from the original builder of the property. The property was built 40 years ago by Costain. Our solicitor says they can't find any trace of Costain, but the vendor's solicitor has provided a letter from Redrow (presumably the current trading name of Costain) confirming retrospective permission for a small extension the current owner had built some years ago.

The letter giving retrospective permission is dated December 2006 so I presume the current owners had the work done and didn't tell anyone, but their solicitor has insisted they get permission as they are now selling. The letter from Redrow is addressed to the vendor's solicitor, not to the vendors, and it says thank you for your cheque for £176.50.

Does anyone have experience of this? I need to know if that fee is likely to be a standard fee for permission for any work done, or does the fee vary depending how much work you have done? Is there anything we can do to challenge a covenant? I don't want to buy a property (freehold) and still find I have to get permission from the original builder and pay a fee for the privilege.

I can't believe our solicitor has not bothered to tell us about this before - they are aware we are buying with the intention of building an extension, so it is an important issue for us. Having left it so close to completion to tell us about it, we are in a panic now. Obviously we will speak to them on Monday for more details, but in the meantime can anyone offer any advice please?

bionic_banjo

I used to work for a house builder and this was a way of getting pocket money for the golf trips. The fee was whatever I decided to make it. It was supposed to cover admin etc...yeah yeah!

Solicitors are so fussy about these and half the time they are not worth worrying about.
The thing with restrictive covenants is that there has to be a benefit to someone and a burden to someone.
In this case the burden is on the freeholder - they are burdened with the restriction. The benefit goes to the house builder...but does it? For them to actually have a legal benefit they have to own land adjoining your house - and not just a tiny bit of it!! I suspect that the developer has finished the estate and long gone - so they have no land to 'benefit' from the covenant - and in which case they cant enforce it.
The only other way that it could be enforced is if the covenant was part of a building scheme. In this case a developer starts with his land and then sells off the land in plots/houses each with the same restrictive covenants. To enforce the covenant, it must be legally proven that the developer had the intention for each plot to benefit by the restictive covenants on the plots - intending 'mutual enforceability' and all the original purchasers must have known that the covenants were mututally enforceable. If after lots of legal bills and research this is the case, it means your neighbours could try and enforce the covenant- but do they really have the time, money and inclination?? Over a shed?? The costs in even starting to prove the enforceability would be mad. mad. mad.

If you are a worrier, you can always apply under the Law Property Act 1925 S.84(1) to have the restrictive covenant discharged or modified. Here you can argue that the restriction is obsolete, or that it impedes some reasonable user of the land or that the proposed discharge of the covenant would not injure the persons entitled to the benefit of the restriction.

Have a look a your estate. Have a look at neighbours property. Have they got sheds Extensions etc? probably... Does your extension and shed injure your neighbours property interests? I think not.

When I bought my last house, I knoew it had a conservatory on it. It was on a wimpy type estate from the 1980s. The restrictive covenant was in favour of wimpy - who had long gone. My solicitor got all jumpy about the missing release deed. I told her to get on with the purchase. Wimpey are not in the business of chasing covenants and all my neighbours had extensions. Not even worth the hassle.

Good luck.

susieb

Hi
We have just bought a new build and theres alot of similar covenants to yours.
WE had to get permission to put up a shed and to erect a tv ariel, the paperwork did say the cost for permission would be £75, but the builder provided them before exchange for free. It does state though that they will charge £150 if the permission was retrospective, so your £176 does not sound to far away.
One point to note though is that on my house all the coventants stop after 3 years, so I presume in my case they are just there to protect the builder while they are on site and still selling houses.
HTH

Scaredy_Cat_3

Thanks Bionic Banjo - that is such a relief! I really appreciate you taking the time to reply and we feel a lot better about things now!

Can you tell me if the fee charged is usually a set fee regardless of the amount of work we get done (ie will it be the same for erecting a shed as it would be for erecting a shed and building an extension)? That said, I really like the idea of getting the covenant discharged. Do you know anything about this process, such as the costs involved and do you have to employ a solicitor?

Given that the original builder is apparently no longer trading (we don't know the connection between Redrow and the original builder, Costain, but it certainly wasn't obvious to our solicitor), I would say that Costain/Redrow would have a hard time proving benefit (other than the financial benefit), so I would really like to try that angle. Yes, very perceptive of you - I am a worrier!).

Also, how do you persuade your solicitor to proceed without having these permissions (Just in case we can't get the covenant discharged)? I reckon the current owners didn't tell anyone about the extension and it's only come to light when their solicitors have looked at the deed and presumably forced them to obtain the permission retrospectively. I am concerned that if we don't get the permission we will have a similar problem when we come to sell the house (and the fees may have increased by then).

Thanks also to you Susieb. That is helpful info, aswell! From what you say it sounds like the current owners were charged the retrospective fee, and if that's the same as the one you were quoted then it sounds pretty standard, which is good. When we eventually get in touch with our solicitors we will get them to check if there is a time limit on the covenant.

Thanks again to both of you - any further advice would be much appreciated!

DemonicKat

I read this with interest as I am in the process of purchasing an ex local authority house which has a driveway.
My solicitor sent me a conveyance dated back to 1969 which states that under no circumstances should a motor vehicle or caravan be parked on the front drive/garden of the property.
My solicitor wasn't that bothered about it but they said I should contact the Council out of courtesy to ask them permission to park my car on the drive!
There is a dropped kerb outside the house so I doubt the Council would have allowed that dropped kerb if the covenant was still live.
However I am going to write to the Council.

Norroy

I have had similar experiences in the past.

I simply got the vendor to take out indemnity insurance against the relevant restrictive covenant being relied upon at any point in the future. This insurance policy is then transferred with the title deeds after every successive sale.

These policies cost around £100.

huggermugger

Just thought I'd put in my ten pen'orth...

The bottom line here is that the solicitor has to discharge his/her responsibility to you and the mortgage company. If there is a restrictive covenant, you have to be notified and you may chose to ignore it/take a punt. However, on behalf of the mortgage company, the solicitor cannnot ignore it as if anything ever goes wrong in the future the mortgage co will scrutinise the transaction & sue the solicitor. It can and does happen that obscure covenants come back to haunt you.

The onus is generally on the vendor to provide information to put everyone's mind at rest and that can be by providing indemnity insurances, as Norroy says. This is often the quickest way to sort it out. Costs vary according to the perceived risk of the covenant ever being enforced. However, there can be arguments between solicitors as to whether it's necessary & who should pay for it which can delay matters somewhat...

Having said all that, these are totally standard clauses in purchase contracts of the last 40/50 years and generally don't cause anyone much problem. They were ostensibly imposed to stop estates from changing too much & becoming overdeveloped. (Tho I do agree that they amount to simply another way for the original builder to get a bit more money in - the overdevelopment bit is generally regulated by planning anyway) The exact costs & terms relating to the covenant will be in the original conveyance, a copy of which you should be given. Redrow bought out Costain in 1993 tho Costain continues as a subsidiary company - I'm astonished your solicitor can't find any reference to it as it is one of the largest in the country. On this particular purchase it doesn't sound as tho you have any problems as the necessary permissions have been obtained, albeit retrospectively.

You can get covenants removed if they are perceived to be unreasonable etc. It's a long drawn out process & as such can be costly and so is done only if the covenant is stopping someone from making serious sums of money.

Whether you pay the fee to Costain/Redrow for any work you may have done in the future is up to you. However, if you don't, when you sell your property the buyers solicitor will ask for proof that you got the necessary permissions. And so it goes.

hth.

nrsql

>> The bottom line here is that the solicitor has to discharge his/her responsibility to you and the mortgage company.

Only if they are acting for both. They probably have to disclose any relevant information to the mortgage companies solicitor but I don't think they would have any duty of care towards the motgage company.
In this case I suspect you could instruct the solicitor to go ahead and they would include notes that you had been informed and the possible consequences and also inform the other solicitors involved. As long as the contract is legal and solicitor was made sure you had made an informed and reasonable decision then the solicitor would be covered.

huggermugger

Every solicitor who acts for someone buying a property with a mortgage also acts for the mortgage company, it's part of the deal. The mortgage company is also his/her client tho there is no fee paid. Unless the solicitor agrees to this, he/she will not be added to the panel of approved solicitors by the mortgage companies and so will get almost no conveyancing work. Neat, huh?

silvercar

totally agree with Bionic Banjo, exactly what my solicitor told me. If the original builder wanted to pursue it, they would have to prove a financial loss.

bionic_banjo

Scaredycat. The fee is for each letter of permission/ release, not per property and in your scenario the fee can be anything within vague reason. There are no set limits but the fees are supposed to cover admin... Covenants for other types of property the fee may vary depending on the value released by eliminating the covenant plus the admin fees. You can apply to have the covenant realeased but - as noted above, you will probably need to use a solicitor and it could take ages.
With regard to your solicitor, just ask them to proceed. Re the Mortgage - if you were a mortgage company lending on this property, you would want to check that the money you are lending is safe. So what you ask yourself is - is the market value of this property damaged by the risk that someone could come and enforce a covenant about a garden shed? Given the actual risk is negligeable that someone might come and enforce the covenant (assuming someone can actually prove they have the right to enforce the covenant)- then the damage to the market value is ...well not even worth considering. Take it this way - a boundary dispute or the property being in a area which floods would be far more important to a mortgage co than a covenant of this nature.