What to do about Restrictive Covenant

Scaredy_Cat_3

Hi

I hope someone can offer some advice please. I also hope I'm posting this in the right section - sorry if I've got it wrong!

I got some very useful advice from people on here before we bought this house. We found out at pretty much the last minute that the property had restrictive covenants on it, one saying nothing can be built without the permission of the original builder, and another relating to an extra parcel of land at the side, which says nothing can be built at all. Well, it was all new to us, and sounded quite scary but the advice on here made us think we were ok to proceed.

So now we've moved in and I'd just like to clarify a few points please. I understand that we have a number of options-

1 - Build anyway and buy an indemnity policy

2 - Buy out the covenants

3 - Submit plans to the builder and hope they give permission

Taking option 3 first, I am wary of this in case they refuse and then we are stuck. Option 2 would be great but I don't know if it can be done. I've been told that we cannot get an indemnity policy if we have already approached the builder. So, if we were to approach them now with regard to buying out the policy, and they refuse, could we then go ahead (in a couple of years) and build an extension without their permission but take out an indemnity policy?

To clarify, what I mean is, if we approach them to get permission and are refused clearly we can't then take out an indemnity policy. BUT if we approach on a different matter (buying out the covenant), would we still legally have the option of taking out an indemnity policy if we can't resolve it now? We wouldn't anticipate actually doing the extension for a few years anyway so I'm sure they would have forgotten any contact we may make now about buying out the covenant.

silvercar

The first thing to do is to find out if the builders still exist. Also if they still have an interest in any of the land / property around.

They would have to have some sort of interest and potential loss to benefit by the covenant. Or that was my understanding, when the solicitor explained the covenents on my recent house purchase.

Scaredy_Cat_3

Hi Silvercar

The builders no longer exist but have been bought out by Redrow. The people we bought the house from did a small extension some time ago, and they paid Redrow a fee for restrospective permission just about the time they put the house on the market (approximately 5 months ago).

We have not approached Redrow officially but either the seller or their solicitor did speak to Redrow and that's where the suggestion of buying out the covenant came from - though no figures were mentioned, and there was no guarantee that Redrow would actually agree to us buying out the covenant, it was just a suggestion. We would like to enquire about it but are afraid that if we do and can't come to an agreement to buy it out then we will have removed the option of taking out an indemnity policy.

Scaredy_Cat_3

Anyone around this evening who can offer advice please?

Leon_W

I don't believe that you could just buy an indemnity policy.

As there is a restrictive covenant, which insurance company in their right mind would insure you in those circumstances ?

The only way forward I would suggest is to try and get the covenant removed.

Scaredy_Cat_3

Hi Leon

Sorry if I've got it wrong - the advice I was given on these boards before we bought the property was that you could take out an indemnity policy. I am only going by what I was told here.

ickster

Basically, providing the Rest Cov is valid, the person with the benefit of the RC could sue you. This could mean you would have to rip down any building work and/ or pay them compensation. Indemnity policies can be obtained to protect against being sued for a breach but they are generally only available if the breach was a while ago etc. Also, Indemnity policies are generally for the benefit of subsequent owners - not the person who did the actual breach. The cost of you buying such a policy is likely to run into £000's
You could build and hope they don't bring action but that is a risky strategy. A friend recently agreed to remove a RC which prevented her neighbour from building at the side of the property. She got £70K for its removal!

Scaredy_Cat_3

PS - I understood that the indemnity policy was specifically to insure against the restrictive covenant being enforced, so if that's the case then simply having a restrictive covenant on the property would hardly be grounds for an indemnity company to decline cover. Actually, I'm not even sure if these indemnity policies are dealt with by insurance companies or solicitors, that's one of the things I'd like some advice on.

ickster

Scaredy_Cat wrote: »

PS -I'm not even sure if these indemnity policies are dealt with by insurance companies or solicitors, that's one of the things I'd like some advice on.

The solicitor arranges them through an insurance company. The solicitor makes no profit from them. The cost varies depending upon many factors. Each is considered on its own individual facts and a quote is give. An underwriter assesses and provides a quote to a solicitor

Leon_W

My question would be "What is the point of a restrictive covenant if you could just insure yourself for a few hundred quid ?"

My opinion is that you can't. A covenant can be there for a very good reason, and until someone who has the authority to remove it does so, then there is nothing you can do about it.

silvercar

I thought Redrow would have to show that the covenent breach caused a loss, either to them (eg by reducing the value of other properties they were selling) or to other properties around who had similar covenents.

Not sure if I'm explaining it quite right but thats the gist of what the solicitor was explaining to me about my (breached) covenents; that the builder would have to (a) exist, (b) demostrate a loss by the breach, (c) wish to take action against me.