Problems getting expired covenant removed from title

grifferz

We're having a incredibly hard time reaching exchange with our first purchase as first time buyers. Offer accepted April 8th on a property with no chain, "great!" we thought, "this'll be quick!" Hah.

Here follows our one remaining issue, and I suppose I am hoping to attract the attention of Land Registry Representative or anyone else who can give some advice as to what they would do. Or failing that just vent about it. (sorry)

One of the things our solicitor asked seller's side for back in April along with everything else was for an expired covenant to be removed from the title deed. The reference to the covenant that appears on the title looks like this:

C: Charges Register
This register contains any charges and other matters
that affect the land.
1
A Transfer of the land in this title and other land dated 25
February 1994 and made between (1) The County Council of Surrey
and The Mayor and Burgesses of the London Borough of Hounslow and
(2) Fairclough Homes Limited Crest Homes (Southern) Limited and
Ideal Homes and North West Limited contains the following
provisions and covenant which relate to the payment of additional
moneys as therein provided.

7. ADDITIONAL PAYMENTS
7.1 In this clause 7:
(a) the following expressions shall have the following meanings
unless the context otherwise requires:
"Covenant - means the covenant imposed by clause 7.2;
"Depot" - means the First Transferor's Ashmead Road Depot shown
edged orange on Plan No 1 and each and every part thereof;

[lengthy definition of a "Habitable Room" removed; basically it's anything that's not kitchen, bathroom or garage]

"Restricted Period" - means the earlier of:
(a) ten years from the date of this Transfer; and

(b) completion of construction of all residential units and other
works permitted by the final approval of reserved matters pursuant
to the Outline Planning Permission (as defined in clause 1);
(b) the expression "Outline Planning Permission" shall include any
other detailed planning permission for the development of the
Property and the Retained Land owned by the Transferees for
housing purposes

7.2 During the Restricted Period for the benefit of the Depot and
so as to bind the Property and each and every part thereof into
whosoever hands the same may come the Transferees hereby covenant
with the First Transferor and its successors in title the owners
and occupiers for the time being of all or any part of the Depot
that the Transferees and the persons deriving title under them
shall not commence development on the Property which would
increase above 1,035 the number of Habitable Rooms on the Property

7.3 Upon receipt the sum or sums due to the First Transferor
pursuant to clause 4.3(b) and the Eighth Schedule of an Agreement
for Sale dated 25 February 1994 and made between the First
Transferor (1) the Second Transferor (2) Ideal Homes North West
Limited (3) Crest Homes (Southern) Limited (4) Fairclough Homes
Limited (5) and Airways Housing Society Limited (6) the First
Transferor will release from the covenant the Property or part
thereof for which such payments have been made

The full text of the covenant is a separate document of 55 pages, of which at the moment I only have a hard copy passed to me by our solicitors so I shall not be able to go into details about that.

So, that expired in 2004 and solicitor wanted it removed. We have now been through all stages to get to exchange. We were only waiting for seller's side to confirm this covenant had been removed. They have been so slow. Our solicitor has had to repeatedly ask them what the delay is.

At one point they even said, "since it has clearly expired we suggest that your clients approach the Land Registry after completion to get it removed." Which frankly just started to raise red flags and caused our solicitor to request copies of all correspondence between seller's solicitors and Land Registry.

Today a bomb shell has been dropped with seller's side passing over a copy of Land Registry's response to their request which reads as follows:

The problem here is that Land Registry does not know whether the
covenant referred to in clause 7.2 of the Transfer has been
complied with, or breached during the restricted period. The only
way I can see that the entry can be removed from the title would be
for all the parties to the Transfer to confirm that either no more than
1,035 Habitable Rooms were created on the Property during the
Restricted Period, or that if more Habitable Rooms were created,
that the additional payments were made in accordance with clause
7.3 and that the parties consented to the entry being removed from
your clients title.

[Property Address] was formerly registered under title number
AGL[Title no.], which is still in the ownership of the developer,
Fairclough Homes Limited. Over a hundred transfers of individual
houses have been removed from this title, all of which had the entry
relating to the payment of additional monies made on their
respective titles. To my knowledge no issues have arisen in the past
on these.

Our solicitor is now saying that as this presents additional risk, our lender will have to be informed and may not wish to lend any more. :eek:
She said she will study the 55 page text of the covenant and get back to us with options on Monday.

I do not wish to try to do her job for her but this has been dragging on so long, not entirely due to the slowness of the seller's solicitors (who I now suspect must have been aware that this could be a sticking point else why hold back on this one thing and try so hard to get us to deal with it).

I worry that our solicitor is being over-cautious. All properties on that estate built by all three of the building companies must have this covenant. We're talking hundreds of houses here. Land Registry official seems to suggest it is not an issue, although obviously they are not offering to indemnify us against this theoretical financial penalty!

I suppose our options now are:

• Contact lender with text of title deed and response from Land Registry and ask if there is going to be a problem? If so, ask if an indemnity will satisfy them?
• Approach the local authority (London Borough of Hounslow) who are most likely the beneficiary of any financial penalties that could have possibly been incurred between 1994 and 2004 and see if we can get them to agree that there aren't any, so there is no risk?
• Abandon our attempts to purchase this property even though we've spent several thousand pounds on fees, because no matter what we do we'll end up with problems selling it due to this?

So stressful!

Land_Registry

grifferz - apologies for the delay in posting to your thread

I am sure you will appreciate that there is little I can add as you have already received a specific response from the Land Registry office dealing with the property/title. Anything I can add can only be in very general terms as a result, which may or may not help directly but may give you some additional ideas around how to proceed - I would however stress that it is to your solicitor you need to turn as it is they who should assess the risks involved and offer possible solutions and/or how to limit such risks as they see them. This may be seen as over cautious but they are doing there job and it seems right that they should at least pursue the matter in the way they have. Others may not have done so but that does not mean the risk does not exist as a result.

The key issue appears to the question of whether the entry can be removed and if not what impact is it likely to have from a lending perspective or when you try to sell.

The issue of removal is covered by the official response - the fact that the time appears to have elapsed is a positive one but removal is only likely if all interested parties agree to and participate in the removal.

The issue around it being a problem in the future is impossible to answer as any new buyer would be in the same position as you are currently in and much would depend on any legal advice they also received. The entry is not one that would normally be simply dismissed or ignored.

So, my answers to your options would be
Contact lender - something your solicitor may have already done as if they won't lend in such circumstances then this is clearly very important. Presumably you have a mortgage offer in place so is there an issue for them?

Approach the local authority - as an interested party it is quite possible other house-buyers have also been in touch and some awareness already exists. Have they already offered any assurances to others? Any view is likely to be beneficial to your deliberations but as the official response mentions ALL interested parties would have to be involved to secure the removal of the covenant. But if they confirm any interest they have no longer exists then this may be sufficient for you, your solicitor and lender to consider the risk to be acceptable even if the entry remains registered? If they confirm that in writing then it may help with any future sale but again much would depend on the legal advice at that time.

Abandon our attempts to purchase this property ....because no matter what we do we'll end up with problems selling it due to this? - this is always an issue as one solicitor or lender may look at things differently. The fact that other houses appear to have been bought and sold would normally offer some positives but your solicitor and lender may or may not take that into account as it is your situation alone they are considering. It is perhaps rare to have such information available anyway as the time and cost of obtaining it might be prohibitive.
Having said that are the Seller's able to offer a view on what considerations their solicitor gave the same issue when they brought and do they have a friendly neighbour who appears to have bought and accounted for the covenant in a positive way and if so on what basis? Something to discuss with your solicitor as well as even if such information was available they may not feel it is something to consider as ultimately you are paying them for their legal advice and not the views of a third party.

Simply some general thoughts around the issue but I would again point you in the direction of your solicitor. The above may hopefully trigger some other posters to arrive and offer some thoughts as well of course.

grifferz

Thanks Land Registry representative. Sorry for not following up sooner, but I thought no one was interested in my rant.

After reading the 55 pages of covenant our solicitor has now come to the conclusion that:

• The financial penalties part has not been done as a covenant so it is questionable that this part could be enforced on anyone but the building companies that originally bought the land from the local authority.
• We are now 9 years past the original expiry of the covenant so there is some doubt as to whether anyone could be chased for any possible financial penalties incurred during the covenant.

She has therefore decided that our lender does not need to be informed of any risk and, if we choose, she is happy enough to allow us to proceed to exchange as long as we understand that when we come to sell we may need to explain all this to the buyer.

I will certainly put some of your comments to our solicitor as well, so thank you, they were very useful.

Land_Registry

grifferz - so glad you have managed to move this forward