restricted Covenant causing Exchange delays - info needed

Kirstyb1987

Good morning everyone,


I am just after some information please as I am not that savvy with solicitor lingo.


I am just about to exchange on my first property. This was meant to happen Thursday/Friday last week but when the searches came back they discovered that there is a restricted covenant on the property. First of all I am unsure on what this actually is in full detail.


Secondly I have been told from my solicitor that this covenant was made in 1901 and my sellers solicitor are not in possession of this and I need some sort of indemnity, originally being told that this could be done straight away and wouldn't cause any issues at all. However, I received a phone call on Friday telling me that the sellers solicitor are being difficult in giving me this indemnity and exchange couldn't take place without it.


My questions are:- What are restricted covenants?
Will this cause an issue with the exchange/completion if they sellers solicitor wont give me indemnity?
Is the covenant not obsolete since it was done in 1901?
Has anyone had to deal with these before and if so what was the outcome?


Thanks a lot guys, I am getting quite nervy with this and really could not cope with this purchase falling through.

eddddy

Kirstyb1987 wrote: »

My questions are:- What are restricted covenants?
Will this cause an issue with the exchange/completion if they sellers solicitor wont give me indemnity?
Is the covenant not obsolete since it was done in 1901?
Has anyone had to deal with these before and if so what was the outcome?

To partially answer you question - you can think of a "restrictive covenant" as a "promise" to do (or not do) something, in relation to the property.

So the 1901 covenant could be a promise... not to keep pigs in the garden; not to build any extensions; to repaint the house every 7 years, etc, etc

To indemnify (or give indemnity) means to "protect you against financial loss".

As an example (with lots of very big "ifs"), if the covenant prevents you from building an extension, and if you built one, and if the person with the benefit of the covenant knows the covenant exists and if they try to enforce it; and if they succeed, you would have to knock down the extension.

So the solicitor is saying that the vendor is not prepared to cover your financial loss in those circumstances.

But you should be able to get 'restrictive covenant indemnity insurance' instead (which would cover your financial losses in the example above).

Kirstyb1987

Thanks a lot eddddy. I have been reading up on things but your answer is a lot clearer.


many thanks for this, I will just have to wait and see what the sellers solicitor comes back with.

suziqqq

We are going through the same thing our vendor built a porch which is not allowed under restricted covenant our vendors solicitor arranged indemnity insurance so hopefully we can exchange now.

Kirstyb1987

suziqqq wrote: »

We are going through the same thing our vendor built a porch which is not allowed under restricted covenant our vendors solicitor arranged indemnity insurance so hopefully we can exchange now.

Good luck, I hope to exchange today or tomorrow all depending if my sellers agree to paying for this indemnity. :mad:


I have just emailed for an update and have been told there has been a lot of ''too'ing and fro'ing'' this morning so its looking as though the sellers are still not keen.


I feel like asking them to split the cost or I'll pay it but I am quite stubborn and will hold out as much as I can. Feel like the ball is in my court as I know they are desperate to complete this Friday.

headachesrus

The cost of the policy isn't prohibitive, used to be £21 but that was 10 years ago, can't see it will have gone up drastically. It is something you will need when you come to sell the property, which is why your solicitors are asking for it now. You could always ask them for a quote for it, and if you are that keen to exchange, and that is the only thing holding it up, offer to pay yourself.

Chyna81

Hi,

This happened to me and the seller refused point blank to pay for the indemnity insurance and left the ball in my court, my solicitor did advise that the cost would be £150 however it wasn't necessary because the restrictive convenant was unknown.

If it was that important then the sellers would have had an indemnity insurance, I am led to believe the insurance indemnity can be passed to the new vendor of the property once they are purchased. This is just what I have read.

Kirstyb1987

I also believed it was around £150-400 depending on the property.


If the sellers decline then I will just have to swallow it up and pay for it myself.


I have been told I cannot exchange without this but I have emailed my solicitor and awaiting a response asking if this is correct.

DaiBach

I was in the same situation on the house I am in the process of selling dating from 1927 - regarding mineral rights beneath the property.


This is common in coal mining areas.


The chances of the people mentioned in the restrictions acting on their rights nearly 100 years are slim (if they're alive).


Indemnity insurance should cover the eventuality and your indicative costs are about right.


I covered the costs for this, as it's minor in the grand scheme of things.

DaiBach

Chyna81 wrote: »

Hi,

I am led to believe the insurance indemnity can be passed to the new vendor of the property once they are purchased. This is just what I have read.

This is FACT. If the property exceeds the value originally covered in the indemnity then the new buyers will have to take out additional indemnity to cover the increase in price.

elsien

My mum's house dating from earlier than yours had a restrictive covenant.
One (which she felt free to ignore) stated that horse and carriages couldn't go to the front of the house, they had to go to the (now non-existent) stables at the back.
The other said that no business could be run from the premises. Which as mum was buying it to turn into a nursery, even though it was unlikely there was still anyone around to uphold it, was a worry so she got the indemnity insurance just in case.
It really does depend on what the covenant says.