Serious breach of restrictive covenant - property purchase

Rollinghills

We are in the process of buying a house and we discovered it's most likely in breach of a restrictive covenant that forbids any construction above the garage. Yet the house has a large bedroom above it, with 2 dormer windows, and very obvious to anyone that passes by. There are at least 5 other houses with large double garages attached to the houses and none have been converted.

I am concerned that one day a disgruntled neighbour could start a dispute and worst case we'd have to demolish the bedroom. It is the largest bedroom in the house and would constitute a big loss of floor space and a big loss in the value of the house.

The solicitor is suggesting an indemnity policy but that only covers 'direct financial loss' ie the cost of demolition, reinstating the garage or any financial penalties (but not the loss of value to the house).
I should add the bedroom was added 15 years ago and latest alterations including the addition of dormer windows was 10 years ago or so. Planning permission was sought so any neighbour at the time could have complained. But anyone who bought a house since or will buy in the future could potentially be unhappy about this.

We like the house but this is a bit of a worry. Should we just accept the indemnity policy, go for it and hope that when we sell the buyer would also accept it? How serious is this? Any words of wisdom would be appreciated.

bris

Only the person that puts the covenant on the property can object and enforce it, a random neighbour cant.


Most covenants will never be enforced because the people who put them on stop having an interest in the property, usually through passage of time. So depending on the time scale and what interest they still have in the property an indemnity policy may be the best way to go.


You can get your solicitor to look further into it, when it was placed and what interest they have now. Covenants can also be removed with good enough reason but it's costly so sometimes best to just let take out the indemnity policy.

Leo2020

It is not the neighbours who you should worry about (unless they decide to inform the freeholder).

The danger is if whoever owns the freehold decides to enforce the covenant.

Rollinghills

Oh, I forgot to mention, the house is freehold.

The covenant was put in by the developer some 20 years ago. However, I understand that it is for the benefit of the whole development ie in theory anyone who benefits from a nice looking street (ie any neighbour) could potentially enforce it, not just the developer. All neighbours will have the same covenant so they surely will be aware of this issue.

AdrianC

Rollinghills wrote: »

The covenant was put in by the developer some 20 years ago. However, I understand that it is for the benefit of the whole development ie in theory anyone who benefits from a nice looking street (ie any neighbour) could potentially enforce it, not just the developer. All neighbours will have the same covenant so they surely will be aware of this issue.

The reasoning behind the covenant may well be the "benefit" of the whole development, but the actual legal benefit of the covenant - the ability to enforce it - rests solely in the developer, or their successor.

They probably don't care two hoots any more, and only put the covenant in place to ensure that nobody "broke ranks" whilst they were still trying to flog bits of the development originally.

Rollinghills

AdrianC wrote: »

the ability to enforce it - rests solely in the developer, or their successor.

Well I hope so although I've read conflicting information. I asked about who can enforce to our solicitor but he has not (yet) answered.

AdrianC

Rollinghills wrote: »

AdrianC wrote: »

the ability to enforce it - rests solely in the developer, or their successor.

Well I hope so although I've read conflicting information. I asked about who can enforce to our solicitor but he has not (yet) answered.

They _may_ have passed the ownership on to a resident's association or similar, I s'pose. There's not really any way to find out unless and until somebody comes forward and says "Look, I've got all the paperwork to prove it's mine."

You have two choices, really.
* Take the risk
* Walk away.

dirty_magic

I'd just get the vendors to pay for an indemnity and forget about it! It's not likely to be enforced.

pinkshoes

Do the covenants not have a time limit on them? The house we have bought has lots of covenants but they expire after 21 years, adm the house is older that that.

Rollinghills

Unfortunately the covenants don't expire :-(
Currently we are thinking of going for it assuming vendor pays for indemnity insurance, just wanted to confirm we are thinking along the right lines and this isn't something much worse.

Land_Registry

The normal scenario re such covenants where they have been imposed by the original developer on each and every property/plot is that the benefit has then passed to each and every property/plot owner who form part of that original development.

A developer will often impose such covenants to restrict new owners from 'changing' the layout, style etc of their development whilst they seek to sell each property/plot. Such covenants also often include ones which restrict For Sale signs going up parking caravans on drives and so on.

The planning process will take no account of such covenants but I appreciate you have not directly linked the two processes.

So, if the covenants were imposed by the original developer and their development comprised some 40 plots then potentially you now have 40 property owners who may have the benefit and may therefore be in a position to enforce them. Not 'random neighbours' but neighbours still the same.

The original developer may have retained the benefit as well if they still own any benefiting land, small areas of land not sold off for example - that is rare nowadays simply because the developer wants to build and make their money and move on without then risking being involved in such matters in the future.

So the key to understanding who now had the benefit of the covenants is to check your own title and see how the covenants were imposed e.g. Transfer by Developer to first owner and how it defines the development/estate. That will give you an idea of scale re who might now benefit.

However, and you have alluded to this already, the key thing to consider is how likely is someone to seek to enforce the covenant? Obviously they first have to know that the covenant exists, secondly that they could benefit from it (as you can see not everyone knows) and so on.

Looking at neighbouring properties gives you an idea of whether others are restricted as well and/or have breached the same covenant but in essence that is really just additional 'risk assessment' to help you to decide whether you need insurance cover and if so on what scale - the modern trend is to insure against most things that are seen as a risk and your solicitor can advise on that for you. You can also get a feel for that yourself of course and take a view.

The key thing is though that the covenant exists, there will be landowners who have the benefit and/or may be in a position to enforce them. I would recommend sticking to your legal advice as they will have experience of handling such matters.