Restrictive Covenant Indemnity Policy - A Con?

speedycochrane

Hi,
I have just received an e-mail from my solicitor stating that my property has a Restrictive Covenant on the land sale (1924!), and the current policy on it (wait? what policy?) was taken out in 2006 and the house is now worth more than that policy, so the buyer's solicitor is demanding that we pay for a new policy. This is £130. I'm confused. The houses weren't built until the late 80's. Who is going to appeal against a covenant that can't be found (not with Land Registry) from 1924? Is this just a case of solicitors being lazy and opting for the path of least resistance? Why should I effectively drop the price of my house by £130 in order to pay for a policy that I can't see as being required? Should I ask my solicitor to challenge this demand from the buyer? I know it isn't the end of the world, but it is the principle I object to - what are the odds of someone finding these missing documents and they having any impact on a house that hasn't been extended? They are concerned because the garage was converted into another room (*1924 Covenant found, clause reads, this land can have houses built on it, but any garages for those motor vehicle things may not be converted into a playroom for kids.....unlikely, or just me?).
Any help gratefully received. Thanks you lovely lot!

Dan-Dan

suggest if your sellers wish to benefit from any indemnity policy then they might like to pay for it (but some people are funny and they could decide to walk away)

Cakeguts

How much is £130 compared to the value of your house? Compared to the value of you house is £130 really a big deal?

eddddy

It may well be the buyer's mortgage lender that's insisting on the indemnity policy.

They often just want to tick a box that says an indemnity policy is in place. (I guess it could potentially cost them more than £130 to take specialist advice on whether an indemnity policy is needed. So it's faster and easier for them to insist on a policy being taken out.)

It's down to negotiation who pays for the policy.

TBagpuss

No, it is not lazy . It's come to light that there is a restrictive covenant and the buyer's solicitor has, quite rightly, warned them that there is a small but potentially expensive risk that someone might try to enforce it in future. The mortgage lender may well require evidence that either the covenant has been released, or that there is an appropriate indemnity policy in place.

If you want, you could of course instruct your solicitors to try to research the issue to see whether the beneficiary can be identified or the covenant released, but that will cost a lot more than £130.
You can do your own research to see whether you can identify a cheaper policy providing the same level of cover.
You can propose that the buyers pay, or that the cost is split, but do consider whether you want to risk losing the sale for the sake of £130, bearing in mind that the same issue is likely to come up with any other buyer, too.

jimbog

Pay the £130 and be thankful that all this is a sign that your sale is progressing in the right direction

brodawel

I would also pay the £130, it's not the buyers fault and they are not profiting from it, they just want to buy your house and get what was advertised i.e. a house without potential issues.

Dan-Dan

brodawel wrote: »

I would also pay the £130, it's not the buyers fault and they are not profiting from it, they just want to buy your house and get what was advertised i.e. a house without potential issues.

How so?

I agree paying to keep sale moving etc but its not correct to say the buyers wont benefit from it , if they dont once they live there, who does?

brodawel

Dan-Dan wrote: »

How so?

I agree paying to keep sale moving etc but its not correct to say the buyers wont benefit from it , if they dont once they live there, who does?

Sorry I was intending it to mean they won't get any of the money, the £130

speedycochrane

Cakeguts wrote: »

How much is £130 compared to the value of your house? Compared to the value of you house is £130 really a big deal?

No - it's not, but it's £130 I have today that I might not have tomorrow as a result. £130 that could be invested in our new property, and £130 I am going to have to take out of the equity of the sale. It's more the principle. I would hate to pay for something that is unnecessary, resultant of a solicitor's laziness (who I am already paying quite healthily for effectively pushing paperwork and doing searches on my behalf), or simply a con.

speedycochrane

TBagpuss wrote: »

No, it is not lazy . It's come to light that there is a restrictive covenant and the buyer's solicitor has, quite rightly, warned them that there is a small but potentially expensive risk that someone might try to enforce it in future. The mortgage lender may well require evidence that either the covenant has been released, or that there is an appropriate indemnity policy in place.

If you want, you could of course instruct your solicitors to try to research the issue to see whether the beneficiary can be identified or the covenant released, but that will cost a lot more than £130.
You can do your own research to see whether you can identify a cheaper policy providing the same level of cover.
You can propose that the buyers pay, or that the cost is split, but do consider whether you want to risk losing the sale for the sake of £130, bearing in mind that the same issue is likely to come up with any other buyer, too.

Thank you - this is useful advice.