restrictive Covenant HELP!

KrissyBrad

I was just about to complete on property purchase, I am buying it to let out, have large deposit & small buy-to-let mortgage, it is an ex housing association property that the current owners have had since 2004. My solicitor has just found in the deed a covenant 'The Transferee confirms that the property is the Transferees only or principle residence and whilst he is the registered proprietor he will continue to use the property as his only or principal home'
I do not intend to live there but want to rent it out, thus I will be breaching this covenant? My solicitor has never come across this before. we have asked South Staffs Housing Association if this stands and they said it does. I have a relative who privately rents a property in the same street a few doors away from the property I want to buy. I am wondering if the covenant is enforceable or what options I have? I wanted a second opinion as my solicitor suggests I pull out of the sale.

Alter_ego

Why not listen to your solicitor? You are paying for his advice.

Keep_pedalling

I would've have thought this quite common in housing built for social housing. Yes it will be enforceable and you would be bonkers to risk it, and anyway I would have thought this would cause your BTL mortgage to fall through as well.

tootallulah

This is a covenant in my own ex- housing association flat, and it is strictly enforced in my building.

Cakeguts

You are going to have to pull out of this sale. Follow the advice of your solicitor.

KrissyBrad

Thanks all for your replies, yes it would impact on BTL mortgage. I'm unsure as to how other ex properties in the same street are being let out privately... I will know more after speaking with their legal team on Tuesday. If they will not allow me to let out the property I will pull out of sale. rather annoyed that solicitor only found this the day I went to sign as they had had the documents almost 2 months!

Chanes

That covenant is entirely enforceable and not vague in meaning. You could stir a hornet's nest with other BTL owners because it is most likely that covenant exists on theirs too. It would be good to know how you get on with your legal people's help - good luck!

G_M

Let me play devil's advocate and go against the consensus.

Is that the entire wording of the covenant?
When you say it's in the 'Deed'? do you mean the Registered Title or an earlier Deed which is referenced in the Title?

KrissyBrad wrote: »

..... it is an ex housing association property that the current owners have had since 2004. My solicitor has just found in the deed a covenant 'The Transferee confirms that the property is the Transferees only or principle residence and whilst he is the registered proprietor he will continue to use the property as his only or principal home'

The reason for asking is that you are probably not 'the Transferee', and therefore it may not apply to you.

I suspect it was a condition of the original Transfer from the HA to the then buyer (your seller). And was then referred to in the Title Charges Register.

If the then buyer was getting a discount on the purchase price (Right To Buy), a condition would be that the buyer must live there. There would also probably be a condition relating to paying back some/all of the discount if they sold the property within X years.

Neither of those conditions would apply to you, as a subsequent buyer at full market price on a private (non RTB) purchase.

But your conveyancer should advise.

KrissyBrad

Yes, its on the TR1 ' Transfer of whole of registered title(s) I also thought it may only apply to the buyer under RTB agreement and is only applicable to them, My solicitor thought the same too but when he asked Housing Association they said it passes to new purchaser? I wondered if 'I' become the transferee if I want to sell. I have a copy of 'Conveyance' from an earlier date and there is nothing about it being a principal home.
the paragraph I wrote is on 'Registered Title' as you have commented, do you think this may not apply to me then? I really hope so and that you are correct, and so is my way of thinking, that it is due to them having a discount which if they sold in the first 5 years they would have had to pay a percentage of back to the HA

G_M

If the TR1 you are referring to is the one drawn up by your solicitor, to transfer ownership from the current owner to you, then

a) yes, you are the 'tranferee' in that scenario, so it will apply to you
b) why has your solicitor included this covenant?

The answer to b) above will be that either
c) he's blindly copying the preceeding TR1 (from when your seller bought under RTB), but does not need to as the conditions no longer apply, or
d) that covenant exists somewhere else (not just on the TR1), and requires each purchaser to include that covenant in each transfer

I'd assume a solicitor knows what he's doing, so would guess d) applies!

when he asked Housing Association they said it passes to new purchaser?

Hmmm... why is he having to ask? As a professional, he should examine (all) the relavant documents and then know what covenants apply. He should not need to seek interpretation/advice from a 3rd party!

I have a copy of 'Conveyance' from an earlier date and there is nothing about it being a principal home.

What date? Is this the conveyance from when the HA sold to your seller? Or is it a historic document?

KrissyBrad

The first conveyance (deed) is dated 4/3/1985 by someone who purchased off the council, My seller purchased from the housing association with a discount, I presume the 1st purchaser sold the property BACK to the HA as they often had 1st refusal of re sale several years ago.

The TR1 I have commented on is the one from the SELLER, (their original document when purchased from HA. My TR1 has not been written yet, I think you may be correct that this does NOT apply to me.... I am not sure exactly WHAT my solicitor has asked HA legal department.
Maybe it will be beneficial to me to also contact the land registry for further clarification?
Also maybe speak to another solicitor in the practice to clarify what my solicitor is doing?
If my solicitor fills in TR1 then, as you state, he does not need to include that particular paragraph if it is not relevant to me, as it was not included in the original deed?
Very confusing as I would have expected my solicitor to KNOW what he is doing.