Buying freehold from council but with restrictive covenants

rq9292

I bought a leasehold house with 912 years left and an annual ground rent of £5.50 in March 2021. I want to make changes to the property but consent needs to be gained from the freeholder (which is the local council) for most of the changes I want to make which incurs a cost of at least £150 per proposal and this is in addition planning permission and building regs.  I inquired how much to buy the freehold and they said £100 plus £350 legal fees. The catch is that one of the restrictive covenants is that "no alterations shall be made to the premises without prior consent of the council". In terms of saving the hassle of gaining consent for building work this appears to achieve little benefit to me. In my opinion it is ridiculous that the council should insist on this covenant in addition to planning permission and BR when they no longer have an interest in the property.  
I think that given the length of the lease and the minimal ground rent it appears to me that buying the freehold with this covenant would make me a freeholder in name only in comparison to my neighbours with identical leases. 

Is this normal and is there anything I can do to purchase the freehold without restrictions? For example if I were to wait 2 years I would qualify under the Leasehold Reform Act 1967. Would buying the freehold as described in that Act allow me to ensure no covenants were applied to the freehold? If so then rushing into buying the freehold now with these covenants might permanently burden the house unless there is a way I can remove the covenants.
The fee for permission is currently £150 as stated but who knows much much it could rise in the future. Retrospective consent costs £500.
How do they enforce the covenant if they are no longer notified when I come to sell the house in the future?


FYI these are all the covenants they wish to impose. The last one seems bizarrely vague to me.
"The following restrictive covenants shall apply thereafter:
a. the premises shall be used solely as a private dwelling house;
b. no alterations shall be made to the premises without the prior written consent of the Council;
c. all buildings, boundary fences etc. shall be maintained to the Council’s satisfaction;
d. all other terms and conditions considered relevant by the Council’s Chief Legal and Democratic Officer shall apply to the premises."

user1977

rq9292 said:

FYI these are all the covenants they wish to impose. The last one seems bizarrely vague to me.
"The following restrictive covenants shall apply thereafter:
a. the premises shall be used solely as a private dwelling house;
b. no alterations shall be made to the premises without the prior written consent of the Council;
c. all buildings, boundary fences etc. shall be maintained to the Council’s satisfaction;
d. all other terms and conditions considered relevant by the Council’s Chief Legal and Democratic Officer shall apply to the premises."

I presume these aren't actually the covenants, but just a general summary of the sort of things they would put in the deed - and the last one means anything specific to the property in question (if for example there are communal parts in the estate which need to be mentioned).

In general though it's pretty normal for freehold properties to have covenants of some sort, especially if it's been bought from the council. The notion that "freehold" means "no conditions apply" is a popular misconception.

AdrianC

rq9292 said:

I bought a leasehold house with 912 years left and an annual ground rent of £5.50 in March 2021. I want to make changes to the property but consent needs to be gained from the freeholder (which is the local council) for most of the changes I want to make which incurs a cost of at least £150 per proposal and this is in addition planning permission and building regs.  I inquired how much to buy the freehold and they said £100 plus £350 legal fees. The catch is that one of the restrictive covenants is that "no alterations shall be made to the premises without prior consent of the council".

This is a covenant that is currently on a freehold title that just applies to your property?
Or is this a covenant they are looking to impose on a new freehold title split from an existing, larger, freehold title?

I think that given the length of the lease and the minimal ground rent it appears to me that buying the freehold with this covenant would make me a freeholder in name only in comparison to my neighbours with identical leases.

There is no such thing as a "freeholder in name only". You would be the freeholder. Full stop. End of.

Your neighbours would not be freeholders.
If your neighbours bought their leases, they would also be subjected to similar covenants, I would presume.

Is this normal and is there anything I can do to purchase the freehold without restrictions?

You can ask nicely to not have that covenant in place. They are, of course, likely to refuse.

For example if I were to wait 2 years I would qualify under the Leasehold Reform Act 1967. Would buying the freehold as described in that Act allow me to ensure no covenants were applied to the freehold?

Not necessarily.

Covenants could still be applied, subject to the agreement of the tribunal that adjudges statutory freehold purchases.

Your legal fees would almost certainly be considerably higher.

How do they enforce the covenant if they are no longer notified when I come to sell the house in the future?

You can take it as read that the local authority are going to know about "alterations", aren't they...? I mean, what with you needing to apply to the local authority for PP... Of course, the two branches of the council may not actually talk to each other, but...

princeofpounds

What you are currently doing is negotiating the purchase of the freehold via the informal route. 

Another option is to force the purchase of the freehold via the formal statutory route. i.e. a Tribunal. If you go down this latter path, then subject to your property actually being eligible, you will win the opportunity do buy the freehold.

The catch is that when you have a leasehold + freehold title, you can't always merge the two titles together. That usually happens when the lease contains obligations to third parties. So it matters a lot if your current lease says 'no alterations without permission of freeholder' or 'no alterations without permission of the council'. Despite the freeholder and the council being one and the same at the current time.

Possibly the Tribunal would look at other more esoteric arguments as to why new covenants in favour of the council may be otherwise imposed, but I'm not sure there would be a strong case for that. Perhaps AdrianC knows of some.

As AdrianC also points out, going the formal route will not save you much money, if any - it takes a few grand to go to Tribunal in legal fees.

You could also try negotiating with the council on the alterations clause. It would be particularly helpful if you could point out to them that clause would (perhaps) not exist if you applied through the Tribunal instead, and that they would still have control over planning matters as for any other house. But they aren't known for being flexible.

rq9292

This is a covenant that is currently on a freehold title that just applies to your property?
Or is this a covenant they are looking to impose on a new freehold title split from an existing, larger, freehold title?

My assumption is it applies to all houses on the street which are all still leaseholds the same as mine. They have offered to sell me the freehold to my property but with the same restrictions as before.

There is no such thing as a "freeholder in name only". You would be the freeholder. Full stop. End of.

Your neighbours would not be freeholders.
If your neighbours bought their leases, they would also be subjected to similar covenants, I would presume.

The common perception of a freehold is that it not subject to control by a third party and not subject to admin fees but neither of those things would be true in my case. With the same restrictive covenants in place owning the freehold doesn't appear to function any differently to just owning the 912 lease. I get to call myself freehold owner and I can sell my property listed as a freehold but the prospective buyer will eventually reach a stage when they find out there is a potentially very restrictive covenant that involves a third party charging admin fees which doesn't appear to be common for a freehold property. If there is any major difference besides being able to list the property as a freehold then I would like to know.

I am not looking to build an extension or to change the outside of the property therefore I am puzzled why the council should feel as though it is important to monitor whether somebody installs a downstairs toilet, moves a doorway or opens up a room when they already have a building control team for that. Why charge a fee to duplicate this work? 

I wonder if anybody has had the same experience as me and whether it is common that buying the freehold doesn't entail any extra freedom.

rq9292

user1977 said:

I presume these aren't actually the covenants, but just a general summary of the sort of things they would put in the deed - and the last one means anything specific to the property in question (if for example there are communal parts in the estate which need to be mentioned).

In general though it's pretty normal for freehold properties to have covenants of some sort, especially if it's been bought from the council. The notion that "freehold" means "no conditions apply" is a popular misconception.

I am not looking to build an extension or to change the outside of the property therefore I am puzzled why the council should feel as though it is important to monitor whether somebody installs a downstairs toilet, moves a doorway or opens up a room when they already have a building control team for that. Why duplicate this work? The cynical side of me says the fees keep a department of the council in a job but I would like to think there is another reason why they want to keep and apparently enforce such a wide ranging covenant in the agreement.

Slithery

rq9292 said:
The common perception of a freehold is that it not subject to control by a third party and not subject to admin fees

Not at all. There are a huge number of freehold properties that have covenants and are liable for various costs.

princeofpounds

rq9292 said:

I wonder if anybody has had the same experience as me and whether it is common that buying the freehold doesn't entail any extra freedom.

We are all just tenants of the Crown anyway... even 'free'holders only have tenure.

Legal technicalities aside.... Whether it is covenants, planning permission, building regs, compulsory purchase, utility access rights etc. etc. the State controls what we do with our own land to a vast extent. 

I don't think we would know freedom if it hit us in the face. 

ratechaser

princeofpounds said:

rq9292 said:

I wonder if anybody has had the same experience as me and whether it is common that buying the freehold doesn't entail any extra freedom.

We are all just tenants of the Crown anyway... even 'free'holders only have tenure.

Legal technicalities aside.... Whether it is covenants, planning permission, building regs, compulsory purchase, utility access rights etc. etc. the State controls what we do with our own land to a vast extent. 

I don't think we would know freedom if it hit us in the face. 

I suppose you could always go and lay claim a remote island somewhere...

princeofpounds

ratechaser said:

princeofpounds said:

rq9292 said:

I wonder if anybody has had the same experience as me and whether it is common that buying the freehold doesn't entail any extra freedom.

We are all just tenants of the Crown anyway... even 'free'holders only have tenure.

Legal technicalities aside.... Whether it is covenants, planning permission, building regs, compulsory purchase, utility access rights etc. etc. the State controls what we do with our own land to a vast extent. 

I don't think we would know freedom if it hit us in the face. 

I suppose you could always go and lay claim a remote island somewhere...

Alas I don't believe there is any Terra Nullius left these days, unless we get a volcanic eruption somewhere in the deep seas. 

I'm also not sure that would lead to a better quality of life for anyone. Just making a point about the nature of tenure and true freedom.

Section62

rq9292 said:

The catch is that one of the restrictive covenants is that "no alterations shall be made to the premises without prior consent of the council". In terms of saving the hassle of gaining consent for building work this appears to achieve little benefit to me. In my opinion it is ridiculous that the council should insist on this covenant in addition to planning permission and BR when they no longer have an interest in the property.

The council will still have an interest in how the property is used and modified. Unlike new build developers who finish a development and vanish, a council will usually continue to own properties surrounding the one being sold. They will want to make sure that nothing is done with the sold property which would a) devalue their surrounding housing stock, or b) cause problems for them (or any tenants).

rq9292 said:

I think that given the length of the lease and the minimal ground rent it appears to me that buying the freehold with this covenant would make me a freeholder in name only in comparison to my neighbours with identical leases.

The significant difference would be that they have to pay an admin fee (currently £150) to get consent for any alterations. You don't yet know what fee (if any) would be charged for giving "written consent" to you as a freeholder. You've assumed it will still cost you £150, but is that really the case?

rq9292 said:

The fee for permission is currently £150 as stated but who knows much much it could rise in the future.

This^.  As a leaseholder there is a contractural fee, which could increase in line with the terms of that contract. As a freeholder you only need written consent, the cost of which (and scope for future cost increases) is currently unknown.

The cost of buying the freehold is equivalent to the cost of making three requests for modifications as a leaseholder. Sounds cheap to me.

rq9292 said:

How do they enforce the covenant if they are no longer notified when I come to sell the house in the future?

The same way all covenants on freehold properties are enforced. I.e. if they become aware of a breach and can be bothered to do anything about it.  You should expect there to be a requirement that you ensure any future purchaser of the property agrees to be bound by the same covenants and indemnifies you against any future breach - it is in your interests for that to happen and your solicitor (when you sell) should make sure that happens.

rq9292 said:

I am not looking to build an extension or to change the outside of the property therefore I am puzzled why the council should feel as though it is important to monitor whether somebody installs a downstairs toilet, moves a doorway or opens up a room when they already have a building control team for that. Why charge a fee to duplicate this work?

Two main reasons.
Firstly, for simplicity. The council won't want to go to the trouble of specifying exactly what modifications do and don't need prior permission, and in doing so potentially create a loophole you could use. Internal changes could, for example, mean splitting reception rooms into multiple bedrooms and turning the house into an HMO. Not all work requires planning or BR approval, so they will want to cover all bases.

Secondly, you need to see the council not as a single entity, but instead as a collection of functions. Building Control is a separate function to Planning which is separate to property ownership. Local Government reorganisation could remove the BC and Planning functions from the council (or they could be privatised by the Government). This would leave the Council, as an adjoining property owner, without influence over what you do with your property. It might appear to be duplication of work, but is really a case of them covering their position against future uncertainty.