Will mortgage lenders lend on property with missing documents and unknown restrictive covenants?

user1168934

I am in the process of buying an ex-council house. The deed for the house says that there are restrictive covenants. The problem is that the document containing restrictive covenants is missing. The land registry do not have it on file and the seller does not have it. My solicitor says that I can take indemnity insurance but warns that mortgage lenders might have a problem with. I have asked him for details but he says he cannot give advice about mortgage lenders.

Can some mortgage advisors or anyone who has experience with mortgaging property with "unknown covenants" kindly help. Is it going to be a problem to get mortgage on this property - for instance will remortgaging in a few years time will be an issue?

I intend to extend the property straightaway within permitted development. Again, since the covenants are unknown I have no idea whether this will be a breach or not. The mortgage lenders will aslo have no way to determine whether it is in breach. Will the mortgage lenders have a problem lending on this extended property in future?

user1977

Lenders should be fine with it as long as there is indemnity insurance covering the risk. It'll be the purchasers who are more likely to have concerns.

And is everybody really certain that they have no idea what might have been in a deed from only ten years ago?

user1168934

user1977 said:

Lenders should be fine with it as long as there is indemnity insurance covering the risk. It'll be the purchasers who are more likely to have concerns.

And is everybody really certain that they have no idea what might have been in a deed from only ten years ago?

The deed is there but the estate transfer document when the current occupier bought is from the council is missing. Not sure where you got 10 year, It was about 25 years ago.

user1977

user1168934 said:

user1977 said:

Lenders should be fine with it as long as there is indemnity insurance covering the risk. It'll be the purchasers who are more likely to have concerns.

And is everybody really certain that they have no idea what might have been in a deed from only ten years ago?

Not sure where you got 10 year, It was about 25 years ago.

Sorry, I think confusing with somebody else's very similar thread.

K_S

@user1168934 Unfortunately, it's hard to give a useful opinion with very little context and it's more conveyancing territory. I would have expected your solicitor to be able to give a opinion, but I can understand why he doesn't want to risk it.

If it's really that important to you you could consider doing what one of my quirkier landlord clients does for cheap properties he could purchase outright, he buys with a small 25/50k mainstream mortgage on it so that he has some assurance over its acceptability to mortgage lenders and ease of a future sale.

But to be honest, a conveyancer should be able to perform the same function if they wanted to.

user1168934

K_S said:

@user1168934 Unfortunately, it's hard to give a useful opinion with very little context and it's more conveyancing territory. I would have expected your solicitor to be able to give a opinion, but I can understand why he doesn't want to risk it.

If it's really that important to you you could consider doing what one of my quirkier landlord clients does for cheap properties he could purchase outright, he buys with a small 25/50k mainstream mortgage on it so that he has some assurance over its acceptability to mortgage lenders and ease of a future sale.

But to be honest, a conveyancer should be able to perform the same function if they wanted to.

This property is not cheap and I certainly do not have the cash to pay outright. I am kind of stretched to my limit to buy it as it is.

I feel that the lawyer is kind of washing his hands of it. He is getting paid whether this deal goes through or not. In a way he is pushing me to take indemnity without clearly saying it out loud. He is telling me the options but not really giving me an opinion/advice. He said to me that in such cases people take indemnity insurance but at the same time said that mortgage lenders might have an issue with it. He further said that on top of that I should also decide whether I want to proceed with such a property with unknown covenants or not.

In your experience, how often do you come across cases where covenents are unknown?

I have only found a handful of threads on various forums and all of them were for covenents that are 70-80 years old. No cases where the covenents were so recent i.e. 25 years.

K_S

@user1168934 These kind of issues rarely come up during my part of the process (up to mortgage offer) so I wouldn't really know. I can't recall a purchase having fallen through due to "unknown covenants" or similar, but that's not a statistically valid statement.

user1977

I think people would need to know more about the title and the history of the property to get a "feel" for what the risk might be. Do the covenants only affect this property, or a larger estate? Is the (likely) beneficiary still around? What has happened to the property since the covenants were put in place (any development / changes of use)?

kingstreet

Your solicitor/conveyancer is also presumably acting for the lender so at some point he is going to have to put this to the lender to gain their approval for the quality of the title. Have you actually applied and told your conveyancer the lender concerned? They may also be able to check the UKF Handbook and see if there are standing instructions for such issues.