Deed of Covanent

Explorer87

Is anyone able to shed some light on what one is? Please!

So I’m buy out my gf’s ex partner from a mortgage. We’re transferring it into my name and now the solicitors have said we have to shell out an extra £800 +vat for a deed of covenant. 

My gf never had one on the original sale. 

steampowered

You are not just buying out the ex partner from a mortgage. You are purchasing his stake in the property.

If the property is leasehold, providing a deed of covenant might be a condition of transferring the case.

If that is the case, it is likely that your GF's conveyancers did have one done when she originally bought the property, but she just doesn't remember or realise because it wasn't made into a big issue.

£800 + VAT sounds like a lot. Query with your conveyancer how they came up with that cost and what the deed covers.

Explorer87

Thanks for that! 

So the property is freehold.

The solicitors have already stated in an email that the cost can be lower but it would work out the same cost once everyone has checked it etc.

The email states
Upon review of the Title register for your property, I note there is a restriction registered in favour of XXXX as per B2 of the enclosed Proprietorship register.  We will need to comply with this restriction upon completion, in order for the Land Registry to register the property in yours and your partner’s name.
The restriction refers to the enclosed Transfer dated 4th January 2006 which states that upon completion of the transfer, you and your partner will need to enter into a document called ‘Deed of covenant’ confirming that you will observe and perform the covenants contained within the Transfer. Upon receipt of the signed Deed of covenant, XXXX’s solicitors will issue a letter of consent which will enable you to register the transfer of equity. 

I have contacted XXXX and their solicitors have since been in touch with us and advised the following
“I believe the scope of work required here is the drafting and serving of a Deed of Covenant and Letter of Consent. On this basis, our fees are £800 + VAT and will be payable by your client.  Could you kindly confirm whether your client is agreeable and provide your undertaking to pay our legal costs of £800 + VAT and any disbursements up to a maximum of £30, whether or not this matter proceeds to completion?”

I have asked them if they can reduce their fees but they stated they can only  do this if I was to draft the Deed of covenant but they will still need to approve it and make amendments if required. On this basis they would charge £350 +VAT and our fees for drafting the documents would be £400. Altogether, it would come to a similar cost but they could increase their fee of £350 +VAT depending on any amendments they require.  

Please let me know as to how you wish to proceed.

 

Explorer87

She bought the house in 2018

eddddy

Is the house relatively new and on an estate? And is XXXX the developer, or perhaps a management company?

It's probably like this:

• There are a set of rules that apply to homes owners on the estate - like they to pay service charges, not park trucks on their drives, ask permission before building a conservatory etc.

• If you want to own a home on the estate - you have to jointly sign a deed (or agreement) in which you covenant (or promise) to follow those rules.

• I expect your gf and her ex both signed the same deed when they bought their home on the estate (maybe your gf doesn't remember).

• The freeholder / management company wants to charge you £800 for drafting that deed - for you both to sign

TBH, the £800 sounds a bit cheeky. I'd have thought they'd have a standard worded deed that all new owners sign - rather than having to write one specially. Or just use the same deed wording that your gf and her ex used when they bought. If you can find a copy of that deed, that might be a way forward.

Explorer87

Yeah I was concerned that its a lot of money and how come they didn’t have one when they bought the house back in 2018? 

Explorer87

eddddy said:

Is the house relatively new and on an estate? And is XXXX the developer, or perhaps a management company?

It's probably like this:

• There are a set of rules that apply to homes owners on the estate - like they to pay service charges, not park trucks on their drives, ask permission before building a conservatory etc.

• If you want to own a home on the estate - you have to jointly sign a deed (or agreement) in which you covenant (or promise) to follow those rules.

• I expect your gf and her ex both signed the same deed when they bought their home on the estate (maybe your gf doesn't remember).

• The freeholder / management company wants to charge you £800 for drafting that deed - for you both to sign

TBH, the £800 sounds a bit cheeky. I'd have thought they'd have a standard worded deed that all new owners sign - rather than having to write one specially. Or just use the same deed wording that your gf and her ex used when they bought. If you can find a copy of that deed, that might be a way forward.

It’s relatively new. The xxxx are developers I believe.

i’ll ask

eddddy

Explorer87 said:

It’s relatively new. The xxxx are developers I believe.

i’ll ask

Also, did your gf and her ex buy directly from the developers?

If so, the developers were being paid a few hundred thousand for a house - so they might have 'bundled-in' the cost of the deed etc. (i.e. they didn't ask for a separate fee for it).

The deed would have just been in the bundle of documents that needed signing.

But this time the developers aren't being paid anything - so they want a payment for the deed to cover their costs.

Explorer87

No they bought off a person who has owner the property before them. 

Is it something that must be done? 

Section62

Explorer87 said:

Is it something that must be done? 

In short, yes.

Your girlfriend and ex-partner might not have been aware of what they were signing, but if the solicitor is correct it was a deed of covenant which includes a requirement to ensure future owners also enter into a deed of covenant to the same effect.

Do all the "XXXX" refer to the developer?  No mention of the ex partner?

What does the ex partner's solicitor have to say about it?  The ex partner needs to be released from the covenants they have given, and they (as well as the developer) should want confirmation this has been done as part of the transfer.

Explorer87

So the ex hasn't yet been made aware of this, just yet. That might change.

XXXX is the developers, not sure if they needed naming, if it will actually change the way this proceeds. 

Well anyway the last email we received was this:

Further to my colleague’s e-mail below, you will be aware that I have asked McNeela Construction’s solicitors as to why there were no fees payable in relation to the required Deed of covenant and Letter of consent in 2018 when you purchased the property.

They have stated the following:

“Our team did not act for the client on their letter of consent in 2018, so we could not comment on the reason why there was no fee payable by your client at this time.

Please refer to my e-mail dated 9th September with our revised fees of £350 + VAT and not the £800 + VAT which we initially quoted as we understood we would not be required to draft the Deed. In any event, the Transfer states that the costs to satisfy the restriction are to be borne by your client. “

_____

I wondered if the deed is something that can be bought out of, can we pay a higher fee and have it written off?

Is having a deed of covenanted something that might at actually put off future buyers?

Ta