Restrictive covenants - advise needed.

Rob_Ski

I am in the process of buying a house built in 1982. The property has restrictive covenants and, there is no copy of the deed referred to it held by the Land registry. The seller has restrictive covenants insurance policy. I have seen the deed of the next door neighbour so, I assume the covenants can be similar or the same on the buying property however, my solicitor can't confirm that.

My questions are:

 

1) If I breach a covenant and for example convert a loft to a room, would it be easy to enforce the covenant?

2) Would it be easy to sell this property in the future if the covenants are not written in the deed?

3) If there is a restrictive covenant insurance policy, does it mean one of the covenants have already been breached before or it's just bought just in case a covenant can be breached in the future? If one of the covenants have been breached, how can I check which one it was?

4) Should I carry on buying the property or withdraw my offer because of the unclear legal status?

ObserverOfLife

I am in a similar position where there are missing additional info on the deeds although it said there are restrictive covenants, no information is available. We want to do extensions and a loft conversion as well. 

The sellers has refused to buy indemnity insurance because it is extremely unlikely for someone to pop up with the covenant and enforce it because it was set in 1930. So we purchased it for a peace of mind in the event that someone do pop up and enforce it. Also, the policy remains for life, even for the next buyer.

there are 2 options if a person enforced the breach: the insurance will buy them off or any breaches will be covered by the insurance. Either way, you will be okay.

We know that next door property has restrictive covenant but this is entirely irrelevant because they are 2 separate land and title deeds. 

user1977

Rob_Ski said:

I am in the process of buying a house built in 1982. The property has restrictive covenants and, there is no copy of the deed referred to it held by the Land registry. The seller has restrictive covenants insurance policy. I have seen the deed of the next door neighbour so, I assume the covenants can be similar or the same on the buying property however, my solicitor can't confirm that.

My questions are:

 

1) If I breach a covenant and for example convert a loft to a room, would it be easy to enforce the covenant?

2) Would it be easy to sell this property in the future if the covenants are not written in the deed?

3) If there is a restrictive covenant insurance policy, does it mean one of the covenants have already been breached before or it's just bought just in case a covenant can be breached in the future? If one of the covenants have been breached, how can I check which one it was?

4) Should I carry on buying the property or withdraw my offer because of the unclear legal status?

1. No. So even if you know there's been a breach and who the beneficiary of the covenant is, you need to consider whether anybody would be so aggrieved by it that they'd want to spend time and money going legal.

2. Yes, the indemnity insurance is designed to make it marketable.

3. (a) The latter (b) You can't, that's the whole problem if the deed is missing.

4. Just buy it. There are 1001 more important and riskier things involved in buying a property.

Just in general - isn't your solicitor answering your questions? You are paying them for legal advice after all!

The indemnity insurance costs peanuts because the insurers are comfortable that the risk they're covering is almost nil. The insurance doesn't guarantee you'll "get away" with any breach, but as mentioned above, it's easier just to pay off most attempts at enforcement, and that's the option the insurers would go for.

Rob_Ski

user1977 said:

Rob_Ski said:

I am in the process of buying a house built in 1982. The property has restrictive covenants and, there is no copy of the deed referred to it held by the Land registry. The seller has restrictive covenants insurance policy. I have seen the deed of the next door neighbour so, I assume the covenants can be similar or the same on the buying property however, my solicitor can't confirm that.

My questions are:

 

1) If I breach a covenant and for example convert a loft to a room, would it be easy to enforce the covenant?

2) Would it be easy to sell this property in the future if the covenants are not written in the deed?

3) If there is a restrictive covenant insurance policy, does it mean one of the covenants have already been breached before or it's just bought just in case a covenant can be breached in the future? If one of the covenants have been breached, how can I check which one it was?

4) Should I carry on buying the property or withdraw my offer because of the unclear legal status?

1. No. So even if you know there's been a breach and who the beneficiary of the covenant is, you need to consider whether anybody would be so aggrieved by it that they'd want to spend time and money going legal.

2. Yes, the indemnity insurance is designed to make it marketable.

3. (a) The latter (b) You can't, that's the whole problem if the deed is missing.

4. Just buy it. There are 1001 more important and riskier things involved in buying a property.

Just in general - isn't your solicitor answering your questions? You are paying them for legal advice after all!

The indemnity insurance costs peanuts because the insurers are comfortable that the risk they're covering is almost nil. The insurance doesn't guarantee you'll "get away" with any breach, but as mentioned above, it's easier just to pay off most attempts at enforcement, and that's the option the insurers would go for.

Hi, thanks for your answers. Yes, the solicitor does answer my questions; however, he is the kind of person I need to keep asking everything and the answers are not clear to me. I am not sure whether he doesn't have vast experience within this area of law or just doesn't want to tell me for some reason. I don't think I'm going to use him again. But anyway your answers clear my head more.

I just want to ask about the indemnity insurance.  Do I understand the insurance covers all the fees and expenses but it actually doesn't cover the alteration of the property? So, if I convert a loft into a room I will be asked to take down the room.

This question might be silly but I don't really understand what we have the restrictive covenants for? It sounds to me like you have a freehold property but it's actually leasehold because you can't alter it and the land also belongs to someone else.

Is it something common people breach the covenants or they are actually fair and don't breach them?

I am also wondering whether the properties with the covenants are less attractive to the buyers and are actually more difficult to sell them?

Do the neighbours make issues if they see you altering the property or are they fine with that?

bouicca21

If the neighbouring properties were built by the same developer at the same time then there is a sporting chance that they have the same or similar covenants.  It’s at least worth investigating.

user1977

Rob_Ski said:

user1977 said:

Rob_Ski said:

I am in the process of buying a house built in 1982. The property has restrictive covenants and, there is no copy of the deed referred to it held by the Land registry. The seller has restrictive covenants insurance policy. I have seen the deed of the next door neighbour so, I assume the covenants can be similar or the same on the buying property however, my solicitor can't confirm that.

My questions are:

 

1) If I breach a covenant and for example convert a loft to a room, would it be easy to enforce the covenant?

2) Would it be easy to sell this property in the future if the covenants are not written in the deed?

3) If there is a restrictive covenant insurance policy, does it mean one of the covenants have already been breached before or it's just bought just in case a covenant can be breached in the future? If one of the covenants have been breached, how can I check which one it was?

4) Should I carry on buying the property or withdraw my offer because of the unclear legal status?

1. No. So even if you know there's been a breach and who the beneficiary of the covenant is, you need to consider whether anybody would be so aggrieved by it that they'd want to spend time and money going legal.

2. Yes, the indemnity insurance is designed to make it marketable.

3. (a) The latter (b) You can't, that's the whole problem if the deed is missing.

4. Just buy it. There are 1001 more important and riskier things involved in buying a property.

Just in general - isn't your solicitor answering your questions? You are paying them for legal advice after all!

The indemnity insurance costs peanuts because the insurers are comfortable that the risk they're covering is almost nil. The insurance doesn't guarantee you'll "get away" with any breach, but as mentioned above, it's easier just to pay off most attempts at enforcement, and that's the option the insurers would go for.

Do I understand the insurance covers all the fees and expenses but it actually doesn't cover the alteration of the property? So, if I convert a loft into a room I will be asked to take down the room.

This question might be silly but I don't really understand what we have the restrictive covenants for? It sounds to me like you have a freehold property but it's actually leasehold because you can't alter it and the land also belongs to someone else.

Is it something common people breach the covenants or they are actually fair and don't breach them?

I am also wondering whether the properties with the covenants are less attractive to the buyers and are actually more difficult to sell them?

Do the neighbours make issues if they see you altering the property or are they fine with that?

5. No, ultimately it would cover undoing the works and any reduction in the value of the property. That's why the amount insured is usually the full price of the property.

6. In this case, to keep the development looking consistent/nice. Other covenants may be to manage maintenance of common parts. Nothing really to do with any distinction between freehold and leasehold.

7. For this sort of restriction, the former - or at least, any breach is more likely to be dealt with via planning etc than by enforcing the covenant. While the developer was still on site, they may have had more interest in preventing early buyers spoiling the look of the place.

8. The covenants for the whole estate are pretty much guaranteed to be identical. And almost every vaguely modern property has covenants, and this is a commonplace example of one. Unless it's something unusual, it doesn't affect marketability or value - though things like liabilities to contribute towards common costs might put some people off.

9. If they're minded to complain I'm sure they'll moan at you anyway, but (if it's something which needs planning) they're more likely to object via planning.