Selling house & unknowingly breached restrictive covenant

Ruth03

My mum is selling her house & has been made aware she breached a restrictive covenant when she put a sun lounge on the house. Even though she got all the relevant planning permission, she had no idea about this covenant in place about making alterations.

She has agreed to take out indemnity insurance to protect the new owners but they’re not happy with this & are requesting that she contacts the company that put the covenant in place. I’ve just read that the company could seek compensation/ask her to remove it in the worst case scenario.

Has anybody else had something similar where new owners aren’t happy with indemnity insurance?

user1977

Ruth03 said:

I’ve just read that the company could seek compensation/ask her to remove it in the worst case scenario.

Where did you read this? What would they be "compensated" for?

In practice, they're only going to be interested in taking a fee for granting their consent.

Isn't your mum's solicitor giving her any advice about this?

Doozergirl

What is the wording of the covenant? 

ABFG

If this is an old covenant the company named in the covenant may not still exist, you can check on Companies' House. In which case you could be free and clear if no successor is named. Either way, having recently bought a place with covenants, my solicitor advised that there are often workarounds to (decades) old covenants which might be accepted by the other side in this case. Hopefully you have a solicitor who can advise.

Ruth03

It’s a covenant from about 10 years ago but the company is still in existence. The solicitor advised that the normal course of action is indemnity insurance. However, for some reason the new buyers are refusing this & want the company to be contacted for consent. 

Sistergold

I would just get another buyer I would not want to start contacting company if I was your mom. It’s only a sun lounge! Buyers can fuss! 

Section62

Ruth03 said:

It’s a covenant from about 10 years ago but the company is still in existence. The solicitor advised that the normal course of action is indemnity insurance. However, for some reason the new buyers are refusing this & want the company to be contacted for consent. 

If the company still exists and are likely to give consent then it is better to do that than take out indemnity insurance.  Indemnity insurance comes with conditions which restrict what the buyer can do in the future - for example if they want to replace the sun room when it is end of life they should contact the company for consent - but that contact may void the indemnity insurance.

Indemnity insurance would be more suitable where the company no longer exists or the beneficiary of the covenant would be difficult/impossible to trace.

MSE_ForumTeam3

I've merged the two duplicate threads together.

Section62

ABFG said:

If this is an old covenant the company named in the covenant may not still exist, you can check on Companies' House. In which case you could be free and clear if no successor is named.

Companies House don't have an exhaustive list of UK companies - there are types of company (often involved in smaller development projects) that didn't/don't need to be recorded by them.  Unfortunately the absence of a name on the current register doesn't prove the company no longer exists.

canaldumidi

On the face of it, I'd suggest offering indemity insurance as advised by solicitor. If the buyer is not happy, re-market the property asap.

However, as requested earlier, hat is the exact wording in the covenant,, who is the beneficiary company? I don't mean the name, I mean what is their ongoing interest in the property if any?

eidand

Whatever you do, do not take down anything. You could actually do whatever they requested and they change their mind and don't buy anyway.

This is the property, you buy it as is or you go away. Give them a week to think it through and then re-market if they stick to their guns