Indemnity covenant not on title register: should I provide it to seller?

lb00

Hi all,

I am currently in the process of purchasing a leasehold flat. Just before the exchange, the vendor's lawyers amended the contract to include the below indemnity covenant. 

8 The transfer of the Property  shall contain the following provisions in Panel 11 of the transfer: 

“11.1 The Transferees covenants with the Transferor, by way of indemnity only, on the Transferee’s own behalf and on behalf of the Transferees’ successors in title, to:

(A) observe and perform the charges incumbrances covenants and restrictions contained or referred to in the property and charges registers of title number referred to in panel 1 in so far as they are subsisting and capable of taking effect; and 

(B) pay the rents reserved by and otherwise observe and perform the tenants’ covenants conditions and obligations of the lease of the Property registered with the title number referred to in panel 1; 

(C) keep the Transferor indemnified against all proceedings costs claims and expenses arising from any future failure to so.”

My solicitor has informed me that this indemnity covenant is not referenced in the legal title of the property. The vendor's lawyers have responded by stating that, as buyers, we must agree to provide them with this indemnity covenant, regardless of whether it is registered, since they provided it to the previous seller.

I am seeking advice on whether we should insist that the title register be amended to include the indemnity covenant before proceeding with the exchange, or if it is okay to proceed with the purchase even if the indemnity covenant is not registered.

Any insights or experiences with similar situations would be greatly appreciated.

Thank you very much!

user1977

I think the point your solicitor is making is that this isn't something essential to do because the title says it has to be done - it's something you can negotiate with the sellers. It wouldn't help you to get it registered (and I'm not sure how you would create such an obligation on the title anyway - is your solicitor actually saying you ought to do this?). It seems a bit of a non-point anyway (assuming you're checking that there are no such outstanding obligations by the sellers).

lb00

user1977 said:

I think the point your solicitor is making is that this isn't something essential to do because the title says it has to be done - it's something you can negotiate with the sellers. It wouldn't help you to get it registered (and I'm not sure how you would create such an obligation on the title anyway - is your solicitor actually saying you ought to do this?). It seems a bit of a non-point anyway (assuming you're checking that there are no such outstanding obligations by the sellers).

Thank you.

As there is a chain of covenants in place I wouldn't be ill advised if I were to agree to provide the covenant to the seller, correct?

Yes solicitor was asking for the covenant to be registered before exchange - you are saying it is irrelevant whether it is registered or not then?

Also mentioning @Land_Registry in case they can provide some advice.

Thanks again.

lb00

I have found a Lexis Nexis article on this:

Where a transfer contains an indemnity covenant but there is no note of that indemnity on the registered title, is the chain of indemnity broken merely by a note not being made on the register? In such a case, would a transferee still have to give an indemnity in the transfer to it?

The chain of indemnity is important as it provides successive indemnities to each of the previous owners in the chain, stretching back to the original covenantor. The chain can be broken, for example by an insolvency, but it may be difficult to know whether the chain is intact. It is therefore the case that transferors are likely to require a covenant to ensure that they are protected following the transfer, regardless of any entry on the title.
It is possible for an indemnity covenant to be entered into the proprietorship register of the title of the land, but this is not necessary for the covenant to be valid, or for the chain of indemnity to continue. It is therefore necessary for a purchaser to check the transfer documentation relating to the transfer to the buyer to determine which covenants have been given.
Provided that the transferor gave an indemnity covenant (as is likely given the transfer contains such a covenant) then it is likely that the chain of indemnity remains intact. The fact that it has not been noted on the registered title does not of itself break the chain of indemnity, and the transferor is highly likely to require an indemnity from the transferee to preserve the chain of indemnity.

My solicitor insists that if the vendors are going to require an indemnity covenant, they should arrange for the existing register at HM Land Registry to be amended to reflect the indemnity covenant agreed upon at the time of their purchase.

What do you advise? Alternatively, instead of asking for the title register to be amended, can my solicitor request to review their transfer documentation to verify the presence of the indemnity covenant and then proceed with providing them with the indemnity covenant?

Thank you all very much

lb00

Bumping this thread! Thanks all.

Land_Registry

lb00 said:

user1977 said:

I think the point your solicitor is making is that this isn't something essential to do because the title says it has to be done - it's something you can negotiate with the sellers. It wouldn't help you to get it registered (and I'm not sure how you would create such an obligation on the title anyway - is your solicitor actually saying you ought to do this?). It seems a bit of a non-point anyway (assuming you're checking that there are no such outstanding obligations by the sellers).

Thank you.

As there is a chain of covenants in place I wouldn't be ill advised if I were to agree to provide the covenant to the seller, correct?

Yes solicitor was asking for the covenant to be registered before exchange - you are saying it is irrelevant whether it is registered or not then?

Also mentioning @Land_Registry in case they can provide some advice.

Thanks again.

Firstly this is something you must rely on your legal rep to advise you on
Secondly a 'chain of personal covenants' can be important to maintain as if that chain is broken it may have an impact later. So if the previous Transfer included personal covenants then the conveyancer dealing with the next one would often insist that they are repeated as they are personal to the seller each time. But again something your legal rep needs to advise you on
And thirdly if there was a personal covenant entered into at the time of the previous sale/purchase and they think a register entry should have been made, then they should report it as a possible error and have the register amended as appropriate.

lb00

Land_Registry said:

lb00 said:

user1977 said:

I think the point your solicitor is making is that this isn't something essential to do because the title says it has to be done - it's something you can negotiate with the sellers. It wouldn't help you to get it registered (and I'm not sure how you would create such an obligation on the title anyway - is your solicitor actually saying you ought to do this?). It seems a bit of a non-point anyway (assuming you're checking that there are no such outstanding obligations by the sellers).

Thank you.

As there is a chain of covenants in place I wouldn't be ill advised if I were to agree to provide the covenant to the seller, correct?

Yes solicitor was asking for the covenant to be registered before exchange - you are saying it is irrelevant whether it is registered or not then?

Also mentioning @Land_Registry in case they can provide some advice.

Thanks again.

Firstly this is something you must rely on your legal rep to advise you on
Secondly a 'chain of personal covenants' can be important to maintain as if that chain is broken it may have an impact later. So if the previous Transfer included personal covenants then the conveyancer dealing with the next one would often insist that they are repeated as they are personal to the seller each time. But again something your legal rep needs to advise you on
And thirdly if there was a personal covenant entered into at the time of the previous sale/purchase and they think a register entry should have been made, then they should report it as a possible error and have the register amended as appropriate.

Thank you very much.
How long does it usually take for Land Registry to amend such an error and make the register entry for the covenant?
Thanks again.

Land_Registry

lb00 said:

Land_Registry said:

lb00 said:

user1977 said:

I think the point your solicitor is making is that this isn't something essential to do because the title says it has to be done - it's something you can negotiate with the sellers. It wouldn't help you to get it registered (and I'm not sure how you would create such an obligation on the title anyway - is your solicitor actually saying you ought to do this?). It seems a bit of a non-point anyway (assuming you're checking that there are no such outstanding obligations by the sellers).

Thank you.

As there is a chain of covenants in place I wouldn't be ill advised if I were to agree to provide the covenant to the seller, correct?

Yes solicitor was asking for the covenant to be registered before exchange - you are saying it is irrelevant whether it is registered or not then?

Also mentioning @Land_Registry in case they can provide some advice.

Thanks again.

Firstly this is something you must rely on your legal rep to advise you on
Secondly a 'chain of personal covenants' can be important to maintain as if that chain is broken it may have an impact later. So if the previous Transfer included personal covenants then the conveyancer dealing with the next one would often insist that they are repeated as they are personal to the seller each time. But again something your legal rep needs to advise you on
And thirdly if there was a personal covenant entered into at the time of the previous sale/purchase and they think a register entry should have been made, then they should report it as a possible error and have the register amended as appropriate.

Thank you very much.
How long does it usually take for Land Registry to amend such an error and make the register entry for the covenant?
Thanks again.

It can be a few weeks currently but the key is for the conveyancer to report it as an error through our contact form. They can also escalate it to reduce the wait time

lb00

Land_Registry said:

lb00 said:

Land_Registry said:

lb00 said:

user1977 said:

I think the point your solicitor is making is that this isn't something essential to do because the title says it has to be done - it's something you can negotiate with the sellers. It wouldn't help you to get it registered (and I'm not sure how you would create such an obligation on the title anyway - is your solicitor actually saying you ought to do this?). It seems a bit of a non-point anyway (assuming you're checking that there are no such outstanding obligations by the sellers).

Thank you.

As there is a chain of covenants in place I wouldn't be ill advised if I were to agree to provide the covenant to the seller, correct?

Yes solicitor was asking for the covenant to be registered before exchange - you are saying it is irrelevant whether it is registered or not then?

Also mentioning @Land_Registry in case they can provide some advice.

Thanks again.

Firstly this is something you must rely on your legal rep to advise you on
Secondly a 'chain of personal covenants' can be important to maintain as if that chain is broken it may have an impact later. So if the previous Transfer included personal covenants then the conveyancer dealing with the next one would often insist that they are repeated as they are personal to the seller each time. But again something your legal rep needs to advise you on
And thirdly if there was a personal covenant entered into at the time of the previous sale/purchase and they think a register entry should have been made, then they should report it as a possible error and have the register amended as appropriate.

Thank you very much.
How long does it usually take for Land Registry to amend such an error and make the register entry for the covenant?
Thanks again.

It can be a few weeks currently but the key is for the conveyancer to report it as an error through our contact form. They can also escalate it to reduce the wait time

Thank you. 
My solicitor is currently in discussions with the vendor's lawyers, insisting that the title register be amended to include the indemnity covenant. We're waiting to see their response. I understand that another approach could be to review the transfer documents from when the seller acquired the property to check what covenants they have previously agreed to. However, my solicitor disagrees and maintains the only viable option is for the seller to add the indemnity covenant to the title register before we proceed with the exchange.

Land_Registry

lb00 said:

Land_Registry said:

lb00 said:

Land_Registry said:

lb00 said:

user1977 said:

I think the point your solicitor is making is that this isn't something essential to do because the title says it has to be done - it's something you can negotiate with the sellers. It wouldn't help you to get it registered (and I'm not sure how you would create such an obligation on the title anyway - is your solicitor actually saying you ought to do this?). It seems a bit of a non-point anyway (assuming you're checking that there are no such outstanding obligations by the sellers).

Thank you.

As there is a chain of covenants in place I wouldn't be ill advised if I were to agree to provide the covenant to the seller, correct?

Yes solicitor was asking for the covenant to be registered before exchange - you are saying it is irrelevant whether it is registered or not then?

Also mentioning @Land_Registry in case they can provide some advice.

Thanks again.

Firstly this is something you must rely on your legal rep to advise you on
Secondly a 'chain of personal covenants' can be important to maintain as if that chain is broken it may have an impact later. So if the previous Transfer included personal covenants then the conveyancer dealing with the next one would often insist that they are repeated as they are personal to the seller each time. But again something your legal rep needs to advise you on
And thirdly if there was a personal covenant entered into at the time of the previous sale/purchase and they think a register entry should have been made, then they should report it as a possible error and have the register amended as appropriate.

Thank you very much.
How long does it usually take for Land Registry to amend such an error and make the register entry for the covenant?
Thanks again.

It can be a few weeks currently but the key is for the conveyancer to report it as an error through our contact form. They can also escalate it to reduce the wait time

Thank you. 
My solicitor is currently in discussions with the vendor's lawyers, insisting that the title register be amended to include the indemnity covenant. We're waiting to see their response. I understand that another approach could be to review the transfer documents from when the seller acquired the property to check what covenants they have previously agreed to. However, my solicitor disagrees and maintains the only viable option is for the seller to add the indemnity covenant to the title register before we proceed with the exchange.

Fair enough and all very much down to your conveyancer to make such decisions as your legal rep. Always follow their guidance as a result