TP1 and covenants

spiritus

Myself and a group of ten other directors are on a board of directors for a management committee for couple of blocks of flats (leasehold) here in the Midlands.

We also have some neighbouring land which is currently being used as lock up garages and the covenants within the leasehold states that this need to remain for the use of the estate.

We believed that the covenants were held by a company separate to ours, one that has no connection to us.

We accepted an offer of £ 115,750 for the land from a buyer who said she would keep the land as is, as per the restrictive covenants.

We understood at the time that covenants can be eliminated but it's not an easy process, and possibly not cheap.........and even more possibly not guaranteed to be succesful. As a result we accepted an offer well below market value to enable us to secure funding for the estate for the forseeable future.

We accepted that the buyer may decide to try to get planning permission, or remove the covenants, in the future, but that would be their responsibility.

However...it transpires that we DO own the covenants after all, after our solicitor discovered this during preparation of paperwork for the sale.

It would also appear the the buyer's solicitor has also realised this as they have been asking for a TP1 transfer. This would allow ownership and enforcement of covenants to the buyer who would then be able to waive those covenants without any enforcement

So instead of selling a piece of land with restrictive covenants it looks like we have accepted a significantly lower offer for a piece of prime development land!

We sold the land on the understanding that the buyer was buying with land with restrictive covenants (enforced by another company) but instead we are being asked to hand over the "ownership" of the covenants as part of the agreed sale.

Has anyone any experience of this?

Are we committed to the sale?

TBG01

Sounds like a mountain out of a molehill. 

You don't say what the covenants are. Most pieces of land comes with covenants. 99.99% of the time there is no issues.

A TP1 isn't used to get round or get rid of covenants. It would've been always required unless the land already had its own separate title.

You haven't sold the land. You've accepted an offer. Nothing is final until contracts have been exchanged or if you've done away with contracts, your solicitor has recieved the money to complete and date the TP1.

Section62

spiritus said:

...

We also have some neighbouring land which is currently being used as lock up garages and the covenants within the leasehold states that this need to remain for the use of the estate.

What is the overall purpose of the covenants - is it to ensure the provision of parking, or is it to stop the land being developed by others?

spiritus said:

Are we committed to the sale?

Your solicitor is best placed to answer that... they will have a better understanding than us of any agreements or committments you've already made to sell the land.

spiritus

TBG01 said:

Sounds like a mountain out of a molehill. 

You don't say what the covenants are. Most pieces of land comes with covenants. 99.99% of the time there is no issues.

A TP1 isn't used to get round or get rid of covenants. It would've been always required unless the land already had its own separate title.

You haven't sold the land. You've accepted an offer. Nothing is final until contracts have been exchanged or if you've done away with contracts, your solicitor has recieved the money to complete and date the TP1.

Yes, I understand a TP1 is not generally used to "get round" covenants but in this case I think it might be.

The agreement was that the covenants would be held by a party other than the buyer. This is why we accepted a lower offer as removal of those covenants would be timely, expensive etc

The buyer's solicitor is requesting we transfer part of the Superior Leasehold over to them, I am presuming as part of the TP1 request. This would enable the buyer to waive those covenants as and when she chooses to so in this particular case, it very much would allow the buyer to "get rid of" the covenants by breaching them and being the lone authority on enforcing those breaches.

eddddy

You mention "leasehold flats", "covenants within the leasehold", a "Superior Leasehold", etc.

It might help if you took a step back and explained the ownership structure, what exactly you're selling etc.

I'm guessing there is something like:

• A freehold piece of land with blocks of flats and lock up garages (Does the management company own that freehold?)

• A superior lease (or head lease). What is the extent of that superior lease - what land and buildings does it include? (Does the management company also own that superior lease?)

• Then individual leasehold flats. Do the flat leases give the owners the right to each use a lock-up garage?

And what is it you are selling? Part of the freehold land and buildings?

(And why were you selling it? And why did you think somebody would buy it - what did you think was the benefit to the buyer?)



You also say "We believed that the covenants were held by a company separate to ours, one that has no connection to us."  

• What company is this? On what basis are they involved?

You talk about "covenants within the leasehold" - I assume you mean covenants in a lease. Which lease? The lease for each individual flat? Or the Superior Lease? Or something else?

Bigphil1474

Can't you just tell them you won't sell the covenants, or you will for an extra half million or something extortionate? I'm surprised you weren't suspicious about someone's motives to buy land which couldn't be built on, and would even consider relying on some other company to enforce those covenants given they could easily be paid off.  

eddddy

Bigphil1474 said:

Can't you just tell them you won't sell the covenants, or you will for an extra half million or something extortionate? I'm surprised you weren't suspicious about someone's motives to buy land which couldn't be built on, and would even consider relying on some other company to enforce those covenants given they could easily be paid off.  

The OP really needs to explain a lot more.

For example, the OP says:

spiritus said:

We also have some neighbouring land which is currently being used as lock up garages and the covenants within the leasehold states that this need to remain for the use of the estate

So is the OP saying there is a lease (or leases) which contain covenants saying that the leaseholder(s) have rights to use the garages?

For example, is it that each flat owner's lease gives them the right to use one of the garages.

If so, the freeholder can't just sell the freehold of the garages and say to the flat owners (leaseholders) "Sorry, we've sold the garages. You no longer have the use of a garage".

That would be breaching covenants in the flat owners' leases.

spiritus

eddddy said:

Bigphil1474 said:

Can't you just tell them you won't sell the covenants, or you will for an extra half million or something extortionate? I'm surprised you weren't suspicious about someone's motives to buy land which couldn't be built on, and would even consider relying on some other company to enforce those covenants given they could easily be paid off.  

The OP really needs to explain a lot more.

For example, the OP says:

spiritus said:

We also have some neighbouring land which is currently being used as lock up garages and the covenants within the leasehold states that this need to remain for the use of the estate

So is the OP saying there is a lease (or leases) which contain covenants saying that the leaseholder(s) have rights to use the garages?

For example, is it that each flat owner's lease gives them the right to use one of the garages.

If so, the freeholder can't just sell the freehold of the garages and say to the flat owners (leaseholders) "Sorry, we've sold the garages. You no longer have the use of a garage".

That would be breaching covenants in the flat owners' leases.

No-you're absolutely right. The lack of detail I am sharing is a combination of me not fully understanding the intricacies and me being intentionally obtuse just in case the buyer happens to resort to the same online resource