Restrictive Covenants

[55allgold]

bulb763 said:

Another Q: if they wanted to enforce the covenant, the only thing they can do is sue for their losses - am I right?

Not sure if they could apply for an injunction to stop you working at home? If they did, presumably, there would then be the matter of how 'reasonable' such a covenant is in 2011. Whichever type of bewigged-throwback who settles these things might decide that something drawn up back then cannot reasonably be applied to, say, telecommuting/etc. (Unlike running a car repair business from your front garden, perhaps).

A few people above and elsewhere have mentioned neighbours acting to enforce a covenant. I've not seen an example to recall any salient details. My GF would certainly like to get rid of the RC-breaking caravan that a neighbour parks outside her lounge window.

So I'm all ears!

[rlw]

944fan said:

I used live in a block of flats. It was nothing special but the old gits who also lived there thought it was some gated community. Anyway the covenants were a joke. They stated that:

You are only allowed one music insutrument in the property and it can only be played between the hours of 8:00 AM and 9:00 PM.
You are not allowed to be drunk and disorderly in the communal areas (how I am supposed to get in to my flat when I am six sheets to the wind?).
No washing on the balcony
No parrots or other noisy birds or pets which may cause a disturbance

Load of bks mostly

Very glad I don't live near you then..........

[Jobbo]

Mr GrimNasty said:

Jobbo said:

he default position from solicitors isn't "It's obsolete"! Not unless they want to insure it with their own PI cover.

Your random selection of a profession, not mine LOL. But actually as you mention it, yes most general solicitors don't have a clue about anything much.

Not particularly random - it's the one profession that's likely to be involved in the purchase of property. I don't think prostitutes, doctors, vicars, teachers etc are likely to give an opinion one way or the other

Back on topic, in theory breach of a restrictive covenant can be enforced by way of injunction, and indeed that's the obvious remedy. A seller imposes a covenant for a reason, not as a cash cow. Sometimes a court will decide that the burden of the covenant is too great for the benefit and will award damages in lieu, which is where insurance would be useful, but do bear in mind that you cannot assume that damages will be awarded; that's not the default remedy. I'm not going to comment on the wording of the covenant specifically because I don't have a full picture of the property, estate, use, title etc; your solicitors do have these details, you're paying them and they have PI cover for the job, so speak to them.

Re. enforcing covenants against neighbours, this right would arise where you have a development scheme; similar covenants would need to be on every title and it would need to be intended that they are mutually enforceable. Much more common with modern housing estates where all the houses are built at the same time; far harder to demonstrate with older properties where you don't have old papers from the time they were built.

[Sparkysea]

Hi Everybody

Please can you help, I need guidance urgently.

I am due to exchange on a new build on Monday and found out on Friday that there is a restrictive covenant being applied which would stop me running a business from the house and I would not be able to have visitors or deliveries. I am a complementary therapist and would like visitors on occasion to attend. I know I would have to approach the council to check if ok but I am extremely worried about this restrictive covenant.

Is it the builder who inserts it in the transfer or the land registry/title?

The builder is selling 3 houses only. 1 is sold already. Can I ask for the covenant to be removed prior to exchange?

I think this is a deal breaker

Sparkysea

[caziques]

You may be best to get legal advice - personally the last people I would contact would be the council.

For ten years I didn't have permission to sell car spares from business premises (only camping gear and gas bottles!). My solicitor explained that as the council could not stop me from carrying on doing what I was doing, and would have to give permission if I applied I didn't need to ask them. The council used to ring me every year wanting me to apply and of course give them some money.

I never applied.

Someone told me once that is was Maggie that changed the rules about using a house for some business use. Councils couldn't stop you just because you hadn't told them - front garden car repairs I can understand - two or three visitors a day I don't see as a problem.

[Jobbo]

Sparkysea said:

Hi Everybody

Please can you help, I need guidance urgently.

I am due to exchange on a new build on Monday and found out on Friday that there is a restrictive covenant being applied which would stop me running a business from the house and I would not be able to have visitors or deliveries. I am a complementary therapist and would like visitors on occasion to attend. I know I would have to approach the council to check if ok but I am extremely worried about this restrictive covenant.

Is it the builder who inserts it in the transfer or the land registry/title?

The builder is selling 3 houses only. 1 is sold already. Can I ask for the covenant to be removed prior to exchange?

I think this is a deal breaker

Sparkysea

Generally, this sort of covenant would be inserted by the developer but check with your solicitor whether that's the case, or whether it was originally on the title.

If it's being inserted by the developer, I can't imagine they will let you walk away over it. If they won't allow it to be removed totally, they should at least accept some wording permitting you to use a room for therapy treatments (or whatever). Whether this use would infringe the planning consent is a question of degree (and this is the only thing relevant to the council); if it's basically a family home and you do some work from home then it should be fine, but if you converted most of the ground floor rooms to treatment rooms and had a big sign outside saying 'Sparksea Therapies', together with numerous visitors then the use would stop being mainly residential, even if it's your sole residence.

If it's already on the title, get your solicitor to do some investigation as to whether it may be enforceable, whether insurance could cover it etc.

[blueg33]

Speaking as a developer and having dealt with lost of land covenants, I would say that this covenant is almost certainly put in place by the developer, it will be part of their standard coveants along with things like not keeping caravans on the land etc.

There is a chance it may be linked to the planning permission too, in which case you are stuffed unless you can get the condition removed (could take 13 weeks)

You need to look at the conditions attached to the planning consent, and then speak with the Sales Director of the developer. They will resist removing the covenant, but may give you a side letter saying that they won't enforce the covenant for the use you describe.

This type of covenant is out of date for modern society as so many people work from home, but was designed to protect the amenity of other residents in the development.

[Sparkysea]

Hi
Thank you for your comments. The developer is very small (a one man band with subbies)and I am told he inserted the covenant. I feel a side letter would not be sufficient as the neighbours could still complain. I don't want to be tied into terms as I might want to do a completely different business such as dressmaking in the future. I can't see myself ever wanting to have a business were I had lots of rooms and advertise outside etc, as it would be my home.
The other thing I dont like is it devalues the property, I might not be able to sell it on easily as a prospective buyer may feel the same as me.
I've decided to walk if its not removed

[Sam_68]

Sparkysea said:

The other thing I dont like is it devalues the property...

This is simply not true: if such a covenant devalued the property, do you think we developers would implement them in the first place?

If you really want to see a property that's been devalued (and possibly relevant if you're going to walk from this deal and look for another newbuild), buy yourself something with a 'live work' Planning restriction on its home office/workshop. I've built a few of these over the years - Planning departments sometimes insist on them as a means of promoting 'sustainability' (ie. work from home = no carbon footprint from commuting) - and most of the time you can't give the bd things away.

[mcflurry]

An old house of mine had a convenent from the mid 19th century, that only married couples were allowed to live in the dwelling. Living in sin was prohibited...

[Jobbo]

Sparkysea said:

Hi
Thank you for your comments. The developer is very small (a one man band with subbies)and I am told he inserted the covenant. I feel a side letter would not be sufficient as the neighbours could still complain. I don't want to be tied into terms as I might want to do a completely different business such as dressmaking in the future. I can't see myself ever wanting to have a business were I had lots of rooms and advertise outside etc, as it would be my home.

I agree, don't accept a side letter - the reason why people are so willing to offer them is because they are tenuously enforceable against between the parties who issue them. If the developer sells off all of its adjoining land (which will happen) then you are going to have even less right to rely on a side letter against someone who didn't originally sign it.

As for being tied into terms, I would suggest a reasonable amendment would be to add words such as, "but this covenant shall not restrict or prevent the occupier from using the Property for business purposes which are ancillary to its primary use as a dwelling". But the people who need to discuss this are the solicitors; make your point clear to your own solicitor and say it's a deal-breaker, and they will find the right compromise.

[Sparkysea]

I say devalue because it could put of buyers like me!Maybe not the best term to use..
Live work units look interesting never heard of them before, however the reason I am looking to buy the house is for a place to reside and not primarily to run a business from. However because of how I earn my living I would like the option to be able to see people at home

[z4chris99]

we cant keep chicken geese or pigs.
we can't split the house to sell bits off.

loads of others I can't remember, it's an old rectory

[Road2Ruin]

Sparkysea said:

I say devalue because it could put of buyers like me!Maybe not the best term to use..
Live work units look interesting never heard of them before, however the reason I am looking to buy the house is for a place to reside and not primarily to run a business from. However because of how I earn my living I would like the option to be able to see people at home

This type of covenant is so common you probably wont find a house without it on! Certainly not a new one. I really wouldn't worry about it. Firstly they are inserted to stop joe bloggs running his garage business from his driveway and leaving broken down cars all over the place, secondly you have to create such a nuisance that your neighbours feel the need to enforce the covenant, thirdly they have to know of it's existance (they will have the same in their deeds but have forgotten about it), fourthly it's unlikely to come to anything even if they did compain as the builder, in this case, is the one that will have to enforce it and he wont be bothered as it will cost hime time and money. Lastly the nieghbours probably wont care as long as you are a nice neighbour and considerate to theirs needs too.

[blueg33]

Always risky suggesting that someone ignores a covenant, especially a recent one where the transferor is still in existence.

But they are standard new build covenants.

[zaphod42]

mcflurry said:

An old house of mine had a convenent from the mid 19th century, that only married couples were allowed to live in the dwelling. Living in sin was prohibited...

Presumably modern law would take precedence over a covenant...

Mine doesn't allow gravel or sand extraction, livestock or advertising hoardings.

[mcflurry]

zaphod42 said:

Presumably modern law would take precedence over a covenant...

Mine doesn't allow gravel or sand extraction, livestock or advertising hoardings.

I paid a token fee for an imdemnity, rather than argue about it for months

[blueg33]

mcflurry said:

I paid a token fee for an imdemnity, rather than argue about it for months

The problem is that very often you have to demonstrate to the insurers that there is no real risk to the covenant. Plus the insurance is not a panacea, in that it will pay out any damages etc but will not usually cover you for consequential loss/loss of profits.

Normal cost of RCI (Restrictive covenant indemnity) is half of 1% of the value of the property, but this often has a minimum fee. Plus insurance tax.

If the beneficiary of the covenant is known then insurance is hard to get, if you have had any discussion with possible beneficiaries then the insurance may not pay out.

RCI is a bit of a minefield as is its relation DTI (defective title indemnity)

Edited by blueg33 on Monday 16th January 18:11

[Cogcog]

My experience is that the neighbours have to be pretty angry or determined to enforce them, and the simple office at home is no longer seen as business use (or they would be charging business rates).

My neighbour breached 2 of his covenants about certain windows being frosted or non opening and the venting of boilers, but the cost of enforcement for the annoyed neighbour was prohibitive.

Having said that I pulled out of a sale once because my solicitior suggested the covenants could be onerous if the neighboursc were ever upset (no more than 1 dog, no commercial vehicles overnight, no fuel tanks in the grounds ewtc).

Overall they are well intentioned.

[Sparkysea]

[quote=zaphod42]

Presumably modern law would take precedence over a covenant...




Mmm... I wonder if the Equality Act would apply?! I think a covenant that stops a business that is not intrusive being run from home prevents disabled people from earning a living.

By the way Friday 18th May 2012 is "National Work from Home Day."

http://www.workwiseuk.org/