What You Should Know About Restrictive Covenants

 

 

 

 

 

 

 

 

 

 

 

When you are buying a property, you may encounter what is known as a restrictive covenant. This is a written binding condition included in a property’s deed or contract by a seller. This dictates what a homeowner can or cannot do with the property under specific circumstances. For instance, a restrictive covenant can prevent new owners from altering the architectural style of the building or keep them from building new structures on a specific part of the land. It could also state that the new owner cannot use the property for trade or other businesses. 

In this post, Conveyancing Expert, a trusted conveyancer in Manchester discusses all you need to know about restrictive covenants:

Why Are Restrictive Covenants Used?

In most cases, they are established to maintain certain standards for residents in a particular community. Housing developers usually add restrictive covenants to transfer deeds so that owners won’t do anything that could possibly affect the neighbourhood negatively or break from the desired “uniformity” of the area.

The restrictions in such cases are often minor, like the prohibition of installing satellite dishes, parking a boat or a caravan in front of the house, keeping livestock in the yard, painting the house a loud colour, or others. 

Land owners may also create restrictive covenants on the lands they are selling to protect their value and minimise damage. 

Are Restrictive Covenants Only Applicable to New Builds?

No. They can be placed even on older properties. Moreover, the age of the covenant won’t have any effects on its validity. There are cases, though, where really old covenants are accepted as unenforceable due to the fact that its original builder cannot be traced or because of ambiguous wordings that make it hard to apply. It may also be deemed void if the covenant is historically obsolete. 

How Will a Restrictive Covenant Affect You?

What you should know about restrictive covenant is that it is applicable to all future purchasers of the property and not just the first or original buyer. They call it “running with the land”. That’s why it is important for you as a buyer to discuss this with your conveyancing solicitor so they can examine the deeds to see if there are any covenants before you sign anything. Remember that once signed, you will already be accountable for any breaches that you incur. 

Additionally, you should check where the ‘benefit of the covenant’ is located and whether or not it has passed onto another person or company. This is because they will be responsible for the enforcement of the restriction and answering queries related to the covenant. 

As a buyer, you should also determine if the property’s value will be affected in the future due to the provisions of a covenant. There are cases in which mortgage lenders refuse to approve loans on properties where a covenant is determined to potentially affect their saleability in the future. In such cases, you can contact the successor in title and current vendor and tell them that you cannot proceed due to the covenant. It’s possible for them to remove the restriction, especially if it’s evident that the covenant is going to affect their ability to sell the property, too. 

Conclusion

These are just some of the basics that you need to understand about restrictive covenants. As you can see it can be one of the factors that can make purchasing a property more complicated, and definitely among the reasons you need quality conveyancing services. A seasoned conveyancer can review deeds to determine if there are any covenants that you should be aware of and give you advice regarding the best steps that you should take.

Losing the plot: Residential conveyancing complaints and their causes

 

 

 

 

 

 

 

 

 

 

Has the Legal Ombudsman opened a can of worms with his recent report ‘Losing the plot: Residential conveyancing complaints and their causes’?

Part of the problem is that conveyancers have no idea how difficult or complicated a transaction might be until they are part way through it. As an ex-conveyancer, with 25 years’ experience at the coal face, I think I have encountered pretty much every problem there is. Having said that, a very modest number of transactions are straightforward, with a clear title, no mortgages to deal with, no alterations to the property and clear searches.

Quoting for conveyancing work without seeing any paperwork is like taking a car to the garage and asking the mechanic to provide a ‘fixed fee’ for servicing it (and carrying out any unexpected repairs) without allowing them to lift the bonnet. They just wouldn’t do it.

It has baffled me for years as to why there is not more helpful information provided to buyers and sellers at the outset of all transactions. Surely a free helpful guide, perhaps available in estate agents offices, could be produced by someone; the Law Society, the Legal Ombudsman or even the Legal Services Board?

Many conveyancers explain in their client care letter (are some too long to be easily understood?) that local searches don’t cover neighbouring properties and that buyers should check their plans carefully. But how many people can really tell if the boundaries on the ground actually reflect the drawn boundaries on the plan? I remember back in 1976 visiting properties with my conveyancing supervisor and not just checking plans but looking for alterations and taking measurements. Very few, if any, mistakes were made.

To add to the problems, despite the fact that there are many more registered titles than unregistered titles, conveyancing has become slower and more complicated (tedious?) than ever, caused partly by the introduction of too much red tape and bureaucracy. Conveyancers can no longer use their experience and knowledge to ‘take a view’ on a particular issue. Everything, no matter how small or insignificant, now needs reporting to lenders, fixing and/or insuring.

Conveyancers are now understandably frightened of their own shadows.

Not all conveyancing factories are bad (although in my experience, few are great) and not all high street conveyancers are good. The problem for the consumer is sorting the wheat from the chaff.

Another thorny issue is referral fees. Again not all firms who pay referral fees are poor. It partly depends on the amount of fee being paid versus the conveyancing fee being charged. I remember a solicitor in Bristol in the ‘80s who used to take an estate agent out to lunch every month and hand over a brown paper bag, containing varying amounts of cash, depending on how many transactions introduced by that estate agent had completed that month. Yes, the method and secrecy involved was dubious but did it make the solicitor a bad conveyancer, no, he was quite the opposite.

I used to receive a lot of work from a particular estate agent (with no referral fee being paid) until they had new owners. I was then told I would not be sent any more new work unless I paid a referral fee. I declined the kind offer and the flow of new work pretty much stopped overnight, except of course for complicated cases, or cases involving the agents themselves, their friends or family, because the referral fee paying conveyancer was not up to scratch!

The LeO has produced another document: ‘Using a conveyancing lawyer: Ten helpful tips’. One tip is to be wary of using an online or call centre conveyancing service if “your conveyancing transaction is not straightforward”. The problem is, as explained earlier, until the transaction is underway no one really knows how complicated a transaction may or may not be.

Surely when it comes to one of the biggest purchases of your life it is better to err on the side of caution and assume that the transaction might be tricky?

Another tip is ”to be wary of referrals and recommendations”. Exactly how will the average buyer or seller know if the referral is to a good firm or to a poor one simply paying the highest referral fee? I am sure that the Legal Ombudsman means well and the tips are a step in the right direction but they only scratch the surface.

In order for the LeO to get a much clearer picture of how difficult conveyancing really is might I suggest that he, or a colleague, spend the week before Christmas in the offices of a busy conveyancing firm?

That would truly be a baptism of fire.