Nigel Higgins - Residential Property explains:
Picture the following scenario. You have had an offer accepted for your dream home. In particular you love the bedroom extension which adds to the comfort and elegance of the property.
Your solicitor advises you the extension has planning permission and a completion certificate that it complies with building regulations. However, he advises you there is a restrictive covenant which requires you to obtain the consent of the person who has the benefit of the covenant, or even worse prevents any building work whatsoever.
What is a Restrictive Covenant?
This is a restriction which is put onto land to prevent people from performing certain actions.
It should be noted that a restrictive covenant of this nature may affect the value of the property since the owner will only be able to carry out internal alterations.
- Examine the wording of the covenants to see if it is enforceable. You will probably need specialist advice.
- In a case where you need consent of the person benefitting from the covenant, you can try to obtain their consent. The older the covenant the more difficult it might be to locate that person. Perversely, this might be an advantage because it makes it more unlikely the covenant will be enforceable. In these circumstances, you should seriously consider obtaining an insurance indemnity policy (See below).
- An insurance indemnity policy’ can offer some protection if the person benefitting from the covenant, is trying to the enforce it. The policy will ensure that the property owner will receive compensation for the cost of altering or demolishing the property and/or the difference between the value of the property before and after the covenant was enforced. However, you should not contact anyone you believe might be the original covenant owner before you try to take out the policy since they may refuse to insure you. You certainly should not contact the owner after the policy has been insured since this will invalidate it. You should also try to ensure as a term in the contract that the seller pays the premium for the policy.
- An application to discharge the restrictive covenant under section 84 of the Law Property Act 1925. This should only be considered as a last resort since it is time consuming, expensive and may not succeed.
For further information contact Nigel Higgins - Residential Property
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