Contract Covenants

[Jamie998]

Morning all,

 

I finally received a draft contract the other day for the purchase of a self build plot.  There are a few covenants within that I would like to share in order to get some second opinions from my fellow self builders.  I am due to meet with my solicitor next week so haven't received formal legal advice yet - I have reached my own opinions but would like a sanity check so here goes:

 

1.  "The transferee will not raise any objections to any planning application made by or on behalf of the transferors or the transferor’s successors in title in respect of the retained land"

 

2.  "The transferee and his successors in title shall not be entitled to any right of access of light and air or any other easement or right which would restrict or interfere with the free use of the retained land for building development or any other purpose"

 

3.  "Approval of plans:  the transferee must not build or erect upon the property any buildings or structures or erections other than one private dwelling house and boundary walls and fences the locations, exterior, design, appearance, finish, decoration of which are strictly in accordance with the drawing and specifications approved by the transferor in writing (which approval in relation to finish and decoration will not be unreasonably withheld or delayed)"

 

4.  "Alterations:  The transferee must not:

(a) build other than in accordance with the drawings and specifications approved by the transferor. 

(b) After completion of the buildings, make any alterations or additions to the exterior of those buildings or any other buildings subsequently erected on the property or to the walls, hedges and fences on the property. 

(c) erect any additional buildings, walls, hedges and fences on the property;

EXCEPT in all cases with the written approval of the transferor and whose fees d those of its professional advisors in connection with the consideration of any such application, whether granted, refused or withdrawn shall be paid by the transferee"

 

Any/all advice/opinions are appreciated.

 

Thanks

[CC45]

1. Our solicitor said that this wasnt legal in reality.  In our contract the word 'reasonable' appears.

 

2.  I assume they want to build next door to you?

 

3.we threw that one out.  Taking the mick.  Why self build someone elses design?

4. See above.

 

It took us months to get the contract sorted, be prepared.  Eventually we met them face to face, lot quicker.

 

Good luck

[lizzie]

1 and 2 standard stuff,

3 and 4 to protect the vendor from some ugly monstrosity and give a degree of control over what is next to them.

 

3 and 4 are not at all unusual but may be open to a bit of flexibility and I would ask your lawyer to work on those otherwise you could be held to ransom on any changes to the current planning even with the get out of ‘not unreasonably witheld’ standard wording inclusion.

 

We started with almost identical wording in ours....comes from the precedents they use to draw up the contracts.

 

Should be all everyday  stuff for a lawyer used to dealing with individual plots sales and purchase....as opposed to plot sales off for a developer.

[Dreadnaught]

Your post is relevant for me as I am currently bidding on a plot, and contracting would be next.

If I were the transferee and this was my plot, I would reject all of these restrictions as being completely unacceptable. I would argue that it is for the planning system to adjudicate on such matters.

 

It can be useful to consider the motives of the vendor for including such clauses. Are there any legitimate concerns? Or is the vendor (and their solicitor) just lazily defaulting to a one-sided contract in the first instance.

 

Out of interest, do you yourself have any unusual demands? For example, do you actually plan to vary the house design? Or would you prefer a "clean" purchase of your plot? If you do intend to vary the design, you might request that the vendor be bound not to object to your new planning submission.

Edited March 31, 2018 by Dreadnaught

[lizzie]

The draft contract is drawn up as a standard document by the vendors solicitor. These are all standard starting clauses. It is the vendors solicitors job to protect his client not the purchaser. It is for the purchasers solicitor to play about and tweak things.  Its all very normal stuff its the way it works.

 

In the end it will get sorted into something that is a workable compromise for both sides but it has to start somewhere and this is where its at. No reason to start getting stroppy with anyone at this stage just do what your solicitor will expect and go through it clause by clause, he/she will advise on what they think is reasonable and what is not.  Up to you if you then ask your lawyer to pursue changing anything that they advise is not unreasonable.

 

You are the buyer, the seller has something you want to buy at a price you have agreed. Within that the seller can ask for things to be included as can the buyer. Its normal. If you as a buyer  become unreasonable in your demands then the seller does not have to proceed with a sale to you.

 

Its the way the system works in England.

[Jamie998]

For a bit of perspective, we speak to the vendor regularly and I have fired some suggested amendments to them already.

 

We do not plan on varying the design much...footprint same, things like room layout different.

 

The only bit we are struggling with is bedrooms/ensuite on first floor as catslides/dormers are dictating positioning of showers etc which affects everything.  Ideally I would like to 'lift' the roof 40cm to lesson the impact internally of the catslide roof yet retain the external appearance.

 

We may be locked in at the current ridge height, however our house will sit higher than neighbours so could potentially lower the ffl to gain that extra height.  

 

Interesting that these seem to be standard starting point clauses.

 

The vendor has no plans to build anything, the unadopted road prevents any further properties being constructed - a planning stipulation (it's a 0.5acre plot).  I get the impression they wish to ensure we don't do anything on our huge plot that will be detrimental to their own.

[Jamie998]

Also,  we are on good terms with the seller so there will be no throwing of teddies or any such.  We are looking to rebalance things so we have freedom and the seller has the assurances they require.

 

The views of my fellow self builders have are always invaluable.

[lizzie]

Sounds all very normal.  We dug a bit deeper and lowered our house down to give a bit more height inside as we couldnt have gone  any higher on the finished roof per planning.

 

Always a work around that suits everyone, rarely a stalemate with two motivated parties. 

 

Hope you get a speedy exchange.

[ProDave]

I would throw 4 out. They are trying to remove your permitted development rights.

 

If they are going to enforce approval of your plans, that must be at zero cost to you.

[epsilonGreedy]

I think clause 3 needs rewording to "allow temporary structures commonly featured on a building site to facilitate safe and secure erection of a domestic house or to achieve compliance with regulatory standards".

[Jamie998]

@ProDave unfortunately that is how I see 4 too - far too powerful rendering us incapable of doing pretty much anything without the vendors express authority, indefinitely.  I have suggested an amendment as follows (with my reasons why) which I hope gives the vendor a warm fuzzy feeling that we wont later construct some monstrosity, yet at the same time allows us to utilise the plot/property as we see fit:

 

          "4(a) Must not build any structure exceeding one storey in height.  This would allow us the freedom to construct items such as those listed above  (sheds/summer houses etc. if we decide to) at a later date whilst               ensuring anything we do construct will have no visual impact on your property.  We are already prohibited from constructing a second dwelling, and considering the screening provided by the mature hawthorn                       boundary, a one-storey limit will ensure no visual impact to your plot. 

          (b) After completion must not make any changes to the walls, hedges and fences forming the shared boundary. To restrict making any alterations or additions is too powerful, as mentioned above; strictly speaking               we could not replace our windows, paint a door or anything.  We think this should be limited to concern only the shared boundary and the area directly opposite your house.

          (c) Deleted this is too prohibitive, we think what needs to be covered in this area is done so by (a) and (b).

          (d) Perhaps a bit on how anything we do must be in keeping with the vernacular of the village, this would prevent us from painting our house blue or doing anything not in keeping with the village etc. "

 

@epsilonGreedy what you suggest is food for thought.  I would like to put a static on there at some during the later stages so we can relocate to the plot in time for the kids to spend a full year in the local Junior School prior to commencing Secondary School, the build may still be ongoing internally at this point.

[Jeremy Harris]

Why not just make clause 4 the same as PD rights?  They are designed specifically to allow unobtrusive development and additions, that shouldn't interfere with any neighbours, yet still allow sensible structures like sheds and single storey extensions (within tight limits) to be built.

 

I'd suggest changing that clause for to read:

 

"in accordance with the provisions contained within the Town and Country Planning Act (General Permitted Development) Order 1995, as amended at the time of any additional development"

 

although strictly speaking the whole clause is redundant anyway, because of the restriction that will always apply under PD.

 

The order is here: http://www.legislation.gov.uk/uksi/1995/418/contents/made

 

and there is guidance on it here: https://www.planningportal.co.uk/info/200187/your_responsibilities/37/planning_permission/2

[Ferdinand]

ISTM that 3 and 4 are strictly unnecessary, as that is the job of the Planning System. You might ask what happens if the planners want something different.

 

I would be a little worried about the restrictions imposed by 2. That seems to limit any attempts to complain about eg excess noise. Definitions of words matter eg “right”.

 

But in practice if you organise for the plot to be owned by you at this point, then your wife could make the complaint or objection. You could still just transfer the built property on to yourselves jointly later .. so the transferee here would be you alone. I think if you are married or cohabiting then there would not be tax implications for swapping assets amongst yourselves like that (?).

 

Q Does this already have Planning Permission?

 

You might try and time limit some of it.

 

F

 

Edited April 1, 2018 by Ferdinand

[Jamie998]

@JSHarris what you say makes a great deal of sense.  However; if we scrub 4 and rely on PD rights being the limiting factor, what may be allowed there may differ from what the vendor would view as offensive or detrimental to their plot.  We are purchasing a garden plot and so will be long term neighbours, I am happy to have something specific in the contract curtailing what we can do, yet there needs to be enough 'slack' to permit us to live and use our plot as we choose - within reason.

 

@Ferdinand I see 1 & 2 as surrendering our right to objecting to any development the vendor may wish to conduct even if it is detrimental to our plot.  I don't expect they intend to do anything - but i do wish to retain the right to object in the same manner that anyone can object to a planning application should the need arise, and then leave it to the planning department to decide the outcome.

 

I have asked that 1 & 2 are scrubbed from the contract.

 

It has been interesting to read others take/view on the contract.  There is a fine balance to be achieved between what the vendors (whom are nice and amenable) feel is required to preserve the value/appeal of their property whilst also ensuring that my wife and I have the same freedom to use the plot as we see fit, in the same manner in which any homeowner can do so.

[Jeremy Harris]

The potential problems you have to look forward to isn't the relationship between you and the vendor, it's the relationship between successors in title, as the covenant will automatically pass to them if either of you ever sell.

 

I can give an example from personal experience:

 

In 1997 we purchased a house in West Sussex that had been built in 1959, by the husband of the widow that was selling it.  They had bought the land from a farmer, not long after they got married, who eventually sold the surrounding land and then it was sold again to a company that built a caravan park on a part of it, and let the fields behind our house to another farmer.

 

The vendor had built two extensions at the rear as their family grew, both with planning permission and building regs approval, so there was no issue there, but there was a covenant in the 1959 deeds that was worded exactly as your is - anything built on the land had to have the prior approval of the vendor or their successors in title.  The vendor assured us that they had spoken to the farmer who'd sold them the land and he had given them permission to build the extensions during the 1960's and early 1970's, but there was nothing in writing with the deeds or any of the approvals.

 

My solicitor wasn't happy, so got the vendors solicitor to write to the successor in title, the company that owned the caravan site and fields, and they demanded £5,000 plus legal fees to retrospectively grant permission for the extensions.  Bear in mind that this company didn't even own the adjacent land at the time the extensions were built.

 

This very nearly scuppered the deal, as the lady selling didn't have the money to pay the company that was effectively blackmailing her and our solicitor said it wasn't our problem, but the vendors, and advised we should just walk away from the purchase.  I went to see the landowner (a chap called Mr Pratt..........) to try and negotiate with him, on the vendors behalf (she was an elderly lady, recently widowed, and was getting really upset by all this) and he told me that because I was creating a problem for him, he was now going to double the charge to £10,000.  I spoke to our solicitor and he said we could get the vendor to take out a one-off insurance against any action being taken, but I was bloody annoyed at the greed of Mr Pratt.  I wrote him a letter, on the vendor's behalf (signed by her), sent by registered mail, formally requesting retrospective permission for the erection of the two extensions, and telling him that unless we heard from him or his legal advisor within 10 working days his retrospective consent would be assumed and recorded with the deeds.

 

He didn't reply, and ten days later the letter, and proof of receipt from the post office was included in our deeds, together with a letter from the vendors solicitor to the adjacent land owner telling him that he had granted retrospective approval by failing to respond.  Our solicitor added a note that the 1959 covenant in the deeds was now deemed to be null and void, on the basis that no enforcement action had been taken.

 

All told it added over a month to the purchase and a lot of stress for us (we were living in Scotland at the time and travelling down at weekends) and even more stress for the vendor, who had no idea that the old covenant could have caused so much trouble.

[nod]

Clause 4 is real solicitor speak

its the same close as we refused to sign eighteen months ago

Our neighbour wanted to insist on a covenant restricting us from having more than one van I have two already and insisted we park the vehicles around the back of the house They park at the front

Our solicitors advise was that covenants are very binding Even one sided ones Once they are on the deeds  and we could find ourselfs having to ask permissions from new neighbors Should these ones move house 

We called there bluff and pulled out at the last minute

Tge estate agent got involved and pointed out to the vendor that no developer would agree any kind of restrictions 

They reluctantly relented

 

Oh they also insisted on heaveyly frosted glass looking out to there side Including our orangery 

We’ve put clear in 

 

 

 

[Brickie]

3 hours ago, JSHarris said:

(a chap called Mr Pratt..........) to try and negotiate with him, on the vendors behalf (she was an elderly lady, recently widowed, and was getting really upset by all this) and he told me that because I was creating a problem for him, he was now going to double the charge to £10,000.

By God,there are some really greedy,opportunistic,horrible b###ards around. 

[Jeremy Harris]

48 minutes ago, Brickie said:

By God,there are some really greedy,opportunistic,horrible b###ards around. 

 

Yes there are.  I don't think I'll ever forget my meeting with this bloke.  It was in his site office on the caravan site, and the bloke was a bit like a gangster.  Smiled the whole time, but was clearly a ruthless character.   He didn't even know that he had the power to say no to these extensions, and force their demolition if he really wanted to push it, until he received the letter from the vendors solicitor when our solicitor uncovered the covenant and lack of evidence that it had been complied with.  I'm certain the vendor had asked the farmer for permission at the time, but just didn't get it in writing or have it lodged with the deeds.  The bloke called Pratt just saw it as way to make easy money from an old lady, or so he thought.

[nod]

1 hour ago, Brickie said:

By God,there are some really greedy,opportunistic,horrible b###ards around. 

Yep

A friend of ours bought a house with a big garden

and the vendor wanted a clause in it That should he ever sell part of the garden They would be entitled to 20% of the sale price

 

[lizzie]

@nod thats known as overage. We put an overage on a separate part of our garden that we sold with last house with a lot higher percentage than 20% if they get planning on it. Its the way of the world and is usual.

[nod]

5 minutes ago, lizzie said:

@nod thats known as overage. We put an overage on a separate part of our garden that we sold with last house with a lot higher percentage than 20% if they get planning on it. Its the way of the world and is usual.

Wow

First time that I’d heard of it

 

[lizzie]

Pension pot @nod

[CC45]

3 hours ago, nod said:

Wow

First time that I’d heard of it

 

Very common.  

 

We told our vendor that we wanted the same rights over their property, that soon saw some changes.

 

We have got a signed letter from then stating they will not develop behind us, pp came through a while back, i.e. dont trust anyone and dont sign a contract you are not happy with - the relationship may change and do you really want someone else controlling what you do?

[Ferdinand]

 

12 hours ago, nod said:

  12 hours ago, lizzie said:

@nod thats known as overage. We put an overage on a separate part of our garden that we sold with last house with a lot higher percentage than 20% if they get planning on it. Its the way of the world and is usual.

 

Entirely normal, and done carefully are an advantage to both sides in allowing a sale to go through at a price which does not have to include a guess about the value of future development potential.

 

At the previous house my parents bought next door (rural bungalow, half acre plot), to prevent the restaurant the other side buying it and making a car park, which came with a 20-year duration overage of 50% on any uplift in value due to a planning permission payable on the granting of that permission.

 

If we had not accepted the overage they might not have sold it, and we would not have been protected.

 

In practice we sold it after 12 years, and the people we sold it too did the max they could under Permitted Development, which was enough and did not trigger the clause.

 

In @Jamie998's case they could offer a suitable overage which will give the neighbour a perceived lollipop and protection should someone come along and develop it, but they know will not be something they want to do so is immaterial to them. That could be a more acceptable alternative to parts of the proposal for Jamie.

 

Ferdinand

 

Edited April 1, 2018 by Ferdinand

[Ferdinand]

23 hours ago, Jamie998 said:

We do not plan on varying the design much...footprint same, things like room layout different.

 

The only bit we are struggling with is bedrooms/ensuite on first floor as catslides/dormers are dictating positioning of showers etc which affects everything.  Ideally I would like to 'lift' the roof 40cm to lesson the impact internally of the catslide roof yet retain the external appearance.

 

We may be locked in at the current ridge height, however our house will sit higher than neighbours so could potentially lower the ffl to gain that extra height.  

 

Interesting that these seem to be standard starting point clauses.

 

The vendor has no plans to build anything, the unadopted road prevents any further properties being constructed - a planning stipulation (it's a 0.5acre plot).  I get the impression they wish to ensure we don't do anything on our huge plot that will be detrimental to their own.

 

If you can shift the emphasis from explicit clauses to reliance on the Planning System, then it may be that some of your internal changes are not material planning matters, and come into the JFDI category. Not sure what happens when a non-material matter is specified in the Planning Application, and someone asks the Council to enforce on it.

 

You could even base parts of your agreement on applying to the Council for particular Planning Conditions where you have agreed a wording.

 

I disagree with a couple of others on the enforcibility of covenants - I see them as being very difficult and expensive, as it requires specific legal action and their continued validity / applicability to be proven, especially when the property has changed ownership. This is perhaps less so in the case of an individual property such as yours, compared eg to a property on an estate where somebody else successfully violating the covenant would undermine it everywhere.

 

My overall feel is with @lizzie and others - go through the normal options and negotiate and an acceptable compromise should be within reach.

 

Best of luck.

 

Ferdinand

 

Edited April 1, 2018 by Ferdinand