The tale of the sale of our old house

[Jeremy Harris]

9 hours ago, Ferdinand said:

 

I am not convinced that it is possible to own a locked in PP on somebody else’s land and enforce a charge against the owner. Is there any law that allows that to happen without an explicit agreement?

 

That is unless your neighbour signed a contract which bound him in those terms, which means that it would at least partially be his responsibility. That may seem a blunt thing to say, but was he by any chance playing in the big boys’ game without making sure the necessary specialist legal advice was available to him?  Given that he was approached that might be an easy mistake to fall into unawares.

 

Essentially they should have been kept from doing development as opposed to due diligence until the mone6 had changed hands, or a really tight agreement was in place. In our case with our land sale we had so much runaround and buggeration that we demanded a walk-away-clean offer from developers and took a reasonably significant hit on the price. But at least we could move on and by then i5 had been several years.

 

In any case, a cautionary tale and he has my sympathy.

 

Ferdinand

 

 

I suspect he was suckered, @Ferdinand, by playing with people that were out of his league.  The head of the planning committee confirmed to the Parish Council a couple of months ago that enough work had been done to "lock in" the PP forever, and separately I know about the 15% of sale price contract with the developer that has walked away.

 

My suspicion is that the developer is playing a long game here.  They know they have very little chance of making the development pay if they go ahead at the moment, as they are involved in developing some cheaper land in the village.  By not tying up capital in the plot next door, they can retain it as a land bank, knowing that it's very unlikely to sell to any developer whilst there are other developments proceeding locally.  They need the market price to increase, so that means waiting a while until the sites identified in the Neighbourhood Plan have been completed.  Once they are, demand will once again outstrip supply and prices will start to rise again.  There is a steady, strong, demand here - witness what happened when we put our house on the market. 

 

I believe that if the original developer was to offer to buy that land again, in, say, three or four years time, then there is a very good chance that they would get it for less money than they had originally agreed to pay.  I know that there is zero interest from other developers in buying that land, something that several people who were involved with the Neighbourhood Plan, and know a bit about local politics and the way developers work around here, believe to be linked.  One ex-Parish Councillor drew up a time line showing how four developers had synchronised their activities on 12 local developments in such a way that they weren't competing with each other.  The interesting thing is that this synchronisation started long before PP had been granted to any site, it went right back to the dates when agents approached land owners, then continued through the planning process and is still clear from the pattern of new house releases to the market.  The latter I can fully understand as good business practice, but the synchronicity of the earlier time lines strongly suggests that they each knew of the plans of the others ahead of time.

 

This is way off the topic of the sale of our house, but to bring it back, I realised that I've been in breach of the second condition in our restrictive covenant since around 2003.  I used to work (a second job) as a light aircraft kit designer, working from my home office in this private dwelling, then ran my own (unsuccessful...) microlight aircraft import business from here, including using my garage as an assembly and test workshop, then for the last few years (since retirement) I've been doing consultancy work from home.  I have evidence of all these business activities going back to 2003, so I believe that, by being in breach of the covenant (unwittingly) and being able to prove it, I may well be able to get an indemnity policy.  I'm going to ring a few insurers today to find out.  It's much quicker to just pay for an indemnity policy than faff around getting the covenant released, I think.

[Ferdinand]

24 minutes ago, JSHarris said:

  I have evidence of all this business activities going back to 2003, so I believe that, by being in breach of the covenant (unwittingly) and being able to prove it, I may well be able to get an indemnity policy.  I'm going to ring a few insurers today to find out.  It's much quicker to just pay for an indemnity policy than faff around getting the covenant released, I think.

 

Since it is more than 10 years, I think you can also apply for a Certificate of Lawful Development for the Change of Use.

 

But once you start talking to the Local Authority it may compromise your ability to get an Indemnity Policy due to possible prior knowledge of the outcome, so perhaps do that first and if it needs an extra push agree to supply a package of evidence to the purchaser if they need more persuasion on a (cannot remember the legal word) no outcome guaranteed basis.

 

There-is also an aspect that certain trades/professions ave an established practice of being allowable from homework.

 

Ferdinand

 

Edited August 14, 2018 by Ferdinand

[Jeremy Harris]

Yes, from what I've learned so far you have to make sure that the beneficiary of the covenant doesn't get wind of any indemnity insurance until after the policy is in place, and ideally not even then.

 

TBH, I doubt he'd be the slightest bit bothered, anyway.  Condition one of the covenant stipulates that there can only be a "single storey dwelling" on the plot, so condition two is really superfluous, I think, as all it does is place the additional restriction that the dwelling must be "private".  I think it would be hard to prove that the dwelling not being private, but owned by a charitable trust, would be detrimental to the beneficiary, anyway, and that's what he'd have to do, as I understand it.

[lizzie]

I don't think doing a bit of work from home or from your shed or whatever constitutes a breach of covenant. 

 

A covenant and a planning condition are two very different things....a certificate of lawful use has no bearing whatsoever on a covenant restriction.  I think you need to be careful you don't end up in a mess with your home recategorised as semi commercial premises not only in breach of covenant but also affecting your right to a  100% tax free gain on the sale of your house as your principal residence.  

 

The covenant restriction does not mean it cannot be owned by a charitable trust but that it must be used as a private residence whoever owns it ....e.g. not run as an HMO or business premises, B&B etc. Used as a private residence does not mean it cannot be used as a buy to let investment but merely that it should be used and occupied as a 'private' residence and not sublet into separate units. It does not stop you taking in a lodger or using the rent a room scheme as it is still a private residence.

 

Do you know yet precisely what it was that made them back off?

 

If not I would wait until you know.  

[PeterW]

19 hours ago, JSHarris said:

Not use the property for any purpose other than as a single private dwelling house

 

Checked with a lawyer friend last night and that is usually there to stop splitting a property into Flats or similar, and it’s “private dwelling house” is used to limit the development of a HMO. 

[Jeremy Harris]

18 minutes ago, lizzie said:

I don't think doing a bit of work from home or from your shed or whatever constitutes a breach of covenant. 

 

A covenant and a planning condition are two very different things....a certificate of lawful use has no bearing whatsoever on a covenant restriction.  I think you need to be careful you don't end up in a mess with your home recategorised as semi commercial premises not only in breach of covenant but also affecting your right to a  100% tax free gain on the sale of your house as your principal residence.  

 

The covenant restriction does not mean it cannot be owned by a charitable trust but that it must be used as a private residence whoever owns it ....e.g. not run as an HMO or business premises, B&B etc. Used as a private residence does not mean it cannot be used as a buy to let investment but merely that it should be used and occupied as a 'private' residence and not sublet into separate units. It does not stop you taking in a lodger or using the rent a room scheme as it is still a private residence.

 

Do you know yet precisely what it was that made them back off?

 

If not I would wait until you know.  

 

Still waiting to hear the specific covenant condition that's the problem, but as their offer included the wording "As a small local trust that helps to support both young and old with housing requirements we see this as a fantastic property with great facilities", and as the charity is registered as providing the same housing requirements, I'm pretty sure it can only be the second condition.  Their in-house surveyor who came and looked around wasn't interested at all in whether the loft could be converted or a second storey added, either, and made it clear that they intended to completely redecorate the interior and his main concern was that the structure and systems like the heating and hot water were in good working order.

 

I completely understand the difference between a covenant and a planning condition - remember I mentioned above having to deal with the problems with buying our plot and getting three sets of deeds amended because of a covenant error, amongst other things?  If you look at our blog you'll also see that I had to deal with boundaries being in the wrong place, such that the house originally approved couldn't have been built, as a part of the same deeds problem.  I also had an interesting conflict with two mutually exclusive planning conditions to resolve.

 

My point is that the second condition of the covenant specifically refers to the land only being used for a "single private dwelling house" and I can prove that I ran a CAA-approved aircraft workshop in my garage for a time from around 2003 to 2009, as I still have the CAA approval paperwork.  It's no longer used for that purpose, and hasn't been since 2009, but I have operated a consultancy business from my home office since 2010.  I know that wasn't a breach of planning conditions, as a home office for a sole trader is allowed within a dwelling without needing any change of use (I checked years ago).  The approved aircraft workshop was probably a bit iffy, but that's in the past and I doubt that the council would try and come after me now about it, as the worst they could do at the first stage is tell me to stop, which I did in early 2009, when that work shifted to a nearby industrial unit.

[lizzie]

Just now, PeterW said:

 

Checked with a lawyer friend last night and that is usually there to stop splitting a property into Flats or similar, and it’s “private dwelling house” is used to limit the development of a HMO. 

Exactly 

[Jeremy Harris]

1 minute ago, PeterW said:

 

Checked with a lawyer friend last night and that is usually there to stop splitting a property into Flats or similar, and it’s “private dwelling house” is used to limit the development of a HMO. 

 

 

Thanks @PeterW, I'd found much the same online with references to the 1985 Housing Act, Section 610.  I'm sure that the second condition was either just a belt and braces addition to the first condition, or there to prevent the house being used as an HMO.  The covenant was written before the 1985 Housing Act, which effectively nullifies it with regard to multiple occupancy, anyway.  The snag is that enforcing the nullification of that second condition via the current law and the Land Tribunal would be a long drawn out process - one to two years, apparently.

[lizzie]

@JSHarrisSo in essence you think they want to run it as some sort of hostel/hmo.

 

If I were the beneficiary of the covenant I would absolutely not agree to that and if I were a near neighbour I would object to any application for a change of use.  Who wants something like that on their doorstep.  It will affect property values.

[Mr Punter]

Just now, lizzie said:

@JSHarrisSo in essence you think they want to run it as some sort of hostel/hmo.

 

If I were the beneficiary of the covenant I would absolutely not agree to that and if I were a near neighbour I would object to any application for a change of use.  Who wants something like that on their doorstep.  It will affect property values.

 

If they want to make this an HMO or hostel they will need planning consent.

[Jeremy Harris]

Just now, lizzie said:

@JSHarrisSo in essence you think they want to run it as some sort of hostel/hmo.

 

If I were the beneficiary of the covenant I would absolutely not agree to that and if I were a near neighbour I would object to any application for a change of use.  Who wants something like that on their doorstep.  It will affect property values.

 

Not at all.  We're talking about a Christian charity that very specifically only offers housing assistance to the elderly or younger members of their own Christian group, not outsiders.  It's a nonsense to suggest that will affect property values any more than us selling it to a woman who both lived in the house and ran her own "escort service", something that covenant would not prevent. 

 

The condition could easily be worded to prevent it being used as a hostel, and the law currently allows that covenant condition to be over ruled and the house used as an HMO anyway - I could do it tomorrow, under the terms of the changes in the 1985 Housing Act.

[Jeremy Harris]

3 minutes ago, Mr Punter said:

 

If they want to make this an HMO or hostel they will need planning consent.

 

Exactly, and I don't believe for one moment they would get it.  In fact I'm near certain they wouldn't, and they would know this as they are a local charitable trust who know the area well.

 

I believe the problem is one of ownership, in that the house would be owned by the charitable trust, and that may well conflict with the word "private" in the second condition.  It may well be that it's a question of their solicitors legal interpretation of that wording that's the problem, here, too.  I'm not in a position to judge this, but I believe the wording "single private dwelling house"  may be interpreted as meaning the ownership has to be private, so excluding ownership by a charitable trust.

 

[Mr Punter]

3 minutes ago, JSHarris said:

 I believe the problem is one of ownership

 

The covenant refers to use, not ownership.

[Jeremy Harris]

Just now, Mr Punter said:

 

The covenant refers to use, not ownership.

 

 

I think that may be where there is some confusion, though.  It could be read either way, as it's written, I believe.  The first condition and third condition clearly specifically relate to use of the land, but the second condition could, I think, be interpreted as referring to ownership of the land, as well as its use.  I'm sure it probably hinges on that word "private" and how their solicitor has interpreted it.

[Mr Punter]

6 minutes ago, JSHarris said:

I think that may be where there is some confusion, though.  It could be read either way, as it's written, I believe.  The first condition and third condition clearly specifically relate to use of the land, but the second condition could, I think, be interpreted as referring to ownership of the land, as well as its use.  I'm sure it probably hinges on that word "private" and how their solicitor has interpreted it.

 

I don't think this can be so.  I cannot see how a covenant can prevent land from being owned by, for example, the state or a company.

[lizzie]

3 minutes ago, Mr Punter said:

 

I don't think this can be so.  I cannot see how a covenant can prevent land from being owned by, for example, the state or a company.

It can't.

[Jeremy Harris]

Things have changed yet again.  It seems they won't reveal which condition is the cause of their concern, and want all three lifted, which frankly I doubt is even vaguely possible, so I'm near-certain the deal is off.

 

The odd thing about all this is that the planning restrictions here would make it extremely difficult to make major changes to the house, given the location and the policies in the  Neighbourhood Plan (change of use from a dwelling, for example, just wouldn't stand a chance of getting through planning). 

 

Financially it makes no sense at all to buy the house just for the small plot of land and rebuild a bigger house, as they they would be paying almost double the going rate for a plot here, and there are at least two other small plots available in the village that are in better locations for less money (but over-priced as plots, IMHO). 

 

Equally it makes no financial sense at all to convert the house to two storeys; I costed that up a while ago and concluded that the increase in value would never cover the cost of doing the work (at that time I didn't know about the covenant).

 

All told a bit of a mystery, but it's clear that the covenant is the problem - they have agreed to buy at the offer price if all three conditions are lifted.

[lizzie]

@JSHarris I have sold properties to 'fringe' religious organisations before I have also let properties to them.  They are not your usual customers. They target certain types of property which suit their needs. Yours is a corner plot on a main road (I mean not an estate road), it is fairly private and secluded but easily accessible looking at the photos you posted -  they all like those.  In my experience they will offer over the odds and they sometimes offer on multiple properties as they expect a fall through rate. 

 

An experienced estate agent may well have got to the bottom of this before it got to wasted legals.  If as an agent you have dealt with these types of organisations before you have learnt to ask questions both of purchaser and vendor before tying up the sale.

 

Your next in line can buy their searches to speed things up.

 

Good luck.

[Jeremy Harris]

To be fair the agent had no idea the purchaser was from a religious trust until I told him, as the initial viewing and purchase offer was made in the name of an individual.  It was only after we'd accepted the offer and started the legal work that the fact that the purchaser was a trust became clear, as they had to declare it to our conveyancers, who relayed it back to me (but not the agent for some reason).   I relayed it back to the agent that they were a religious body only yesterday, when the issue of the covenant came up, and it was clear he didn't know.  Perhaps he should have been more diligent and checked them out before passing their offer to us, but my limited experience with estate agents is that few seem very proactive in terms of checking prospective buyers out beyond what the prospective buyer tells them outright via the information form they fill in (which may well be just an email nowadays). 

 

I doubt they would sell their searches, TBH, as from what I've been reading over the past 24 hours they almost actively avoid contact with anyone who's an outsider - for years they were known as the Exclusive Brethren, primarily because they avoid contact with those outside their congregation.  They seem to be trying to allay some of the conspiracies that abound about them now, and even have a website, and to be fair we were good friends with one of them when we lived in Scotland and he was a nice chap, who just tended to keep himself to himself much of the time.  I suspect they are generally good people, trying to just live their lives by what they believe with minimal contact with outsiders.  Having said that, they run a pretty active rapid response aid operation, that provides assistance to people in natural disasters, etc.

[ProDave]

I think at this point I would be instructing the agent to put it back on the market.  Nothing to stop you still trying to save this deal, but I would want more people viewing just now.

[lizzie]

+1 @ProDave

 

[lizzie]

15 minutes ago, JSHarris said:

To be fair the agent had no idea the purchaser was from a religious trust until I told him, as the initial viewing and purchase offer was made in the name of an individual.  It was only after we'd accepted the offer and started the legal work that the fact that the purchaser was a trust became clear, as they had to declare it to our conveyancers, who relayed it back to me (but not the agent for some reason).   I relayed it back to the agent that they were a religious body only yesterday, when the issue of the covenant came up, and it was clear he didn't know.  Perhaps he should have been more diligent and checked them out before passing their offer to us, but my limited experience with estate agents is that few seem very proactive in terms of checking prospective buyers out beyond what the prospective buyer tells them outright via the information form they fill in (which may well be just an email nowadays). 

 

I doubt they would sell their searches, TBH, as from what I've been reading over the past 24 hours they almost actively avoid contact with anyone who's an outsider - for years they were known as the Exclusive Brethren, primarily because they avoid contact with those outside their congregation.  They seem to be trying to allay some of the conspiracies that abound about them now, and even have a website, and to be fair we were good friends with one of them when we lived in Scotland and he was a nice chap, who just tended to keep himself to himself much of the time.  I suspect they are generally good people, trying to just live their lives by what they believe with minimal contact with outsiders.  Having said that, they run a pretty active rapid response aid operation, that provides assistance to people in natural disasters, etc.

Sounds not untypical. With their offer did they show proof of funding in the individual name too?

 

I agree with lots of agents being lazy these days, they use kids who think Right move is all it takes to sell a house.  Part of the skill involved form the EA end is not only finding the purchaser but in holding a sale together to exchange and for that you need an agent and team.  Old school sixth sense flushes out a lot of these odd ball purchasers (not always of course!), if their money is good and they do the deal fine but in my experience of dealing with them they always want something tweaked and they want clear title properties that they can use for whatever purpose they need.

[Jeremy Harris]

35 minutes ago, ProDave said:

I think at this point I would be instructing the agent to put it back on the market.  Nothing to stop you still trying to save this deal, but I would want more people viewing just now.

 

Already done!

 

I'm asking the neighbour just out of completeness, but I'm near 100% certain he will say no - I would if asked such a question.

 

16 minutes ago, lizzie said:

Sounds not untypical. With their offer did they show proof of funding in the individual name too?

 

I agree with lots of agents being lazy these days, they use kids who think Right move is all it takes to sell a house.  Part of the skill involved form the EA end is not only finding the purchaser but in holding a sale together to exchange and for that you need an agent and team.  Old school sixth sense flushes out a lot of these odd ball purchasers (not always of course!), if their money is good and they do the deal fine but in my experience of dealing with them they always want something tweaked and they want clear title properties that they can use for whatever purpose they need.

 

No, the proof of funding is just a statement that the funds would come from a numbered bank account.   I've just come off the phone to the agent and he admitted he'd never come across a religious group like this before.  I passed on your observations about religious groups behaving like this (pretending that I had the information from a solicitor friend...) and he was unaware of it.  He's worked as an estate agent locally for a few years before switching to Purple Bricks quite recently, but is still young; at a guess I'd say he's in his late 20's/early 30's.  As you say, I think one key issue here is not working as part of a team who have a wide range of experience.

 

He's now going back to the others who were in a position to make a formal offer to see if they are still interested, and arranging to get the "Sold subject to contract" sign taken down and replaced with a "For Sale" one.

 

At least we can be reasonably open and honest with any other prospective buyers who ask why our sale fell through - I can see no problem in letting them know that the original purchasers wanted all covenants lifted, but expressing my view that I considered it was the restriction on the use of the property as a single private dwelling that was probably the concern, hinting that they may have wanted it as a place of worship, without saying as much!

[newhome]

15 minutes ago, JSHarris said:

At least we can be reasonably open and honest with any other prospective buyers who ask why our sale fell through - I can see no problem in letting them know that the original purchasers wanted all covenants lifted,

 

I wouldn’t even volunteer that much. I would just say that there is a covenant that ensures that it is only used as a single private residence (this is a plus point for most people!) and you believe that was the blocker given that the buyer was a religious order. 

 

 

[Jeremy Harris]

8 minutes ago, newhome said:

 

I wouldn’t even volunteer that much. I would just say that there is a covenant that ensures that it is only used as a single private residence (this is a plus point for most people!) and you believe that was the blocker given that the buyer was a religious order. 

 

 

 

 

Sounds a sensible approach, although I wasn't going to mention the previous buyer being a religious trust - you never know, we may get a prospective buyer who's a member of their congregation!