Proposed Holiday Let has a covenant restricting use for business purposes

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    Proposed Holiday Let has a covenant restricting use for business purposes

    Hello, hoping someone may be able to help with a question on a restrictive covenant.

    We're in the process of purchasing a property in Devon. We plan to move to the property in a few years once the children have finished school where we live but in the short term plan to use the property for holidays and trips ourselves and to holiday let it the remainder of the time.

    The TPI shows restrictive covenants imposed upon the owner (Transferee) for the benefit of the Transferor (who owns the adjoining fields) which we will be required to sign up to (or challenge/seek amendment).

    One of the restrictions provides that the Transferee shall 'Not use the property other than as a private residence for the occupation of one family and not to use the property for business purposes provided that bed and breakfast of not more than two rooms or for a holiday letting for not more than one family where the registered proprietor remains in occupation does not amount to breach".

    My questions are:

    1. What does 'remain in occupation' mean in this context? I've done a few google searches and "occupation" seems to mean where a person exercises physical control over land and that a person is in "occupation" so long as they have the power of entering into and staying there at pleasure, and of excluding all other persons (or all except one or more specified persons) from the use of it. The land is freehold so on my reading we would still be "in occupation" even if we were not physically present but would appreciate any thoughts. Obviously if the clause means we need to physically be there while it is being holiday let that would be unworkable. Note: the house has 3 small beds and is practically only big enough for one family - there would not be room for us to stay there at the same time (and it might put off guests!) so its hard to imagine that could ever have been the intention.

    2. The restriction allows holiday letting to 'not more than one family'. Is this enforceable? Whilst we could likely live with this if absolutely required given property is mainly suited to families, we would prefer to offer more widely, e.g. to couples, groups of friends. Whilst I can see how an owner of retained land may wish to exclude large boisterous groups (e.g. stag dos), as would we, it seems overly restrictive. As above the property is small with only one double bedroom so practically it is restricted to about 4 people (5 max if sleep on sofa) so unlikely to attract big groups. On the basis that renting to a small group causes no detriment to the retained land (the property is surrounded by open fields in every direction and there is no other house within half a mile) there could be no "loss" to the retained land so could they bring a claim to enforce? It's also not clear how the owner of the retained land could find out. Could this restriction be challenged on the basis of discrimination?

    Thanks in advance for any advice.




    #2
    Having had quite a lot of experience dealing with properties that had restrictive covenants imposed, my advice would be to ignore the covenant and rent the house out to whoever you wish to.

    The possibility that you will be sued for breach of covenant, which would require the owner of the land with the benefit to visit the house every week to establish who was occupying it in order to begin legal proceedings that will take months to reach court, seems beyond the bounds of possibility.

    I would say that the risk to you is so negligible it can safely be ignored.

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      #3
      Thank you Pilman. I agree, practically this would be very unlikely.

      Comment


        #4
        It means you can have one family only at a time as long as you are also there. You can't let it as self-contained. You might be able to obtain an indemnity policy but what would the penalty be anyway as how would it be quantified?

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          #5
          Thanks Sarah, so you think ‘occupation’ in this context means physically present rather than control? Do you know if there is any case law on the interpretation of these words?

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            #6
            If you want to live there all the time eventually and it is the perfect house what is the worst that can happen? You get "told off" and told to stop. And you do. Then you can just use it for your own holidays.
            Unshackled by the chains of idle vanity, A modest manatee, that's me

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              #7
              Thanks Islandgirl, I tend to agree but we still have a few years of school where we live currently so would prefer not to be saddled with two mortgages without ability rent out at all. Given that we live fairly nearby (about two hours away), will be at the property regularly and lots of our “stuff” will be there permanently, I’m inclined to take a broad interpretation of ‘occupy’ more along the lines outlined in my original post. Ultimately, if it is holiday let to considerate couples, single families (an assumption I know) there would be no impact on the reserved land (as above the house has no near neighbours and is surrounded by fields) it’s hard to see that anyone would care if the technical owner was physically present (if indeed that is what those words require). Would be great to know if this has ever been interpreted by the courts though, for peace of mind.

              Comment


                #8
                There is a definition of possession in the Law of Property Act 1925

                “Possession” includes receipt of rents and profits or the right to receive the same, if any; and “income” includes rents and profits;
                That is why an absentee Landlord living in London is still in possession of his property, even when it comprises hundreds of acres of tenanted farmland in the Highlands of Scotland.

                That is who the law intended to benefit from that definition when Parliament included so many absentee landlords who voted to approve the Act in 1925.

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