Council Restrictive Covenant

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    Council Restrictive Covenant

    I have an ex-commission house that i wish to subdivide into two flats (once it has had a small extension).

    There is a standard restrictive covenant on the deeds dating back to the original council house sale by the then owners, restricting the plot to just one dwelling.

    The Council's Asset Manager has confirmed that the covenant could be extinguished in return for a fee (£10k). basically a bit of blackmail as they know that i will be in breach of the covenant if i build subdivide.

    I've come across the Council's Asset Manager before and he basically uses a finger in the air to come up with the extinguish fee; as i know that he's quoted different amounts to different people for similar jobs, even going to so far as to saying " well how much can you afford"!.

    My question is whether the council would have much success or indeed possibly bother pursuing me legally if i go ahead with the subdivision (i will get planning just am not willing to pay the £10k ransom fee).; thanks!

    #2
    Could you get insurance against potential action or even challenge the covenant itself ?

    Comment


      #3
      There is case law that deems this restrictive covenant illegal.
      Search: Regina v Braintree District Council ex parte Halls

      Comment


        #4
        The "Braintree" case did deal with this situation, but is not as cut and dried as confirming all such requests for money are unlawful.

        Those restrictive covenants run with the land, not with the council that imposed the covenent when the property was originally transferred.

        I have dealt with a council who still retained council houses, as well as dealing with two separate Housing Associations who had acquired the ex-council houses under a Large Scale Voluntary Transfer (LSVT).

        The council asked for £20K which I did not pay.
        I applied to the Land Tribunal to have the covenant removed as obselete because no houses in the immediate area remained owned by the council.

        One HA charged a legal fee of £150+VAT to release by deed the covenent that allowed a house to be built in the original garden.

        The second HA wanted 10K, but the average price paid by them in the LSVT in an affluent area of Hertfordshire, was £7.5K per house, so I negotiated a much lower fee which equated to the previous legal costs I spent when applying successfully to the Land Tribunal.
        I tol dthe Managing Director that if each house near the proposed site was worth £7.8k there woul dbe no diminuation in value just because another private house was ereceted alongside the private hopuse that was bought for development purposes. In that case each of the neighbouring properties were in HA ownership, so it was the detrimental effect on each of those houses that would have had to have been assessed if a claim for breach of covenant was ever made in court.

        If you know that a HA now owns the ex-council houses near to your property, it may not be in the power of the council to release the covenant as it will be the nearest property that will be effected if a development of your house caused the value of that property to diminish.

        A breach of covenant can only be enforced through the courts who decide if damages should be paid based on the damage to this adjacent property.

        If you know that other ex-council houses have been developed by paying sums of money to the council there is then a strong legal argument that no damage was caused to neighbouring properties once those new houses were erected.

        Based on that fact I would think it extremely unlikely you will be sued for breach of covenant if you decide to obtain planning permission and redevelop the property by ignoring the restrictive covenant.

        Comment


          #5
          Personally, I would get this covenant removed from the deeds now.....it could prejudice obtaining any borrowing to develop into flats or future sales.
          About 9 years ago, I converted an ex-council 3 bed semi into 4No.flats....firstly I approached the planning dept. of my local council and my proposal was agreed in principle...then I negotiated with the council's estates dept., with them suggesting a figure of £20,000 to lift the covenant if P.P. was granted.
          I made reference to the Braintree case and after further negotiation agreed to a figure of £4000 which the council interpreted as an administration fee.....perhaps I could have stuck to my guns and paid them nothing but to get the project underway ASAP this is what I paid once P.P. was granted......Dacorum Borough Council (Hertfordshire).

          Comment


            #6
            Apologies for bumping a 5 year old thread but it seemed silly starting a new one when this covers the exact area of my question. I have gained planning permission for a new EOT house and there is a restrictive covenant in the original RTB conveyance that the council put in. It is Dacorum Borough Council so same as buffalo747 and I'm hoping to negotiate something similar ie a miraculous drop from circa £20k to £4k when I get my solicitor to throw some case law at them.

            My main question is whether there is any more recent case law than the referenced Regina v Braintree District Council ex parte Halls above?

            Comment


              #7
              When there is a restrictive covenant imposed on land it is a benefit for particular land, not the council who placed the restrictive covenant on the transfer deed.

              The first thing to investigate is does the Council still own property near to the one now in private ownership that has planning permission to build a new dwelling.

              The next thing to verify is what detrimental effect will the new dwelling have on the land that is identified as having the benefit.

              That is the criteria that a court would take into consideration if there was to be a claim of breach of covenant by the owner of land that is benefitted and it can be shown that this land has been detrimentally burdened by the new development.

              This is all about a loss of value, and when council houses exist in near proximity to a new house, it is not really possible for that benefitted property to be devalued if the tenant's rent is the only way the property value could be assessed.

              There is case law about how a court is to take such loss of value into consideration.
              Winter v Traditional and Contemporary Contracts Ltd [2007] EWCA Civ 1088

              I recently saw a letter sent from a solicitor acting for a Housing Association that had acquired all of the council houses through a Large Scale Voluntary Transfer. The letter demanded a sum of 48k to release the covenant imposed on a semi detached house sold to the sitting tenant under the right to buy legislation, which had a restrictive covenant stating there was to be no commercial use, only use as a single dwelling.

              The other half of the semi-detached pair was the only dwelling still owned by the HA and the calculation of the price required to release the covenant after planning had been granted for a detached house in the side garden on the opposite side of the other semi-detached HA dwelling was based solely on the value of the land as a building plot.

              I was able to point out to the the solicitor that this was not the correct way to value the benefit of the restrictive covenant, and asked him to provide evidence of the loss in value to the actual dwelling that had the benefit of the restrictive covenant, which was the only remaining social housing dwelling in the area after most tenants had already exercised the right to buy.

              I had researched the price paid by the HA to acquire over 3000 homes from the council in the LSVT, and because the value was specifically intended to reflect the fact that these were tenanted social housing properties, the average price paid to Mid Beds Council was £8,000, when the market value of a similar house was £180,000..
              The current tenant of the other semi-detached HA house already faced towards a detached dwelling built when the houses were still council owned before 2003.

              The question I posed to the solicitor was how did a new detached house on the other side of the semi-detached pair that would not be seen from the tenanted property owned by the Housing Association who had paid £8K to acquire it in 2003, devalue this property.

              That was when the matter was resolved and permission was granted by letter for the new dwelling to be erected.

              I realise that Dacorum Borough Council own the social housing, but the same principle applies if a claim that a breach of covenant occurred because a new house was erected after the same council had approved such a house based on the standard planning requirements that all new dwellings should not have an adverse effect on neighbouring dwellings.

              Even if the houses on each side of the proposed dwelling are still council owned, the rent paid by each tenant is not going to be reduced because one new house is to be erected by a private land-owner.

              Write to the Council and ask that it issues a letter confirming that you have permission to erect the dwelling granted planning permission, because on that fact alone it shows that the council have already decided that there will be no loss in value to any council owned property in near proximity to the land burdened by the restrictive covenant.

              To offer any money at all would not be reasonable.

              Comment


                #8
                Hi Pilman

                Can I just say thank you so much for such a long detailed and useful response to my question (as well as thanking you for the information you had posted previously in this thread). Having researched RC's a lot these past few days I must say I agree wholeheartedly with what you say and your position i.e. paying anything isn't really reasonable based on the meaning of these specific type of RC's (backed up by statute i.e. s.84 and case law).

                However as Buffalo above also said, the ultimate point of the development is to sell off both houses eventually and I need to ensure clean title to both. Perhaps more importantly the appearance of clean title so that a buyer/buyers solicitor/broker/mortgage lender isn't scared off by what appears to be an unresolved RC from the old RTB conveyance.

                I already have the granted planning permission in writing and the subsequent letter from the estates department regarding the RC's expressly admits this whilst still claiming I need their written consent to go ahead i.e. vary the RC's which I don't believe is actually the case but could leave me open to issues over clean title if I don't get written agreement from the estates department over the RC's.
                I've sent an initial response to their opening letter and have my solicitor on standby to start throwing case law/s.84 at them if their position remains entrenched. I shall update this thread for posterity as and when I get news.

                Comment


                  #9
                  You also should review case law about the fact that Dacorum Borough Council is a legal person in the eyes of the law.

                  Depending on the wording of the original RTB conveyance the "legal person" has granted permission for the house to be built, when it had prior knowledge that it imposed the restrictive covenant and so it can be inferred that it released that covenant by granting planning permission for a new house to be erected knowing that it had imposed a restrictive covenant.

                  The Estates department did not impose the restrictive Covenant. The legal person identified as Dacorum Borough Council did.

                  Comment


                    #10
                    Thank you Pilman, an important clarification.

                    Comment


                      #11
                      I have a very very similar situation. I wonder how this played out. JAYDavys. Do you have an update?

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