Buyers caught out by limits on living

Growing numbers of house builders are placing restrictions on what buyers can do with their properties, long after the contracts are exchanged. 

Felicity Hannah
Wednesday 29 March 2017 11:02
The promise of a brand new home could be shattered by a growing trend in restrictive covenants.
The promise of a brand new home could be shattered by a growing trend in restrictive covenants.

Imagine spending more than half a million pounds on a new family home only to discover you might not be allowed to bring your dog when you move in.

That’s just one of the cases The Property Ombudsman (TPO) is grappling with, after the buyers of a £550,000 new home were assured they could move their dog in and so paid a £2,000 reservation fee on the property. Two weeks later it emerged that they would need to apply for a dog permit, meaning they had no certainty that their beloved pet could live with them after all.

TPO ensured that the full reservation fee plus £540 extra was paid to the would-be homebuyers, which is reassuring. But few of us realise that a home builder can sell a property but still impose wide range of surprising and sometimes even distressing restrictions that affect how they live long after they receive the keys. And it’s getting worse.

Cats, vans and washing lines

When a property builder places restrictions on what buyers can do with or to their new homes it’s called a restrictive covenant. These are nothing new, builders have often imposed restrictions on what buyers can do with their homes.

However, in recent years a number of covenants have made headlines after developers banned washing lines, cats and even sheds from their new-build estates, even after the homes are all sold.

Neil Stockall, head of residential property at Higgs & Sons Solicitors, says that developers are increasingly keen to retain control of their developments.

“It is very common and they generally last in perpetuity,” he says. “Builders would argue that restrictive covenants are essential in maintaining the aesthetics, layout and use of the development and the dwellings, and should be seen as positively protecting the value of the estate as well as individual homes.

“They want to ensure that whilst they are developing the estate they have control on how the built areas are used so that they don’t impact on the sale of subsequent plots.”

Richard Freshwater, director at property firm Cheffins, agrees that there’s been an increase in the number of covenants enforced on new build schemes.

“This increase can partly be attributed to the increase in competition for developers and as more new schemes are built, their overall appearance is important to set themselves above the rest.

“Once a scheme is fully sold, these covenants will often still apply and this is partly due to the developer trying to protect their reputation. Should the scheme then be surrounded by caravans, commercial vans and washing lines, this will not reflect favourably on the reputation of the development in general.”

Rover's refusal

A restrictive covenant preventing near neighbours from having a cockerel in the garden might make sense but many would-be buyers will be surprised to learn that the builder might stop them bringing their dog.

Managing director of Bewley Homes Andrew Brooks, explains: “The restriction of pets in properties tends to apply to those properties with shared communal areas, such as apartment blocks or multi-floor developments without private garden space.”

And he is keen to defend homebuilders’ decisions to impose other restrictions on the homes they create. “As developers, we have a duty of care to think about this in conjunction with the long-term aesthetic impact our developments are going to have on the environments in which they are built – an environment which is very important to our clients when making the biggest investment of their lives. One way in which we can protect this environment is by putting restrictive covenants in place.

“In the main, restrictive covenants are built into the deed of a property and will last in perpetuity.”

A force for good

While some restrictive covenants may protect buyers from neighbours devaluing their homes or developers’ reputations, some do more. For example, Pocket is a developer that builds starter homes for first-time buyers at 20% less than the going market rate.

It imposes a covenant on buyers that restricts who they can sell their home onto and for how much, to ensure it remains affordable for medium-income buyers.

Pocket CEO Marc Vlessing says: “Restrictive covenants can be a force for good if they help homes stay affordable in perpetuity. Pocket’s homes are sold with a restrictive covenant which ensures they remain affordable for local first-time buyers forever.”

Whatever the reason for the restrictive covenant, if buyers don’t know to look for clauses then they risk being caught out.

Paula Higgins, chief executive of the Homeowners Alliance, says: “We would always advise anyone looking to buy a new-build home to check their contract closely and have their conveyancer do the same. These restrictions must be included in the contract in order to be adhered to and if you spot them in time you can challenge the developer.

“Too many buyers take an almost nonchalant approach when buying a new build under the misguided illusion that since it is a new build property there'll be little of any concern. Obviously this is not the case.

“Employ the services of a good solicitor (don't use your builder's preferred choice) and read the small print in the glossy brochure as well as the contract.”

Cancelling the covenant

Homeowners who find a restrictive covenant irksome can challenge it. Gideon Sumption of Stacks Property Search says: “if the covenant no longer serves a useful purpose, namely that it is of no tangible benefit to the land or buildings that the covenant was created to enhance, then it can be challenged via the Lands Tribunal.

“A good example is the frequently found restrictive covenant imposed by the Church of England on the sale of redundant rectories, that they may not be used as a public house. Attitudes to drinking have changed since these covenants were imposed and it is highly likely such a covenant could be removed, in the event that you wanted to turn your old rectory into a pub…”

However, plenty of homeowners simply ignore the restrictions, hoping that once the builder has packed up and left there will be no one around who cares enough to enforce it.

Freshwater adds: “When it comes to getting around these covenants, we have seen that sometimes they are simply ignored by purchasers. For example, there is a series of flats in Cambridge which have covenants against them being rented out, these have been completely ignored by purchasers and there has been such a blanket breach of the covenant that it is no longer enforceable.”

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