Title restriction – Could Bank pull the plug?

by Readers Question

16:27 PM, 10th February 2020
About 2 months ago

Title restriction – Could Bank pull the plug?

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Title restriction – Could Bank pull the plug?

I am in the process of the purchase of a traditionally built 3 bed house freehold title. I Am using a new solicitor on this banks panel. We are near the end of the conveyance with mortgage offer, searches done etc.

The title has standard restrictions put in by the Council such as only occupied by one household. My solicitor has picked up on the ‘not to run a business’ clause stating that this includes running a BTL business.

So she needs to check with bank and I may need indemnity insurance.
Well I argued the case as this has never been an issue before, but to no avail. I am concerned the cautious bank will pull the plug if it gets raised with them.

I could switch solicitors, but I am at the end of the process.

Any advice or experience on this is welcome.

Adrian



Comments

Dylan Morris

10:27 AM, 11th February 2020
About 2 months ago

I find it hard to believe the Council would prohibit you renting the property out to residential tenants. They may of course have an issue with you renting it out commercially say to a haulage company etc. I suggest your solicitor writes to them to specifically clarify their exact intention. Ask the Council to confirm in writing that you can rent it out. (Running a business from a property would not normally include simply renting the house out to residential tenants). If the Council stipulate it is for owner occupation only then steer clear why on earth would you want to buy it ? And yes a mortgage provider will not lend on a BTL basis if there is such a restriction.

Andrew

12:12 PM, 11th February 2020
About 2 months ago

I’m going through a similar thing at the moment regarding a covenant and an indemnity Insurance will probably be invalid as you will knowingly be breaking the covenant/restriction imposed by the council , our solicitor has advised me that we will have to approach the council and will probably have to grease their palm to get the restriction lifted.
He likened it to obtaining health insurance but not disclosing the illness you already have, that’s in my case anyhow.

Good luck. 👍

Adrian Alderton

8:58 AM, 12th February 2020
About 2 months ago

Thanks for the comments. My view is that my solicitor has become fixated with an irrelevant technical legal detail. The fact of the matter is that this is an ex Council property. It will have been historically rented under its original use, so fail to understand why the Council could have an issue with it being let (to a single household) and therefore potentially take enforcement action.
My broker confirmed my view that as this is outside their normal checklist they will more than likely withdraw the mortgage offer.
Escalated it with solicitor but looking like I'll have to ditch them and look elsewhere with additional expense to me. The joys of property!

Dylan Morris

9:14 AM, 12th February 2020
About 2 months ago

Reply to the comment left by Adrian Alderton at 12/02/2020 - 08:58Your solicitor may have an overly cautious view but regardless they should be writing to the Council to seek clarification. Just a thought but is there a possibility of making a complaint to the Law Society as clearly your solicitor is not doing their job ? Maybe seeking compensation for delays or at the very least not paying them for the work they’ve done so far. (Perhaps just the threat of a Law Society complaint will wake them up !!).
Another option would be to speak to the Council yourself and assuming they have no issue, asking them to write to your solicitor confirming such ? (Or passing the Council official’s details to your solicitor so they can make contact with such person).

Old Mrs Landlord

12:04 PM, 12th February 2020
About 2 months ago

If you are intending to live in the house and run your Buy-to-Let business from it I can see that might come under the scope of this restriction but if you are running your business from your personal residence or indeed any other address, that should be proof that you are not running it from the house you propose to purchase.

Lindsay Keith

12:50 PM, 12th February 2020
About 2 months ago

Reply to the comment left by Dylan Morris at 12/02/2020 - 09:14
Did you do any due diligence regarding the solicitor's expertise before engaging him/her? I was never a conveyancer but acting for Professional Indemnity Insurers and other work showed me the wide spectrum of 'expertise' and the importance to check before you buy!

Adrian Alderton

15:24 PM, 12th February 2020
About 2 months ago

Your right I didn't do enough due diligence on the solicitor except ask a few basic questions. The previous solicitor I used was away all of Jan so had to find another who was on lenders panel.
Good point re contact the Council which I have followed up.

Adrian Alderton

12:34 PM, 21st February 2020
About 2 months ago

Just a wrap up on this one. Sacked my solicitor and managed to get mortgage re-offered. Appointed another who confirmed this restrictive covenant is not an issue. Also as suggested contacted Council and after the above actions did get a response confirming they would not take action re the restrictive covenant.
So just have a battle with the solicitors bill now.


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