Selling Property With A Restrictive Covenant

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Whether you are the leasehold or freehold owner of your house or flat, if it has a restrictive covenant then this means there are certain legally binding limitations in place for what you as the owner can do with the property in some situations. Although a restrictive covenant may make it harder to sell your home, getting a swift and competitive offer is still possible.

1. What are restrictive covenants for properties?
2. The reasons for a home having a restrictive covenant
3. How restrictive covenants can affect the sale of a house or flat
4. Selling a home with a restrictive covenant
5. Is it possible to remove a home’s restrictive covenant?
6. Options to sell a property with a restrictive covenant
7. Frequently asked questions about restrictive covenants

What are restrictive covenants for properties?

If you are the freehold or leasehold owner of a house or flat and you are looking to sell the property, you’ll need to check whether there is a restrictive covenant on the home.
Restrictive covenants generally are specific, binding legal agreements between someone who sold a property and the current owner that set limits on what can and cannot be done with the building, the land on which it was constructed, or both, in certain circumstances.
As this guide explains later, you as the owner must abide by any restrictive covenants on your home because you could face large fines or even litigation if you violate these limitations.
There are a wide range of issues that can be covered by restrictive covenants, with some of the most typical including a prohibition on using certain private roads on a property, not allowing the construction of large structures such as another building on the property’s land, barring the conversion of a property into another use such as from a home to several flats, and banning commercial use of the land.
But there are many other scenarios that restrictive covenants can cover for properties. The exact terms and conditions of the restrictive covenant on your freehold or leasehold house or flat will be unique to your situation, and it could range from a minor to major limitation.
The HM Land Registry, which is a non-ministerial division of the UK government, has a website that includes a database of properties registered throughout England and Wales that have restrictive covenants. But it only identifies which homes have restrictive covenants and does not say what the conditions are, which would require taking additional steps to obtain this information about a property.

The reasons for a home having a restrictive covenant

There are a number of justifications for why restrictive covenants are used, but generally they are designed to keep the standard of properties and their surroundings a certain way.
One example is with a property developer who might have built a large housing estate with many roads and homes that are all designed to a particular style. When selling these homes to private buyers, this developer might have included a restrictive covenant as part of the transaction that prevents large-scale modifications to the exterior of any of the properties, or various other conditions and restrictions, as the estate agency Haart explains on its website.
Having a restrictive covenant could cover something as seemingly minor as whether or not you can have a satellite dish on your roof through to a ban on using grassland for livestock. Each restrictive covenant will be unique to whichever building or land for which it was created.
And it’s not just properties developed by builders on estates that could be subject to restrictive covenants, as many single houses, flats and other homes throughout the UK might have these limits as well.
Restrictive covenants can be found at new or old properties, although it can be easier to contest one of these restrictions at a very old home where the original owner who established the initial limitation can no longer be found. That’s why restrictive covenants are an issue that can affect many property sales, not just the sale of newly constructed houses or flats.

How restrictive covenants can affect the sale of a house or flat

There are a few conditions for a restrictive covenant that must be met, including that the land affected can be identified, that the limitation touches and concerns that land – meaning it affects the value or use of the property – and it must apply to the home and not apply to a person, as Wikipedia explains.
If the restrictive covenant on your property satisfies these conditions then it will be legally binding and you must comply with it, and plan for how to sell with this limitation in place.
You must also inform potential buyers about the restrictive covenant, because this is a fact that is required by law to be disclosed during the conveyancing process, which is the formal information-gathering that happens when a home sale progresses. If you know about a restrictive covenant on your property then you must disclose it to a serious buyer, because they could sue you if they buy the home and later discover that the limitation exists and you knew about it. Answer any queries that you get about a restrictive covenant honestly and fully.
Having a restrictive covenant in place could make your home harder to sell for a couple of reasons, including the fear that the future owner might have about the penalties that they could face in the event that an action they took resulted in breaching the restriction.
Another reason why a restrictive covenant may reduce the number of people interested in purchasing your property is that prospective owners might not be willing to adhere to whatever limitation is in place, because their plans for the home would violate that prohibition. This can be enough to make some people completely lose interest in buying your flat or house.
Yet another explanation for why restrictive covenants can complicate the sale of a home is that mortgage providers could be wary about issuing a loan to buy one of these properties.
When issuing mortgages, lenders will assess a home to see whether it would be possibly to quickly sell it again in the event that the borrower defaults on the loan and the mortgage provider needs to find a buyer for the house or flat to recoup their outstanding debt. If a lender views a home with a restrictive covenant as hard to sell, they may reject the application for a loan and this could make the sale impossible if the buyer needed the loan to pay for it.

Selling a home with a restrictive covenant

When you’re trying to sell your property,another issue to resolve is whether you might have breached your restrictive covenant and how that could potentially affect your ability to get buyers interested.
Depending on the terms of your restrictive covenant, you could face expensive problems if have breached it – and this could cover anything from seemingly relatively small issues like putting up a flag pole through to major changes such as building an extension on the property. You could face a legal challenge from whoever is responsible for enforcing the restrictive covenant, with consequences including having to undo whatever work you did or pay significant fines.
If you have a property where you recently breached the restrictive covenant and are facing a challenge over it, this must be disclosed to potential buyers. They will need to know about their potential liability and whether there could be further changes to the home as a result.
One important note is that if you have breached the restrictive covenant more than a year ago and have not yet been challenged over it, and then you try to find a buyer for your home, you might be able to obtain insurance that would cover the costs of any challenge to the action that you took in violating the restrictive covenant. You should be able to transfer this insurance policy to the future owner of your home, which may address any concerns that they have.
If you have violated the restrictive covenant but cannot get insurance, you could ask for retrospective consent from the owner or other entity that enforces the limitation. This would essentially be them giving you permission for having breached the restriction.

Is it possible to remove a home’s restrictive covenant?

You might be considering trying to remove the restrictive covenant on your house or flat, and this can be possible in some cases, as the HomeOwners Alliance explains.
In the event that you are not able to get an insurance policy for your property’s restrictive covenant, your next step should be getting in touch with the person who has responsibility for enforcing the restriction and asking them if the prohibition can be removed from the title deeds and other property documents, which would then eliminate this as a selling problem.
Failing that, to undo a restrictive covenant you would have to escalate the issue to the government’s Upper Tribunal (Lands Chamber) which hears challenges that attempt to either eliminate or change covenants that the person who files the case sees as overly restrictive.
Just beware that pursuing one of these tribunal challenges can cost a lot of money and take many months, which would make it impossible to sell your property quickly. And there is no promise that you will succeed with your case, which would effectively put you back at square one with having the restrictive covenant but also wasting your funds and time.

Options to sell a property with a restrictive covenant

One of the last important decisions that you’ll have to make when preparing to sell your home with a restrictive covenant is choosing which approach for finding a buyer.
Typically, you can choose among selling with an estate agent, selling to a quick home buyer, selling with an auctioneer or selling without any help. There are certain pros to each method, such as quick buyers never charging sellers any commission, as well as prominent drawbacks with some approaches, like the many months it may take to sell with an estate agent.
Write down your top priorities with selling, which should include key facts like how long you are prepared to wait before finding a buyer, what your ideal selling price is, whether you can accept paying commission to a third party when selling, and more. Then compare these facts against the details of the four methods and this will help you find the ideal match for your needs.

Selling with an estate agent

You will not be required to do much work if you decide to sell your home with a restrictive covenant using the services of an estate agent. That’s because they will handle everything, starting with producing a listing that describes the house or flat and its main features, and includes photographs of the interior and exterior. They’ll market this listing in their office, online and in local newspapers, then organise viewings to take potential buyers on tours of the property. Finally, estate agents will hear offers from buyers, ideally taking one to completion.
But for doing all of this work, the usual estate agent will charge a seller commission often based on the property’s sale price. This will boost your expenses because the fee is taken out of the sale proceeds right away. If you would like to avoid commission when selling your home, you should look at other strategies.
Using an estate agent is also far from the quickest way to sell a property, and it’s not unusual that sellers can wait more than a year before they get a genuine offer from a buyer. Remember also that buyers are able to withdraw their offers without any type of penalty right up until just before contracts are exchanged. If that occurs, your sale will fall apart and it could add several months on to the process because you will have to begin again with trying to find a buyer.
There are some estate agents who only know how to market and sell specific types of properties, and they might have zero experience with finding buyers for houses or flats that have restrictive covenants. This implies that these companies won’t know how to get people interested in your property, and it could remain on the market for a very long time.
For every estate agent that you speak with, ask them if they have managed to sell properties with restrictive covenants before. Only use companies that are able to prove this success, because they are much more likely to know the steps to take to find you a buyer.

Selling to a quick home buyer

Quick buyers, like LDN Properties that launched more than a decade ago, make fair and fast offers to purchase almost any leasehold or freehold home, regardless of its age, condition, location, shape, size or type, and that includes properties with restrictive covenants.
Selling to one of these companies can be a great option therefore for owners of properties that some buyers might see as problematic. LDN Properties, for example, has a lengthy and diverse list of purchases throughout the UK that includes not only homes that have restrictive covenants but also flats without structural warranties, houses with thatched roofs, vandalised properties, buy-to-let flats, half-finished houses, homes with absentee freeholders, flats near traffic lights, and many other examples.
They are also often the most rapid way to sell a home, because they can usually exchange contracts and pay the seller their proceeds all within just a handful of weeks. That’s on average many months faster than the timeline involved with the other three methods of selling.
Also, the legitimate no-fee quick buyers will never require that you pay them any commission when they buy your home, which helps to lower your property selling expenses. But with an estate agent or auctioneer, you can expect to pay fees that will be taken from the sale proceeds.

Selling with an auctioneer

Auctions can be a relatively slow way to sell a home with a restrictive covenant, because it involves several delays, including many weeks or months to wait between when you enter your property for sale and when the auction is held. If your flat or house sells at the auction, the buyer than usually has about 28 days to complete all of their work required to finalise the purchase of your property, for example signing all of the relevant legal documents.
It can also be an expensive way to find a buyer for your home, because the average auctioneer will require that you pay them commission based on the property’s sale price in the event that your house or flat sells. If you are trying to reduce your overall expenses with selling you should consider other methods, because this fee will be subtracted immediately from the eventual sale proceeds that will be generated from successful auctioning your home.
As part of the auction process you will be asked to decide on a reserve price, and this is the lowest price at which you can agree to sell your home. You must make sure that you opt for a reserve price that is calculated to generate a profit from the sale for you, even once the auctioneer has taken their commission out of the final proceeds. If you do not plan ahead on this, you face the potential risk of selling either breakeven, which means close to what you originally paid for the home, or even at a loss compared to the price at which you bought it.
Some auctioneers might also not have much, if any, experience with trying to sell homes that have restrictive covenants. If that’s the case, they may find it difficult to know how to advertise and generate interest in your property, and this could end with it not selling at the auction.
To prevent this outcome, ask auctioneers to provide you with data on their past successes in selling homes like yours, and try to avoid selling with a company that lacks such expertise.

Selling without any help

You have to be prepared for a lot of stress when selling on your own, because it will be your responsibility to handle every step of the process – everything from the initial creation and marketing of a listing through to organising viewings and hearing offers from buyers.
It’s only suggested as a viable option for people who have either managed to sell a home with a restrictive covenant in the past, or that know a skilled friend or family member who is open to helping them out for free. Otherwise you could be looking at a very slow process, and it may be more than an entire year before you are able to get a serious offer from a buyer.
The only obvious pro of selling without any assistance is that you won’t need to pay any commission to an estate agent or an auctioneer, which helps to save you money. But this saving could be wiped out by the funds you’ll have to spend on advertising your listing.
Instead, one alternative is to sell your home to a no-commission quick buyer, like LDN Properties. These companies will never charge you any fees when purchasing your property, but they’ll also be able to finalise the process of buying your flat or house in a few weeks. So not only would you avoid fees, but you’d do it on a much faster pace than selling solo.

Top queries and answers about selling property with a restrictive covenant

Homeowners thinking of selling their property fast in a short timescale usually have some questions to be answered, ranging from the types of property we can buy through to selling with a short lease. Here are some of the top questions we can be asked when selling property with a restrictive covenant: