AUCTIONnews


legal Don’t lose the plot over covenants


Beware of restrictive covenants on properties bought at auction, warns Chris Baguley, director at Auction Finance.


Covenants restricting what an owner of land or property can do with a property are extremely


common. Covenants are private agreements between owners which may restrict the way land may be used and developed. A landowner can put whatever


restrictive covenant they want on the land they are selling. Some covenants might be old and the purpose for which they were originally imposed may not still exist or be reasonable. On the other hand, some covenants may be newly imposed by the vendors of the plot. In fact, an individual selling


a property may not even be aware of any covenants themselves. For instance, a widower might be selling a property that her husband had dealt with previously.


Covenants to watCh out for Attending auctions across the UK means we come across all manner of unusual covenants dictating how residential property can be used. Some interesting ones include: The property must not be painted pink Rubbish bins at the property must be hidden from street view Cars may only be repaired behind a screen Car/caravans must not be parked at the property Satellite dishes must not be visible


Some of these may seem


ridiculous but people should be aware they are legally binding and must be followed. If a property is coming up for auction and you find there is a restrictive covenant is in place, check out the expiry date. If it will soon run out, it shouldn’t be a problem but the bidders should be aware of it, all the same. You can also find out details


of any covenants within the information held by the Land


44 JUNE 2010 PROPERTYdrum


Registry. It pays to thoroughly check out the deeds to the property as any covenants will be contained within this document. Any covenants found on a home should be included – and highlighted – in the legal pack.


old laws still Count It’s vital property investors realise that old laws might still restrict the use of new land, however outdated they may seem. If a buyer purchases a property and finds later that it has a covenant, he may well be able to modify or discharge it. If the original purpose of the covenant has become inappropriate over time, for example, the Lands Tribunal can have power to change it. Christopher MacCafferty,


associate at law firm Ralli, has some useful advice. “From a legal perspective, you must make checks when buying, particularly if you have plans to either alter the usage or physical characteristics of the property. “Consider whether the property


is subject to easements and covenants. Look at the Town and Country Planning Legislation and the need for planning permission and also check for building regulation consent. “Before buying any property


you must ensure the seller has complied with all of this and with any restrictions on the usage of the property and obtained any necessary consent. If you do have short or long term plans for the use of the property you also need to consider whether they would fall foul of any of the controls listed above.” Agents should always suggest that bidders ask their legal representative for advice if they are unsure what is in place and the legal pack isn’t clear. The solicitor will be able to advise on whether the buyers plans for the property are currently possible and if not what is needed to make them possible.


www.auctionfinance.co.uk


Stuart Gibson(L) and Toby Limbrick of Network Auctions


opportunities


Life Reversion properties increasingly popular


Network Auctions reports increasing success with life reversion lots offered over the past year.


Life reversions are homes that have usually been the subject of equity


release schemes. The owner will have sold the property for a sum – usually discounted by up to 60-65 per cent of market value – to release the capital. They are likely to be retired and see the opportunities the sum can bring to them while they can enjoy it – travel, home comforts, gifts – and to supplement their pension. The homeowner retains the


right under a ‘life tenancy’ to stay in their own home until it is vacated – either when moving, going into a care home or on death. They also continue to pay all the charges associated with the property. One buyer at the Network


Auctions sale at Hatfield House went along out of curiosity and bought such a property on spec: “My brother and I weren’t


expecting to buy anything – we didn’t even take a cheque book!” said Stuart Gibson. “We bought the flat for £21,000 – and then found out that it is currently worth, with vacant possession, about £70,000 on the open market. It was a good price (guide £17,000- £19,000), we took a gamble.”


The property was a


one-bedroom retirement flat in Peterborough, purpose-built by McCarthy and Stone. It was bought in 2000 for £55,000 and subsequently sold to an equity release company. In common with other such companies, life reversion properties are continually traded by them at auctions. The current occupiers are


‘An impulse buy has turned into an exciting investment.’


aged 61 and 62 – an indication that the younger they are, the more attractively priced the property is likely to be. “Of course, being a


retirement flat we can’t live there as we are under 60, but if one of us were to move in when we reach that age we would have no CGT to pay,” continued Stuart Gibson. “We are looking at putting


the property in trust for our children so we definitely see ourselves buying more life reversions. What started as an impulse buy has turned into an exciting investment opportunity for us.”


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