Covenants introduced after exchange of contracts at auction

[lillibet2]

Does anyone happen to know whether the vendor can introduce restrictive covenants after a house has been purchased at auction and contracts exchanged without negotiation with the purchaser? thanks

[honeybee13]

Hello there.

 

I think we need to know more about what happened in order to advise. Without revealing personal details, can you explain what went on please? I imagine you signed a legal document and were there solicitors involved?

 

HB

[lillibet2]

Thank you, I will try. My partner and I bought a house at auction. We were new to this and probably naive. We used a conveyancer we had used before but she wasn't experienced with auctions. After the auction having read all the associated documents, paid the deposit and exchanged contracts, we proceeded to completion 4 weeks later. Unbeknown to us and not picked up by our conveyancer, the vendor who was the executor of an estate of a deceased person and a solicitor had introduced 3 restrictive covenants which now are causing real problems and we are being threatened with legal action because we have not complied with one of the covenants of which we were not aware. Does this make sense? So the question was, can restrictive covenants like this be introduced after contracts have been exchanged and without informing the buyer, just slipped in with the paperwork and hoping to get away with it?

[honeybee13]

Thank you for the extra info, I can understand why you would be upset.

 

Are you able to say more about the covenants or what aspect of the property they affect please?

 

HB

[lillibet2]

One of them was not to object to any planning application made by the owners/trustees of the retained land after our house was partitioned off. This is what they are now threatening action over. Another way leave was that drainage from any development built on the retained land would go under our garden. They have now put in a planning application which would require our whole garden being dug up. We would never have agreed to these covenants had we known about them. We thought we had bought a house and at exchange nothing would change before completion without our knowledge. Who is right? thank you

[honeybee13]

Thank you again. Fwiw, I would feel the same as you, this is tough for you.

 

We need the legal guys now, I'll keep an eye on your thread to make sure you get answers.

 

HB

[lillibet2]

thank you

[AndyOrch]

Restrictions and Covenants

 

Restrictive covenants often appear on title to property. Often they were imposed at the time that the property was constructed and are intended to maintain the appearance and integrity of buildings and surrounding estates e.g a restriction that a property is to be used as one private dwelling house in the occupation of one family only. Such restrictions can hinder future development of the property and should be investigated carefully prior to auction.

 

http://www.hartscales.co.uk/documents/auction_guide.pdf

 

Regards

 

Andy

[lillibet2]

thank you Andy. These covenants and way leaves were introduced only after we exchanged contracts and without our knowledge. They were the result of a last minute panic when the vendor wanted to ensure the remaining site could be developed without our objection and that they could dig up our garden to lay drains for their site. They were not in existence prior to exchange.

[steampowered]

I think this depends entirely on the terms of the contract. The first step is to carefully read all of the contract terms. What do those terms say about the period pending completion, and do they incorporate the Standard Conditions of Sale?

 

Are you 100% sure that the covenants were introduced after exchange of contracts? It isn't uncommon for restrictive covenants to be imposed before the auction, as the level of disclosure about auction properties can be quite limited (particularly if you took the risk of exchanging contracts without doing any land registry searches).

[BazzaS]

I think this depends entirely on the terms of the contract. The first step is to carefully read all of the contract terms. What do those terms say about the period pending completion, and do they incorporate the Standard Conditions of Sale?

 

Are you 100% sure that the covenants were introduced after exchange of contracts? It isn't uncommon for restrictive covenants to be imposed before the auction, as the level of disclosure about auction properties can be quite limited (particularly if you took the risk of exchanging contracts without doing any land registry searches).

 

Are the covenants registered at the Land Registry?

If so, on what date (in relation to the auction date, and date of completion)?

[lillibet2]

Thank you steampowered for your reply. The terms as far as we can tell incorporate the standard conditions of sale. The covenants were introduced after exchange of contracts and we employed a conveyancer to undertake land registry searches prior to exchange. So the question is who is responsible? Are we responsible for not reading all the documents prior to completing. We certainly didn't expect anyone to introduce changes. Our conveyancer didn't notice anything, but we are assured that the covenants were registered at the land registry after the contracts were exchanged but prior to completion. What can we do?

[lillibet2]

The covenants were registered at the land registry after exchange and prior to completion. That has been checked by an independent solicitor. As this has major implications for us now which could be very costly and we are threatened with legal action for having broken one of the covenants of which we were unaware, we want to know who is responsible? thank you for your reply.

[BazzaS]

Thank you steampowered for your reply. The terms as far as we can tell incorporate the standard conditions of sale. The covenants were introduced after exchange of contracts and we employed a conveyancer to undertake land registry searches prior to exchange. So the question is who is responsible? Are we responsible for not reading all the documents prior to completing. We certainly didn't expect anyone to introduce changes. Our conveyancer didn't notice anything, but we are assured that the covenants were registered at the land registry after the contracts were exchanged but prior to completion. What can we do?

 

Surely if the covenants were introduced AFTER the contracts were exchanged then they aren't in the copy of the contract you signed nor the copy of the contract in your possession, and you are not contractually bound by them.

 

If you then suffer loss as a result of the covenant being registered prior to completion : you have a claim in negligence against your conveyancer and their professional indemnity insurance.

My understanding is that a conveyancer can search the Land Registry and request an alert for any new changes made to the register shortly after their search to protect against such changes made just before completion.

 

If the covenant was in the contract you signed, then, yes, the seller and your conveyancer can say "you should have read it before signing it" unless you specifically asked "have any new terms been introduced" where you MIGHT be able to claim misrepresentation.

[steampowered]

Does the paperwork contain any legal terms and conditions, or does it simply cross-refer to the Standard Conditions of Sale? Presumably it refers to the fifth edition (which is available here: https://www.lawsociety.org.uk/advice/articles/standard-conditions-of-sale/)?

[lillibet2]

The paperwork refers to special conditions of sale in respect of the sale by auction. I don't know how these differ from standard conditions of sale. The link that you sent said 'page not found' i'm afraid. I'm not sure what are 'special' about them.

[steampowered]

Can you give me the exact wording of the incorporation clause? Its important to be 100% sure that you are referring to (and finding online) exactly the correct document. Attention to detail is crucial when you are looking at contracts.

[lillibet2]

thank you steam powered. I do realise how important it is. The special conditions of sale in respect of the sale by auction of (the property) which incorporates the general conditions of sale runs to five pages, and I'm not at all sure from looking at it which are special and which are general conditions. The first heading is 'special conditions of sale', and under this heading are the definitions and interpretations: the auctioneer, the buyer, the buyer's solicitor, the completion date the contract rate, the general conditions (means the common auction conditions as referred to in the property auction group's auction details - which I don't have at present), the particulars, the property, the purchase price, the seller, the seller's solicitors, working day, interpretation. The next heading is general and special conditions of sale and it says the property is sold subject to the general conditions and these special conditions. In the event of any conflict the special conditions shall prevail. next sub heading is memorandum which talks about the signature at the close of the sale and deposit being paid. The next heading is completion. this talks about the completion date being four weeks after the auction. the next heading is capacity and covenants of Title which says the seller sells as executor with limited title guarantee. This refers to the epitome of title which I do not have at the moment but am looking for it. There were no existing restrictive covenants on this prior to the auction. There are a few other headings. I don't really know how important they are and whether they refer to general or specific conditions. Sorry if this hasn't been helpful, and I"m very grateful for your help.

[steampowered]

Hi, thanks for the information that is useful.

 

 

Very often there are "General Conditions", which are like a detailed set of terms and conditions which can be used for any transaction. You then have the "Special Conditions" which set out the terms which are specific to this particular transaction - such as the price, identity of the property and any special terms.

 

 

You need to read the Special Conditions to check that there is nothing in there which could affect your situation. However this is unlikely. What we really need to identify is which document is the "General Conditions". The "General Conditions" themselves probably are not in your paperwork, but there should be a clear definition of what they actually are. It might be this (http://www.rics.org/uk/knowledge/more-services/guides-advice/common-auction-conditions-3rd-edition/). Once the correct General Conditions have been identified, there should be a clause in there which deals with the period between exchange and completion in detail.

[lillibet2]

I will try and find out from my conveyancing solicitor which were the general conditions. Certainly the ones you have given me the link for do not include the right to introduce any new way leaves or covenants between exchange of contracts and completion, but I must check these are the correct conditions. Thank you for your help.

[Guest]

The covenants were registered at the land registry after exchange and prior to completion. That has been checked by an independent solicitor. As this has major implications for us now which could be very costly and we are threatened with legal action for having broken one of the covenants of which we were unaware, we want to know who is responsible? thank you for your reply.

 

you mentioned that the covt's werent picked up by your conveyancer, and you completed 4 weeks after exhange. did your conveyancer do more searches that shld be done after exchange (and prior to completion) to ensure that there has been 'no change to the title since the contract was issued'?

[lillibet2]

I don't know that I'm afraid Ford. I would have to check. Thank you

[lillibet2]

I don't know that I'm afraid Ford. I would have to check. Thank you

 

I have now checked both the general and special terms and there was nothing there to say that anything could be introduced between exchange and completion. We are just within the 6 years that you have to make a complaint, and think that we should write to our conveyancer, laying out the details and asking for them to respond. The question is that if they don't respond until the 6 years is up, will we lose the right to claim? Or does the six years start from the time that we became aware these covenants were introduced after we had exchanged contracts which is quite recently? Also, should we be consulting a specialist solicitor to make a claim against our conveyancer? thank you for all your help.

[Guest]

....Also, should we be consulting a specialist solicitor to make a claim against our conveyancer? thank you for all your help.

 

 

maybe. you could ask for an opinion from an independent solicitor. afaik imo, generally, further searches 'should' be made again after exchange (contracts) and just pror to completion, even when it is fairly quick between. just to be sure there has been no changes since contracts. as it seems, in general, that title changes cld be poss after exchange.

wait further opinion though.

[lillibet2]

thank you