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Joshua
Joshua, Lawyer
Category: Property Law
Satisfied Customers: 25358
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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I am thinking of renting out my house as we are moving

Customer Question

Hello, I am thinking of renting out my house as we are moving away. The agent will rent the house to either a family or to individuals (depending on the easiest to find).
Our housing estate was built in 2004 and has a TP1 document with restrictive covenants. One of the Restrictive Covenants states "The Property shall not be used for any purpose other than as a one private dwellinghouse in the occupation of one household only".
Does this mean we could not rent our house out to individuals?
Some members of the Residents management company of which I am a member say this means it cannot be an "HMO" and only one family is allowed to live there.
Looking at my local councils web-site, for my type of house if I only rented to 4 individuals my property would not be classed as an HMO so I am not going against the council only the say so of the Residents Management company who are quoting the Restrictive Covenant.
In addition a number of people on the Residents Management company are running their own businesses from their home, in my view this also goes against the same restrictive covenant as it refers to a dwellinghouse i.e. it has to be a home, not a place of business.
Would this covenant even be enforceable? Other covenants in the same document state you cannot park your car on the managers land (the road) or put satellite dishes up, yet everyone parks on the roads and do put up satellite dishes.
Regards
Paul
Submitted: 2 years ago.
Category: Property Law
Expert:  Joshua replied 2 years ago.
Hello and thank you for your question. I will be very pleased to assist you. I'm a practising lawyer in England with over 10 years experience. The definition of an HMO is a property occupied by two or more persons who do not form part of the same family. The definitions provided by s254 Housing Act 2004 - see here:http://www.legislation.gov.uk/ukpga/2004/34/section/254 HMO legislation is complicated because although a property occupied by two or more individuals not forming part of the same family is an HMO, it will not be an HMO that is licensable. Legislation requires the properties with three or more stories occupied by five or more separate individuals must be licensed but some councils can impose local directions that require that any property occupied by between 3 and 6 individuals to also be lienced. Your council it would seem may required licencing for four or more indiviudals but HMO licencing requirements are not to be confused with the basic definition of an HMO which is as above. the covenant you kindly refer to is very specific in that it provides that the property may not be used for any purpose other than as a dwellinghouse for occupation of one household only. Therefore, renting the property to individuals who for more than one household (i.e. are not all members of the same family) would breach the covenant I regret. it may be that the covenant is not enforceable because there are complicated rules laid down in common law that decide if a covenant can be enforced, however I suspect if you have a residents company the covenant is likely to be enforceable. however, if you would like me to look at this, if you can provide me with the wording from the preamble to the covenants I would be happy to review it for you. The wording should be on the lines of "...for the benefit of the Sellers retained land the Transferee covenants to observe and perform the following covenants..." of course, the covenant places no restriction on renting the property out to a family and so there is no difficult to renting to partners, or married couples with ot without children so there is still considerable scope for lettings. In any event notwithstanding the covenant, if you are a first-time landlord, many responsible agents would caution you in respect of letting on an HMO. They are perfectly profitable but can bring more issues than a standard family let so are generally not considered a good first time landlord let. Your agent may be advising you differently and certainly it is true you can squeeze some extra profit from the letting but you will typically have a greater chance of problems such as damage, rent default and so on particularly if considering students which may be particularly upsetting if it is your main house you are renting out rather than a buy to let. I hope the above is of assistance? If you have no further questions for now I should be very grateful if you would kindly take a moment to click to rate my service to you today or just reply back to let me know if the above is helpful. Your feedback is important to me. If there is anything else I can help with please reply back to me I'd be very grateful
Joshua, Lawyer
Category: Property Law
Satisfied Customers: 25358
Experience: LL.B (Hons), Higher Prof. Dip. Law & Practice
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Customer: replied 2 years ago.

Hello Joshua,

Thank you for your answer.I understand about the conditions for the different HMO's as my house is on 3 floors the limitation is in it must be let to less than 5 people which is fine as we are only planning on letting to 4 individuals.

My understanding of the Restrictive Covenants on the housing estate goes as far as to asking who would actually enforce the covenant?

Although there is a residents management company in place, it is highly unlikely that they would be able to use the monies collected from the Maintenance people pay to fund taking someone to court for breach of covenant i.e. why should someone on one side of the estate who is not being inconvenienced by someone living on the other side of the estate breaching the covenant be liable for paying legal fees (from their maintenance money) for taking someone to court for breach of covenant?

In addition couldn't you argue that people are being prejudice towards you as there are other households on the estate in breach of the same covenant or other covenants?

My understanding is that it could cost several thousands of pounds to take someone to court over breach of covenant that may or may not succeed.

The covenant preamble is:- "FOR the benefit and protection of the Neighbouring Premises and so to bind the Property into whosoever hands the same may come but not so as to render the Transferee personally liable for any breach of covenant after he or they shall have parted with all interest in the Property the Transferee hereby covenants with the Transferor and also as a separate covenant with every other person who is now or who will be an owner of any part of the Estate and with the Manager and the Builder that the Transferee and those deriving title under him will at all time observe and perform the following restrictions and stipulations."

Expert:  Joshua replied 2 years ago.
Thanks. Do you have the definitioin of "Neighbouring Premises" from the deed?
Customer: replied 2 years ago.

The definition of "Neighbouring Premises" is:- "The Estate other than the Property."

I guess this means the rest of the whole estate meaning anyone could potentially request or try to enforce a restrictive covenant on anyone else on the estate rather than your direct neighbour.

Expert:  Joshua replied 2 years ago.
Thank you. On the face of the wording the covenant will be enforceable by any plot owner that was purchased after yours from new - e.g. if your plot was sold by the developer first then every other plot on the estate could enforce against you whereas if your plot was sold last then no other plot owner could enforce the covneant covenant against you. This is due to be fact that only the land that is remaining in the rest of the estate takes the benefit of the covenant at the time it is made and so those plots that have already been sold off before the covenant is given, do not take the benefit of it.if the residents company also owns land that formed part of the estate, the residents company may also be able to enforce the covenant if the transfer to the residents company took place after the sale of your plot.Otherwise, the wording of the covenant appears to satisfy the tests laid down in the Case of Crest Nicholson and would appear to be enforceable. Otherwise, in terms of your comments regarding enforcing the covenant in court, generally speaking I do not disagree with you - generally covenants are enforced when nuisance is caused to 3rd parties rather than as a matter of principle so if your rental does not cause a nuisance to others, the chances of the covenant being enforced are probably low but one cannot guarantee that of course. You could consider using six-month tenancies rather than 12 month tenancies which gives you some breathing room in the event you did receive notice of enforcement
Customer: replied 2 years ago.

Hello Joshua,

Thank you for your answer.

We did not buy the house from the builder, we purchased the property from the first time buyers only 3 years ago.

Also the estate was handed over to the Residents management company after the sale of the last plot so in essence, they could enforce the covenant but who would have to pay to have it enforced?

The only money the residents management company has is that from the residents on the estate and is used to maintain the estate, I am not to sure it would go down well with the residents if their funds were being used to take individuals to court for breach of covenant being decided by the Residents Management Company, some of whom are in breach of the covenants themselves especially if it was not a 100% guarantee that the court case would win.

Expert:  Joshua replied 2 years ago.
The relevant date for working out who can enforce the covenants is the date of each purchase from new from the developers. Subsequent transfers of ownership are not relevant. It is not easy to work out what order the plots were purchased in other than by obtaning all the TP1 documents from each plot to work out the date which in practice is never done unless there is a breach of covenant case going forward. Based on what you say the residents company could enforce but as you say are unlikely to do so lightly. They would have to cover legal fees in any breach claim but could seek to recover fees from you if successful.
Customer: replied 2 years ago.

Thank you very much. Much appreciated.

Paul

Expert:  Joshua replied 2 years ago.
A pleasure. Best wishes

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