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Thomas
Thomas, Lawyer
Category: UK Law
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Experience:  BA (Hons), PgDip, Practising Solicitor
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Please consider the following two clauses taken from a conveyance

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Please consider the following two clauses taken from a conveyance of a house to my brother's limited company.

1. THE OWNER OF THE PROPERTY WILL NOT USE OR PERMIT THE PROPERTY TO BE USED FOR ANY PURPOSE OTHER THAN A PRIVATE DWELLING HOUSE
2. THE OWNER OF THE PROPERTY WILL NOT USE OR PERMIT THE PROPERTY TO BE USED FOR ANY TRADE BUSINESS OR PROFESSION WHATSOEVER.

Please tell me if these restrictions will prevent my brother's limited company renting out the house to people who were to use it only as a private dwelling place (as their home)

Please note that we are fully aware that the restrictions would prevent the company from renting the property to someone to use as say a bakery (trade) a dentist's office (profession) or as a home for someone who was to be cared for by visiting carers (business)
We believe that no injunction would lie as result of the company renting it to ordinary tenants to use as their private dwelling house, that such renting could not fairly be called a business. Are we right?
If we are not right about this then, in view of the above restrictions, for what, if any, lawful use can the house be put?

Good evening,

 

First, the practicalities, only the person who originally imposed the covenant and the other owners of properties in the area could apply to Court for an order that the covenant is enforced against you.

 

A covenant of this nature is usually imposed by developers who wish to secure the residential continuity of the development to protect the property and other from a diminution in value because of environmental factors resulting from a business trading there.

 

I suppose that in a (very) strict interpretation of the construction of the words the act could arguably be said to be a breach, but not on a broad interpretation and it's certainly not in the general spirit of the covenant (which a Court would be mindful of - it is intended to prevent someone opening a shop with all the noise and disturbance that follows with it. A company renting in the course of it's business to residential occupiers would not cause any greater disturbance than if your brother were occupying it as it's home. It would be a pretty unsympathetic Court to impose it in my view.

 

In any event your brother can a obtain restrictive covenant indemnity policy to cover the cost of any loss suffered as a result of enforcement action being taken (and for the legal costs of enforcing this). If you google this you will see plenty of insurers will to provide such a policy.

 

Your brother should also speak to his conveyancer to take his view on the covenant, presumably your brother told them of his plans for the property but I should be extremely surprised if his view departs very far from mine.

 

If this is useful please kindly click accept so that I may be rewarded for my time. It will be gratefully received and you will be free to ask follow up questions.

 

Kind regards,

 

Tom

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