Dwellinghouse versus Household – covenant issue

Hi Chris,

My experience of covenants and restrictions in the past is that they tend to come to light at the last minute during the legal paperwork before completion.

They are usually very difficult to overcome, so please be careful and check this out carefully before you start costing yourself too much money.

Dear Chris

Neil is spot-on – be very careful!

Section 1 of the Housing Act 1988 uses the concept of a separate dwelling in the following way:

“A tenancy under which a dwelling-house is let as a separate dwelling is for the purposes of this Act an assured tenancy”

That means a room in a shared house can be (and often is) let on a separate assured shorthold tenancy (even if there is nothing in writing at all – but that is a subject for a different discussion).

If sharers each have their own tenancy agreement then you will find it difficult to say that they do not occupy separate “dwelling houses” if someone picks up on the restrictive covenant – you will be in breach.

Although not entirely foolproof, better by far to let the whole place to one tenant who is responsible for finding others and managing the property. Even this is not watertight, however, and has its own serious headaches, but you would be less likely to be found to be in breach of covenant.

If the property is leasehold the problem is more acute still: you may find yourself forfeiting the lease with no compensation, even after many years of paying a mortgage. Beware!

Reply to the comment left by "Charles King - Barrister-At-Law" at "30/10/2015 - 13:00":

Thank you Charles. Regarding your para below:
"If sharers each have their own tenancy agreement then you will find it difficult to say that they do not occupy separate “dwelling houses” if someone picks up on the restrictive covenant – you will be in breach."

Well, if each tenant has an AST, and the tenant occupies only his bedroom exclusively whilst sharing other facilities, surely it is hard to argue that each of them DOES occupy a 'SEPARATE' dwelling house because they share kitchen/lounge/etc. I am not a legal expert, but it sounds hard to think such a type of occupancy is 'separate'. Put it another way, if it would be 'separate dwelling house' then for each bedroom Council Tax should be levied individually, which I don't think it happens. The only situation in practice where I have seen separate CT banding is for units that are largely self-contained (essentially small studio flats).

As I said, I am not legal expert but views on my comments about would be appreciated.

many thanks

Reply to the comment left by "Charles King - Barrister-At-Law" at "30/10/2015 - 13:00":

Charles,

After re-reading your comment, I kind of understand the 1988 law makes the point that one AST equals one dwelling house.

But then the more recent legislation states a 5-bed HMO does not require planning permission. Doesn't this mean that my covenant 'single dwelling house' is not breached if let on max 5 ASTs ?

And of course my earlier point remains, if each AST is a dwelling house then separate CT should be payable on each AST (which does not happen in practice).

Comments highly appreciated, thanks

I agree with Christian's thinking on this. Also, assuming it went to court, I suspect the judge will want to know in what context the covenant was originally written. The issue of interpretation becomes an issue if the developer no longer exists! However, I strongly suspect that developers included this statement to prevent the building of additional properties (buildings) on the same land.

You are quite right Christian, from a common sense point of view. The key case on this is the House of Lords decision in Uratemp v Collins [2001] - http://www.publications.parliament.uk/pa/ld200102/ldjudgmt/jd011011/uratem-1.htm - which you might like to read. The law doesn't always follow common sense. A single room, even with signifiant shared facilities, can be a separate 'dwelling house'.

Furthermore, where you have a restrictive covenant to a freehold even those not direct parties to the covenant can theoretically sue - i.e., neighbours, etc.. Lenders would certainly be jittery, and might cause expensive trouble down the line. The Council Tax position will be relevant, but no judge will consider themselves bound by what the council says about seperate dwellings - they will make a decision on what they believe the situation to be legally and fatually. All the comments here are very sensible though (as ever). I can't say you'd definitely be in trouble - I would only urge caution where binding covenants are involved!

Reply to the comment left by "Charles King - Barrister-At-Law" at "30/10/2015 - 18:23":

hi Charles, greatly appreciate the comments, and the case law attached.

I understand, a room is a dwelling house if there is an AST for it.

So if the entire house is let on 1 AST, regardless to how many sharers on that contract, then it is 1 dwelling house and the covenant is not breached ?

That would certainly be a safer way of doing it to avoid the breach of covenant. Even then it might not be entirely unproblematic (for e.g. if the lender decided to investigate at some point and tried to argue that the agreement was some kind of sham) and the arrangement would need relatively careful management. I wonder if the prospective lenders might be pursuaded to agree in advance in writing to several occupiers under a single AST? Just a thought

Reply to the comment left by "Charles King - Barrister-At-Law" at "02/11/2015 - 17:51":

hi Charles

I asked the lender if it would agree to several occupiers under one AST, waiting for reply but don't think they will agree.

I am puzzled about the 'single dwellinghous' restriction. The covenant is a planning restriction imposed by the Council after all. If the Council were to grant me HMO license, wouldn't that actually mean the 'single dwelling' covenant is not applicable ? And more to this point, permitted development rights actually allow 5-bed HMOs without planning required, so isn't that again saying the 'single dwellinghouse' covenant does not apply ?

The area was developed by London Docklands Development Corp in the 80s, all houses should have the same restrictions, yet the area is full of lettings to sharers. I just cannot get my head around this issue, do I miss something here ?

many thanks for the view Charles !

You're welcome Christian. You're probably not missing anything - and I may well be being over-cautious. It is difficult to say without seeing the covenant itself - I am assuming this a covenant registered at the Land Registry against freehold land? There is a rigmarole for getting these things formally changed.