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Warning to agents over homes with restrictive covenants

The residential director at Mullucks Wells in West Essex and East Hertfordshire, William Wells, has contacted Estate Agent Today to highlight what he considers “a relatively dramatic change” by some mortgage lenders. 

He says it applies to non-standard properties and especially those with restrictive convenants, so affects in particular some homes with land.

He says the latest email he has seen from HSBC’s mortgage division contains this paragraph:


“These restrictions impede HSBC's ability, in the event of possession, to obtain a fair market value for the property and therefore compromises the integrity of our security. Therefore, where it becomes apparent that there is a restrictive covenant in place we are unable to lend and the application will be declined and returned to the branch.”

Wells says that this appears to him to demonstrate that HSBC does not understand the concept of an uplift clause, because if residential development takes place and there is an increase in value, a proportion of that goes to the existing owner. 

“Effectively, the present owner is better off and the previous owner is better off and the bank is certainly no worse off” he says.

“I accept that some purchasers may be nervous of buying a property with an uplift clause but evidence would suggest that this is a minority, because as an owner you are in control of the land and if you make no planning application, then nothing happens” he says.

“I suppose the simple explanation is that if a lending source has enough business, it can make up whatever rules it likes. But this is a serious issue for many home owners of the larger properties, particularly those with land. It is something estate agents need to be a lot more careful about now and in the future” he says.

  • Richard Copus

    There seems to be an increasing lack of understanding of anything except the most basic properties from the main lenders. This is possibly because of lack of knowledge in those creating lending policy. It would help if the NAEA and RICS used their positions to explain the various restrictions and to emphasise that not all properties are simple houses and that the more complicated titles can often form better security for the lender.


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