Newspaper article Evening Gazette (Middlesbrough, England)

Know Your Law

Newspaper article Evening Gazette (Middlesbrough, England)

Know Your Law

Article excerpt

Byline: Marc Turner

There seems to be no let up in the popularity of television programmes and media articles about becoming rich through property development.

In recent years, stock market returns have been poor whereas land prices have increased. And with interest rates still remaining relatively low, some see property as a sure way to make easy money.

But with a greater number of buyers out there, developers are increasingly having to look at "problem" sites in an attempt to make a profit.

So what are some of the potential pitfalls that developers need to look out for?

* Restrictive covenants - these are restrictions on the development or use of land, enforceable by one landowner against another. With agricultural land, for example, there may be restrictions that prevent building work being carried out, or any uses other than farming.

Subject to various rules, covenants will be passed on so that they apply to, and are enforceable by, later owners of the land.

If the covenant is binding, the courts can enforce it by granting an injunction prohibiting the intended development, or award compensation to the person with the benefit of the covenant.

If the covenant is a recent one (within the past ten-15 years) buying out the person with the benefit could be the only option to overcome it. If the covenant is older there may be other options, such as taking out indemnity insurance.

Such policies are becoming increasingly common, with the compensation agreed against losses arising from the covenant, such as the cost of buying out someone with the benefit.

However, these policies can quickly become outdated as property prices rise. Insurers are also much less likely to take on a site if the person with the benefit of the covenant can be identified and has already been approached for a release. …

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