Background Image
Should estate agents disclose restrictive covenants to potential buyers? Image

Should estate agents disclose restrictive covenants to potential buyers?

To comply with the Consumer Protection from Unfair Trading Regulations (CPRs) estate agents must provide the ‘material information’ that the average consumer needs, according to the context, to make an informed transactional decision. So, should estate agents be upfront about restrictive covenants on property listings?  

The regulations don’t explicitly state that restrictive covenants should be stated, however, if the information could impact the buyer’s decision to purchase the property, then it certainly fits within the expected material information that they would need. 

What are restrictive covenants and how do they impact a property?

Restrictive covenants are conditions that are written into a property’s title deeds that determine what a homeowner can or cannot do with their house or land. They forbid actions such as renovations or extensions without obtaining the consent of the covenant beneficiary. By purchasing a property with a restrictive covenant, the homeowner agrees to the conditions of the covenant. 

As a result of the restrictions, the value, or potential value of the land may be affected and therefore can have a huge impact on a buyer’s decision to purchase the property as well as the offer that they make. 

This also has an impact in terms of an estate agent’s obligation to the Consumer Protection Regulations. As per the NTSELAT guidance on property sales and lettings, it is a breach of the CPRs for businesses to mislead consumers by failing to give them the information they need to make an informed decision, where this causes or is likely to cause the average consumer to take a different transactional decision. For example, known ambiguities concerning the property’s title are considered material information and should therefore be disclosed.  

How to find out if there is a restrictive covenant on a property

You can find out if there are any restrictive covenants on the property by accessing the title deeds via Land Registry. If you want further information and guidance, you can opt for a Veya Report which provides an overview of the property’s main title details as well as a detailed analysis and suggested solutions to title issues. In addition, Veya also offers a whitelabelled Instruction Winning Report that can be taken along to valuations, arming estate agents with unique insights on the property including details of any restrictive covenants. 

Improving material information on property listings

Up until now, there has been much disparity on the information provided on property listings, with agents having to read between the lines to decide what to include or not include on property listings. 

The National Trading Standards Estates and Lettings Team (NTSELAT) announced a project earlier this year which has been developed in response to estate and letting agents’ requests for clarity on what information should be disclosed as standard when marketing a property. 

NTSELAT have collaborated with property portals and other industry leaders to help define and clarify what constitutes material information and have set out a three-phase plan implementing mandatory material information on property portals. 

Part A, which was announced in February, includes information that is considered material for all properties. A further two phases are being developed, which will incorporate further material information such as restrictive covenants, flood risk and other specific factors that may impact certain properties. 

This project supports the goals set out in the government’s Levelling Up Whitepaper. Levelling Up Minister Neil O’Brien MP said: “Far too often when buying and selling properties, deals fall through, costing young people thousands of pounds in wasted expense. By providing all the necessary information up front, this can be avoided, and it will make the process of buying a first home much easier and more cost-effective.” 

Our whitepaper Estate agents and the rise of upfront information provides more details on the project if you would like to know more.