When buying a property in the UK, some may come with conditions that could affect your ownership rights or future use of the land. These conditions might include agricultural ties, restrictive covenants, or overage clauses. If you’re considering purchasing a property with any of these restrictions, it’s crucial to understand what they mean and how they could impact your plans.
What Are Agricultural Ties?
Agricultural ties, also known as agricultural occupancy conditions (AOCs), limit who can live in a property. These restrictions often apply to homes built on agricultural land and require the occupants to be involved in agriculture or related industries. The aim is to ensure that housing remains available for those working in agriculture.
If you’re not involved in farming or a similar industry, getting a mortgage for a property with an agricultural tie can be difficult. Lenders may be hesitant because the restriction limits the market for resale. However, if you’re eligible and can demonstrate your role in agriculture, these properties can offer good value, as their market price is often lower than unrestricted properties.
What Is a Restrictive Covenant?
A restrictive covenant is a legal agreement that limits what you can do with a property. These covenants can be attached to the property itself and often stay in place even after it changes ownership. Common restrictive covenants include:
- Building restrictions: Preventing you from making certain types of alterations or building new structures.
- Land use restrictions: Limiting how the land can be used, such as prohibiting commercial activities.
- Preservation requirements: Requiring you to maintain certain features of the property, such as keeping a historic building in good repair.
If you’re buying a property with a restrictive covenant, it’s important to fully understand the limitations. Breaching a covenant can lead to legal action, and in some cases, may require you to undo work or pay damages.
Overage Clauses: What You Need to Know
An overage clause is a condition in a property sale that requires the buyer to pay the seller a percentage of any increase in the property’s value if certain events occur in the future. This is often triggered by events like obtaining planning permission for development or selling the property for more than a set amount.
For example, if you buy a piece of land and later receive planning permission to build houses on it, the seller may be entitled to a percentage of the increase in value due to that planning permission. Overage clauses are usually time-limited, but the specific terms can vary, so it’s essential to carefully review any clause before agreeing to the purchase.
How These Restrictions Affect Your Mortgage
Properties with agricultural ties, restrictive covenants, or overage clauses can complicate the mortgage process. Lenders may be cautious about offering loans on properties with these restrictions because they affect the property’s value and resale potential. You might need to provide a larger deposit, and in some cases, specialist lenders may be required.
Tips for Buyers
- Seek expert advice: Always consult a solicitor who specialises in property law to ensure you fully understand any restrictions or obligations attached to the property.
- Consider long-term plans: If you plan to develop or sell the property in the future, restrictions like covenants and overage clauses could limit your options or require additional payments.
- Specialist lenders: If you’re looking at properties with agricultural ties or overage clauses, speak to a mortgage broker who can connect you with lenders familiar with these types of purchases.
Disclaimer:
This article is for general guidance purposes only and does not constitute legal, financial, or professional advice. Mortgage products and their terms can vary, and it is important to seek advice from a qualified, regulated professional who can assess your individual circumstances. Please ensure you consider your unique needs before making any financial decisions.
While every effort is made to ensure that the information provided on this blog is accurate and up-to-date, we do not guarantee its completeness or accuracy. The mortgage market can change rapidly, and the information on this blog may become outdated. We recommend verifying any information before acting on it and seeking tailored advice.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
