Occupancy restricted property / Covenants
Section 106 planning agreements / restrictive covenants
Intended to regulate development or proposed use of property.
Range is varied but may include:
- Limiting occupation to a certain category of occupant - local residents, first time buyers, specified age requirement, specified employment types.
- Restricting use of property - tied to agricultural use, restricting residential occupation to certain time limits, for example, 10 months of the year.
The impact on acceptability depends upon the impact of the restriction. There may be a strong local demand for the property from qualifying purchasers.
Broadly restrictions that mean a property must be used for agricultural use will be unacceptable.
The valuer will determine the impact on the suitability of the property for lending and the conveyancer will determine whether the purchaser / owner complies with the obligation, advising the bank of any issues that may impact the lending.
Where the restriction limits the time a property can be occupied this will only be acceptable for holiday homes / second home loans and subject to the valuer confirming the property is suitable for lending.
The following restrictive covenants are unacceptable in all cases:
- Property restricted to age of occupier (Over 55s)
- Time usage of dwelling ( E.g. – Can only be used 11 months out of the year)
- Property restricted to agriculture use including Fishery, Equestrian, forestry.
- Purchaser(s) must be living and/or working in a small geographical area (e.g. specific parish), which is not in the list of acceptable areas
- Property ownership restricted to specified age group
- Limit on mortgage payment as a proportion of income (if the valuer is aware)
- Fixed capital values E.g. The property cannot be sold for more than the original purchase price
- Any BTL property with occupancy restrictions
- Help to buy applications subject to section 106/75 agreements.
Resale Price Covenant Schemes
Resale Price Covenant Schemes can be supported by TSB subject to specific terms being met. Therefore, if a case relates to a Resale Price Covenant Scheme, please request a copy of the latest TSB Affordable Housing Scheme Guidance Notes and confirm with the conveyancer that the scheme meets these specific terms prior to a mortgage offer being generated.