I dont understand the wording in my Lease Covenants

[i.dan]

So my Flat's Lease contains a restrictive covenant. It is a pre-emption clause, similar to a Right of First Refusal. The restriction is also referred to on the Title Deed as a Form N type Restriction.

The wording of all of which seems vague or open to various interpretations (to my ignorant mind).

Can you help to explain what these mean. -

A

The Schedule for the Restriction is introduced by

Schedule 9.

Provisions on Sale by the Tenant

1. Definitions and Interpretations
1.3 'the property' means the whole of the property and not part only.

Do I interpret that as meaning the restriction does not apply in the event of part of the equity being transferred between existing joint owners? For example in the event of separation, or in the event of a new joint owner being added to the property.

Or given that a transfer requires a TR1 (transfer of the whole) that necessarily means the whole property, regardless of whether it is part of the Equity?

For what it is worth the Freehold contains a restriction that the number of flats allowed is limited to the amount there is. (flats cannot be divided)

B

From the Lease

3. The Tenant agrees and covenants with the Landlord

3.32 Not to sell 'the property' except in accordance with the provisions of (the restriction schedule), but that this restriction shall not apply or be binding on a mortgagee in possession.

but in the Restriction Schedule 9.

2. The Tenants covenants with the .. Managers ... that she will not ... dispose of 'the Property' otherwise than by a Mortgage of Charge) unless ... etc.

Does this mean simply that a mortgage provider can easily repossess the property?
Or does it mean that if there is a mortgage on the property the pre-emption clause is waived?

Any clarity much appreciated.

D

[atticus]

1. You have not given the wording of the restriction so I cannot tell you what that wording means. The best I can say is that most likely this will not affect transfers of equity between joint beneficial owners.

2. A mortgagee may enforce its rights. Otherwise the property would be unmortgageable.

[i.dan]

1. This will not affect transfers of equity between joint beneficial owners.

2. A mortgagee may enforce its rights. Otherwise the property would be unmortgageable.

The Land Registry have asked for a Certificate from The Managers, prior to registering the Transfer of Equity (which was applied for using TR1). Because the Title notes that a restriction on any 'disposition' requires such a certificate (that the provisions of the Lease have been complied with etc) to be provided by the Managers of the Freehold, whereas the Lease is worded as above.

Is it a Disposition = Y
Is it a Sale = yes and no
Is it a sale of the whole property = N

Neither the Lease or the Title state the restriction does not apply in the event of Transfer of Equity.

My worry is that, while this drags on. My ex-partner will remain a joint Legal owner of the Estate, but with zero equity as she has been paid for her shares.
That risks complications in the event of death etc prior to this being resolved.

[atticus]

Please read my edited post. Without sight of the wording - presumably the Land Registry has had that advantage - I can say no more.

[i.dan]

1. You have not given the wording of the restriction so I cannot tell you what that wording means. The best I can say is that most likely this will not affect transfers of equity between joint beneficial owners.

2. A mortgagee may enforce its rights. Otherwise the property would be unmortgageable.

Reference to the Restriction on Title -


In The Title Deeds

2. (19.12.2013) RESTRICTION: No disposition of the registered estate other than a charge by the proprietor of the registered estate is to be registered without a certificate signed by (The Company) or its successors in title of the management of the building that the provisions of the Lease dated XXXXXX referred to in the Property Register have been complied with.



In the Lease.

3 The Tenant agrees and covenants with the Landlord

3.32 NOT to sell the property except in accordance with the provisions of the 9th Schedule and the Offer letter Template of the 10th Schedule of this Lease (and for the avoidance of doubt it is agreed and declared that 9 & 10 of this Lease do not apply or be binding on a mortgagee in possession)


NINTH SCHEDULE (9th Schedule)

Provisions on Sale by the Tenant.

(Definitions)
1.3 ‘the Property’ means the whole of the property and not part only

2. The Tenant covenants with the Landlord and as a separate covenant with the managers for herself and her successors in title that she will not at any time sell or otherwise dispose of the Property (otherwise than by way of a Mortgage of Charge) unless she shall have first offered the Managers by service of the Offer Notice the opportunity of purchasing the Property in accordance with the terms hereinafter contained.

[atticus]

Isn't the simplest thing to get that certificate?

[i.dan]

Isn't the simplest thing to get that certificate?

Yes, you'd think so wouldn't you..

In reality there are issues with the management company Directors.
Our property's Company Directors are granted, by a literal interpretation of the articles, complete power of control over the management of the Freehold company, including preventing any change in the board of Directors. Obviously those powers are contained by the covenants of the Lease. So, interpreting what the Lease means is all the more important.

I am a shareholder of the company. That does not give me a vote at ordinary meetings.

I think the problem is there is a mismatch between the wording in -

1. the Title Restriction: where it states all dispositions trigger the restriction.

2. and the Lease in which it is said by 1.3 of the (interpretations) of the Restriction clause, that only dispositions of the whole property trigger the restriction.

I think common sense would suggest that 2. is correct. But I don't think that law prioritises common sense,or common understandings over a factual reading of the documents (the articles, the Title Deed and the Lease), not to mention the shareholders agreement (though we dont have one).

And ultimately, what the documents SAY legally is what I'm unsure of.

What happens when a the property documents are unclear?
Or when the restriction described in the Title is in some way different to the details of that restriction.
Which one takes priority?
Especially in this instance where the Directors are acting with (in my opinion) unfairness and prejudice, but in the spirit of sanity I cannot see an unfair prejudice claim being anything but an expensive hassle of what will essentially be an exercise in 'he said, she said..'