18 March 2010

How restrictive is your covenant?

Late last year I made a Freedom of Information enquiry of the Valuation Office in order to establish the basis on which they made their valuation of the Tin Dunny (at the request of Somerton Town Council) prior to it being bought by Somerton Town Council in September of 2008. The documentation provided to the Valuation Office by Somerton Town Council is remarkably sketchy and the result of this is that the Valuation Office's valuation is made with specific limitations. Reproduced below are three extracts from page 2 of the DV's report:







When you consider these statements, and if you know the facts behind them, you immediately see some problems. In the first extract the DV states that, with regard to restrictive covenants, there are none of which he knows (or of which he was informed). But the fact is that there are two restrictive covenants held over Unit 8 Cary Court - a dominant covenant held by the vendors of the site in 2001 (IG, GC and AJ Chant) and a secondary covenant held (but waived temporarily during Somerton Town Council's ownership) by Mr A H Canvin. Whilst the secondary covenant has been waived temporarily, the Council breached the dominant covenant by applying for 'change of use' and implementing that 'change of use'.

In the second extract, the DV assumes that the service roads are adopted public highways maintained at public expense but the fact is that the estate roads are not adopted and public highway but are, in fact, private and believed to be controlled by Mr A H Canvin.

In the third extract, the previous two points are covered again.

Then, on page 3 of the report, the Valuer states their assumptions about the nature of the transaction.


So, what is to be made of the 'valuation' itself? Well it is fair to propose that it is seriously flawed, not through any error on the part of the Valuer but because of the lack of disclosure on the part of Somerton Town Council. The valuation was requested by the Town Clerk, obviously on the instruction of the Council and, as (ex)Cllr Canvin was a part of that Council, it is fair to assume that he was part of that instruction. So, as he certainly authored the secondary covenant, did he not have a duty to disclose the existence of the two layers of covenants? Was his involvement in the creation of the secondary covenant and his position as a Local Councillor not a conflict?

The difficulty that the covenants present is that they preclude the use of the building in anything other than 'industrial or storage use' which certainly excludes the use of the building as a community hall. So it can be sold as an industrial or storage unit, but if it is, what happens to the plush bar, the dance floor, the stage etc etc? The investment that delivered the refurbishment of the building would clearly be at risk if not a total loss.

Then the is the matter of the nature of the transaction (the 4th extract). Was it made 'at arms length'? That is certainly questionable given the fact that the sale of the Etsome Terrace land was an integral part of the transaction to buy the Tin Dunny. Was there 'proper marketing'? Well, from my own knowledge of the facts, the Tin Dunny was never advertsied 'for sale' on the open market and (ex) Cllr Canvin brought the opportunity to the attention of the Council. Not quite my idea of 'proper marketing'.

Finally, did the parties act knowledgeably, prudently and without compulsion. I can't speak for the Edgar part of the transaction but it is my own view that, were the questions posed to the old Somerton Town Council, the answers would be 'No', 'No' and 'No'.



Till next time, I'm Niall Connolly