The Ombudsman's final decision:
Summary: Ms C complained the Council delayed in removing a restrictive covenant on a building her organisation was selling. We find the Council was not at fault. The Council did delay in sending Ms C a stage one complaint response. That was fault. It has apologised, that is a sufficient remedy for the injustice caused.
- Ms C complained the Council delayed in removing a restrictive covenant on a building her organisation was selling and went back on an earlier commitment to lift the covenant. She said in doing so the Council had blocked the sale of the building, which had already been agreed with a prospective buyer.
- She also complained the Council had failed to keep her properly informed and had failed to respond to her complaints about this matter.
- Ms C said the delay had an adverse impact because the organisation needed the funds from the sale urgently and because her organisation continued to incur costs for the upkeep of the building for an unnecessarily prolonged period. She said her dealings with the Council had caused her unnecessary stress and inconvenience.
The Ombudsman’s role and powers
- We investigate complaints of injustice caused by ‘maladministration’ and ‘service failure’. I have used the word ‘fault’ to refer to these. We cannot question whether a council’s decision is right or wrong simply because the complainant disagrees with it. We must consider whether there was fault in the way the decision was reached. (Local Government Act 1974, section 34(3), as amended)
- If we are satisfied with a council’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(i), as amended)
How I considered this complaint
- I read the complaint correspondence provided by Ms C.
- I made enquiries of the Council and considered its response. That included emails between the solicitors representing the different parties and copies of the overage agreement.
- Ms C and the Council had an opportunity to comment on my draft decision. I considered any comments received before making a final decision.
What I found
- Restrictive covenants are binding conditions that are written into a property’s deeds or contract by a developer or seller to determine what the purchaser can or can not do with the property following sale.
- These are used when land or property is sold. They are an agreement the buyer will pay extra money on top of the original purchase price if certain events happen. An example of this is if a buyer increased the value of land they had bought by obtaining planning permission for it.
- In the early 1970’s, the Council sold a plot of land with a restrictive covenant on it to the organisation Ms C works for. The covenant stated the site could only be used for certain purposes and for activities closely related to those purposes.
- The organisation decided to stop using the building in 2014. It decided to sell the building and to use the funds to refurbish another building it owned. However, it struggled to find a buyer because of the restrictive covenant. In 2018 a potential buyer (the Buyer) expressed an interest in buying the building.
- The Council appointed Officer A to deal with the sale of the building. Between September 2018 and March 2019 there were discussions with Ms C about the covenant. These discussions included the Council fully removing the covenant for a fee of £25000; or partially removing it for £15000. That would mean the Council retained some control over the site following the sale.
- In April 2019, Officer A prepared a report for the Council outlining different proposals for dealing with the covenant. In that report it said the organisation had agreed to pay the Council £15000 for the partial release of the restrictive covenant. However, the Buyer wanted full release of the covenant. The Council’s Director of Place decided not to proceed on that basis as it did not protect the Council’s interests.
- Following that, the case records show Officer A spoke with Ms C and discussed an overage agreement; that was agreed by the Director of Place. The Council contacted the Buyer’s and Seller’s solicitors about the overage agreement. The Council received confirmation that all parties agreed with the overage proposal at the end of May 2019.
- Officer A prepared a report for the Executive Cabinet Member meeting on 9 July, for formal Council approval. Internal emails indicate that was the next available meeting after the terms were agreed. The Council was in contact with the Seller’s solicitor about this.
- The Council’s records show the proposals were not considered at the Cabinet meeting; therefore, on 18 July, the Director of Place approved the proposals under delegated powers.
- The case records show the Council issued instructions to the Buyer’s solicitor at the start of August 2018 however, there was some discrepancy about the terms of sale and overage agreement. The Council’s legal team required greater clarity about the overage terms. Between August 2019 and December 2019, the Council’s, Buyer’s and Seller’s solicitors negotiated about the wording of the overage agreement and payment of fees. Ms C met with the Council in October 2019 to discuss the progress of the sale. The sale completed in December 2019.
Ms C’s complaint to the Council
- Ms C contacted her Member of Parliament (MP) in April 2019, July and October about the sale of the Church. The Council responded to those MP requests.
- Ms C complained to the Council herself in July 2019. She said the Council had agreed to lift the covenant before Easter but then refused to do so without reason.
- The Council sent a response to her MP on 24 July 2019 and copied in Ms C. It said it had agreed to release the restrictive covenants and set out the proposed overage agreement. It said it was issuing instructions to the Council’s solicitors to complete the necessary legal formalities. It did not respond to Ms C’s complaints about delays and the earlier agreement.
- On 17 September 2019, Ms C chased the Council for a response to her complaint. She complained further at the start of October 2019. In addition to the delays, she said the Council did not want to proceed with the sale as it had alternative plans for the site.
- The Council provided a stage two response on 30 October 2019. It said there were ‘protracted negotiations’ about the sale of the site and a change in person dealing with the matter had caused further delay. It said it was a complex matter and it had tried to resolve as fast as possible. It said the Council supported the sale of the site and as part of the process had tried to protect the commercial interest of the Council. It gave Ms C the right of appeal if she remained unhappy.
- Ms C appealed the Council’s decision. She said the Council had agreed to remove the covenant for £25000 and had backtracked on its word; she said the delay in removing the covenant meant the organisation had had to reduce the price of the building and had resulted in the organisation having ongoing maintenance costs it could not afford.
- In its response the Council said:
- Although there were initial negotiations between Ms C and Officer A; they did not have the authority to release or vary the covenant. They were required to gather all relevant information and make a recommendation to the Council’s Director. The Director did not agree with the initial recommendation therefore further negotiations were needed.
- In commercial transactions Council Officers’ responsibilities lie with the Council and not other parties. Therefore, Officers had the duty to obtain best value for the Council. It said that any delays were necessary to ensure the Council met its legal duties.
- The sale of the building was a commercial matter and the Council could not be held responsible for any third-party costs whilst negotiations were ongoing or any financial loss as result of the Buyer negotiating a lower price.
- It accepted it had delayed in sending a stage one response until October 2019. It noted she had been copied into the response sent to her MP in July, who had contacted the Council at the same time, however it was not clear that was a stage one complaint response. It apologised and confirmed it would provide staff with further training.
- It disagreed its communication with her was poor. It said the Council had communicated with the Buyer’s and the Seller’s solicitors and it would have expected the solicitor for each party to update their clients.
- Ms C states the Council initially agreed to remove the covenant for a fee of £25000, but the reneged on that offer. That agreement was not made by an Officer with the authority to make that decision. The Council’s Director for Place rejected that proposal. The Council was entitled to make that decision. The Council was not at fault.
- From April 2019 to December 2019, the case records demonstrate ongoing communication between the Council and the Buyer’s and Seller’s solicitors. There is no evidence the Council had alternative plans for the site and, the emails indicate it wanted to act swiftly to resolve the matter. However, there were multiple amendments to the overage agreement and associated fees that needed agreement from all parties’ solicitors. The Council was not at fault.
- Although the Executive Member Committee failed to consider the proposal for the overage agreement on the 9 July; the Director for Place used delegated authority to agree to the proposals on 18 July 2019. The Council did not delay in that decision making. The Council was not at fault.
- The Council has accepted it delayed in sending a stage one complaint response in July 2019, and that it should have made it clear, that the response sent to her MP on 24 July was the complaint response. In addition, that response did not address the complaints Ms C made to the Council about delays. Failure to respond to all aspects of the stage one complaint was fault. That meant Ms C did not get a full response to her complaint until October 2020. The Council has apologised for its complaint handling; that is a sufficient remedy for the injustice caused.
- Ms C complained the Council had failed to communicate in a timely manner and only contacted her when she complained. Once Ms C had agreed in principle to the overage agreement in April 2019, the Council’s primary communication was with the Buyer’s and Seller’s solicitors. That continued throughout the ongoing negotiations. We would have expected the Seller’s solicitor to keep Ms C informed of progress, not the Council. The Council was not at fault.
- The Council was not at fault for delays in removing the covenant from a building. There was fault in its handling of the complaint. The Council has apologised for this. Therefore, I have completed my investigation.
Investigator's decision on behalf of the Ombudsman