Summary: Mr X complained about the Council demanding a higher amount from the sale of a property which he bought from it with a loan which has a legal covenant attached. The Ombudsman should not investigate this complaint. This is because the complaint concerns a legal agreement and only the courts can vary the legal terms and provisions.

The complaint

1. The complainant, whom I shall call Mr X, complains about the Council requiring him to pay 90% of any profit made on a property which he bought from it with a loan which involved a charge on the deeds. He says he was advised when he bought that the repayment would be lower.

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The Ombudsman’s role and powers

2. The law says we cannot normally investigate a complaint when someone could take the matter to court. However, we may decide to investigate if we consider it would be unreasonable to expect the person to go to court. (Local Government Act 1974, section 26(6)(c), as amended)

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How I considered this complaint

3. I have considered all the information which Mr X submitted with his complaint. I have also considered the Council’s response and Mr X has been given the opportunity to comment on the draft decision

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What I found

4. Mr X bought a property form the Council for £1 in 2014 with a loan for £30,000 from the Council to be repaid monthly. He now wishes to sell the property but has been informed by the Council that he will need to pay 90% of any profit which he has made to the Council. It says this is part of the covenant on the property which he signed when he took out the loan.
5. Mr X says he understood the repayment would be 80% of the profit and that the Council is seeking to charge him more than it agreed. We asked the Council for a copy of the charge on the property deeds. The agreement states that if Mr X sells the property before the sixth anniversary of the purchase then he must repay 90% of any profits. The sixth anniversary is in July 2020.
6. The Ombudsman cannot investigate disputes about legal contracts or covenants. Only the courts can determine any such disagreements. If Mr X wishes to challenge the terms of his loan and the charge on the property, then he would need to seek legal advice and a remedy in the courts.

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Final decision

7. The Ombudsman should not investigate this complaint. This is because the complaint concerns a legal agreement and only the courts can vary the legal terms and provisions.

Investigator’s decision on behalf of the Ombudsman

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Investigator's decision on behalf of the Ombudsman