Restrictive Covenants And Their Impact On Property

What Are Covenants?

Covenants are promises contained within a deed.  The covenant can be either positive or negative (restrictive) in nature.  They are used as a way to control the use of land and also to ensure that the land is used efficiently. A restrictive covenant restricts you from doing certain things on the property for example not to build more than one dwelling on the land in question.  A positive covenant could be a repairing obligation such as maintaining a fence or a wall.   

Restrictive covenants are usually found in the majority of title deeds.  During the buying process, it is up to the purchaser’s conveyancer to check the title documents to the land or property and to ascertain if there are any existing covenants that are still binding on the land.   Your conveyancer will be able to inspect the title deeds and depending on the circumstances, establish whether the covenant is binding on future purchasers and advise you of any restrictions on the land. 

Restrictive covenants are often found in historic title deeds and may be unenforceable because:

1. the original owner cannot be traced;
2. it may be that the wording of the covenant is ambiguous and difficult to interpret;
3. The covenant may no longer be relevant as it may inhibit the intended use of the property. A change in the character of the neighbourhood or property sometimes makes the covenant obsolete; or
4. At the time of creation of the covenant it was not protected by registration on the Land Charges Register (in the case of unregistered land) or by entry of a notice on the charges register (in registered land).  

Why Must Covenants Be Considered?

Consideration of restrictive covenants can be especially important if you are intending to either develop the land, let out the property or make alterations to it.  In these circumstances you may not only require permission from the Local Authority but you may also require consent from the original developer, or if in the case of a Leasehold property you will likely need consent from the freeholder (the person who owns the land the property is built upon).   You should check your deeds carefully to ensure that covenant consent is not required. If there is such a covenant, the necessary consent must be obtained whether or not you have obtained planning permission. 

Breach Of A Covenant?

If it is established that a covenant binds a property and the covenant has been breached then the court can award damages to the injured party or order an injunction to prevent the breach from continuing.

Dealing With Covenants

Covenants can be extinguished or modified by a deed between the parties or by application to a land tribunal.  The problem with applications to the tribunal is that they can be very costly, time consuming and there is no guarantee you will be successful. So it is often better to remove by agreement if possible. 

If it transpires that a restrictive covenant has been breached on the property you are purchasing or your plans with the land you own mean you may breach them then it may be possible to obtain indemnity insurance.  The purchaser’s conveyancer will ask the seller of the property to provide an indemnity insurance to cover against any loss sustained by the purchaser in the event of a challenge should a beneficiary attempt to enforce the covenant.   The insurer will need the conveyancer to confirm that certain conditions are met such as the breach has continued for at least 12 months and there is no evidence of enforcement action being taken. 

Summary

This is a complex area and covenants need to be considered carefully, particularly if you intend to develop land or change its use in any way.  If you would like any further advice or guidance please contact our Commercial & Agricultural Property Team.