A restrictive covenant is a binding condition written into a property’s deed or contract by a seller.
This condition will apply to all future owners and determines what they can or cannot do with the property.
These conditions can theoretically be almost anything, but often relate to whether you can change, build on, or run certain businesses from a property.
Why would you put a restrictive covenant on a property?
Often, covenants are put in place to maintain living standards for all or some of the residents local to a property. Limitations on development and commercial activities often fall into this category.
Alternatively, reasons can be more sentimental. Some covenants require things like the growing of a particular plant in the garden, or the keeping a certain book on the property.
This can be as a kind of memorial, or to ensure the continuity of a tradition.
How are homeowners affected by restrictive covenants?
Some of the common restrictive covenants which impact on homeowners are:
- Banning pets or livestock, either regarding specific animals or in general
- Disallowing certain types of, or all commercial activities
- Not allowing building on part of, or all the land
- Limitations on what can be built, be it the number of homes or the height of the buildings.
- Controls on the aesthetic appearance of any building
- Requirements to preserve scenic views
- Bans on signs or flag poles
- Bans on outbuildings and swimming pools.
- Bans on renting the property out
- Limits on the presence of caravans or tents
- Limits on the number of occupiers
- Bans on solar panels, satellite dishes and CCTV cameras
- Limits or bans on the conversion of any pre-existing buildings
- Limits to loud noises, nuisances, and other undesirable activities
Many of these restrictive covenants could reduce the value or enjoyment you can get out of a property. This is why it is particularly important your solcitors check for these when going through the conveyancing process.
The real problem is these covenants can be extremely difficult to remove.
One of the most important things to know about restrictive covenants is that they “run with the land.” This means they are applicable to all future owners of the land.
If you buy a property on which a restrictive covenant applies and then sell it on, it will still apply to the next owner. When they sell, it will apply to the owner after them, and the owner after them. Theoretically, a restrictive covenant should remain with a property forever.
When you are buying property, it is important for you to instruct your conveyancer to check for covenants, and flag them up before you complete the transaction.
If a covenant is a deal breaker, you should carefully consider your purchase, as removing it may be extremely expensive, or even potentially impossible.
Once you have completed the transaction and the property is yours on paper, you will be held accountable for any breaches.
Do restrictive covenants apply to new builds?
Most houses in new developments are subject to some restrictive covenants. These can be onerous or minimal, depending on the development.
These covenants are often intended to control the feel and aesthetics of a neighbourhood and help avoid the risk of one owner de-valuing all properties.
For example, they often prohibit things like further construction and keeping livestock, control where satellite dishes and security cameras can be placed. They could also ban the parking of caravans and boats in front of the houses.
Sometimes, these conditions are put in place by the developers as they are required conditions for the local authority to grant planning permission. At other times landowners may place covenants on land when they sell it to the developers. This is often the case if the developers are retaining some adjacent land or have a neighbour who they do not want to annoy.
Some suspect less scrupulous developers write restrictive covenants into deeds purely to secure the payments required to remove them.
It is always worth looking at the restrictive covenants which apply to a new build property and ensure you will not wish to contravene them in future before you buy it.
How do I find out about restrictive covenants?
Details about any restrictive covenants on a property are found in its title deeds.
Alternatively, they can be found in Section C of the Title Register, which is downloaded from HM Land Registry for £3.
If several covenants apply to the property, they may only be summarised in section C of the title register, the Charges Register.
When this is the case, the full details will normally be in an attached document referred to in the charges register.
What does it mean to have the benefit of a covenant?
When dealing with a restrictive covenant it is particularly important to find out where the benefit of the covenant resides.
This person or organisation (the beneficiary) is ultimately who gains from the covenant being in place. They normally obtain this status by owning a particular property, often a neighbouring one.
When dealing with leasehold property, the benefit of a restrictive covenant usually stays with the landowner.
Occasionally the benefit of the covenant will have passed on to a seemingly unrelated person or property. If this is the case, it can be easier to challenge it.
What happens if you breach a covenant?
A breach of a restrictive covenant is defined as when a property owner fails to act in accordance with its requirements.
If you breach a restrictive covenant, you can be forced to make good any work to its previous state, pay an large fee, or even face legal action.
When a breach of a restrictive covenant also breaches the terms of a lease, the leaseholder has no defence against their lease being terminated.
If you are selling a property and have found out that you have breached the terms of the covenant, you should seek legal advice immediately.
A solicitor can check the wording of a contract to see if it is enforceable. If it is, they will need to buy insurance to cover it before you sell the property.
Restrictive covenant indemnity insurance
If you have breached a covenant for longer than 12 months and have yet to receive a complaint you can purchase restrictive covenant indemnity insurance.
Once bought, these policies will protect you from the potential costs that could come about through future enforcement.
A restrictive covenant indemnity insurance policy can last in perpetuity. This means it can be passed onto future owners. This means that your property will be much easier to sell.
Who enforces a restrictive covenant on property?
The enforcement of a restrictive covenant is up to its beneficiary.
This is the person, persons or organisation who has the benefit of the covenant. They are also sometimes known as the covenantee.
A covenantee can be a private induvial, a company, or a trust. The status can be inherited or sold but is almost always attached to a particular property.
For example, often a property’s neighbours can be the beneficiaries of a restrictive covenant applying to it.
When a restrictive covenant on property is breached, the beneficiary must act quickly and take out an injunction.
An injunction forces all work breaching the covenant to stop immediately.
If your neighbour is conducting work which breaches a covenant you are the beneficiary of, you should speak to a solicitor and enforce an injunction immediately.
If you fail to do so within reasonable time, the case could end up going to the Lands Chambers of the Upper Tribunal.
This is the court chamber responsible for enforcing covenants. If a case takes too long to reach a judge, they may rule in favour of the party who breached the covenant, due to inaction on the part of the beneficiary.
Positive restrictive covenants
“Positive” restrictive covenants are clauses and conditions in a deed which specify that an action must be taken. This will usually involve spending money.
These are common with listed buildings or new build property and can involve maintaining something in a specific way. This could include mowing any lawns, building in a certain style, or using specific materials.
Normally, positive restrictions do not run with the land.
How do I remove a restrictive covenant on property?
There are a few tricks to removing restrictive covenants.
Firstly, you should check if the beneficiary can be tracked down. If they no longer exist, then the covenant is essentially unenforceable.
If, for example, the company who is the beneficiary of the covenant has shut down, or the person named in it has passed away, there can be a strong legal argument for it being obsolete.
Covenants may also be unenforceable if the offending land is not registered with HM Land Registry.
Finally, a good solicitor may be able to look closely at a covenant’s wording, and check if it is still watertight, legally speaking.
If the terms of the covenant are too ambiguous it may not be enforceable. Alternatively, the terms of it could be prohibited by competition law or contradict public policy.
Your solicitor may want to run part or all the covenant by a barrister to ensure this is the case.
Negotiating the release of a restrictive covenant on property
If a covenant looks enforceable, the best approach can often be to talk to the beneficiary and negotiate for its release.
What this will cost you generally depends on how much the beneficiary gains from the covenant. If the covenant substantially increases the value of their land, they are unlikely to want to remove it.
Generally, the goal here is to find a mutually acceptable solution. This will often involve monetary compensation.
When the reason you are attempting to remove a restrictive covenant is to allow development, offering a share of any profits can be an effective way to convince a beneficiary to go along with it.
Generally, solicitors suggest offering a 33% share in these situations.
After reaching an agreement, the beneficiary will need to sign a deed of discharge, release, or modification. This document will then be formally lodged with HM Land Registry
How to challenge a restrictive covenant
If the beneficiary refuses to cooperate you can take the case to the Lands Chamber of the Upper Tribunal. This process is governed by Section 84 of The Property Act 1925.
This court will decide if the covenant should be removed, or if it should stay in place. If the covenant is removed, they can award the beneficiary of it damages from the claimant.
In addition, the claimant is liable to pay the beneficiaries’ legal fees, no matter whether the case is won or lost.
There are several grounds which could lead to a covenant being discharged by the Tribunal. These include:
- If it is judged obsolete or irrelevant
- If it is an unjustified impediment to reasonable use or development
- If it is of insubstantial benefit to the beneficiary
- If it is within a development or neighbourhood which has notably changed since it was established
- If it is time bound, and the stated period of time has ended
- And if removing it is of no injury to residents and occupants in the immediate vicinity
Often, judges can remove covenants when changing population dynamics have made them no longer beneficial to the area. This can mean allowing sustainable urban development or removing bans on alcohol consumption.
However, if removing the covenant means disturbing a peaceful environment, the court is less likely to rule in favour of it.
Notably, the legal goal of the covenantee must be to protect an amenity, or the value of the land. If they are purely seeking financial gain the judge is likely to rule in favour of the claimant.
When the court rules for the discharge of a covenant, they have broad powers to award damages. Most will examine the potential reduction in value of property caused by the removal of the covenant and base the damages figure on this.
Generally, damages resulting from the removal of a covenant are not too substantial. If removing a covenant is likely to cause huge damage to a properties value, the court is unlikely to remove it.
Challenging a restrictive covenant in the courts is a difficult and expensive process. This generally takes at least three months and will cost thousands of pounds in damages and legal fees. And there is no certainty of the covenant being removed at the end.
Therefore, this process should only be a last resort.
What if my conveyancer misses a restrictive covenant?
It is your conveyancer’s responsibility to highlight restrictive covenants on a property when you are buying it.
If they fail to do so, you are well within your rights to go to the Legal Ombudsman. Your conveyancer could be forced to pay compensation to you.
However, if you are out of pocket more than £50,000 the Ombudsman will not be able to renumerate you. This is because this is the limit of the amount it can award.
If your conveyancer missing a covenant has caused you more than £50,000 worth of damages, you should consult with a private litigator.
In Summary
Watching out for restrictive covenants when buying property is hugely important.
You need to be sure that any that exist do not impinge on your plans for the future of the property.
This is because removing restrictive covenants can be extremely expensive, time consuming and in some cases impossible.
Has this article been helpful? Let us know by leaving a short comment below.
Leave A Comment