What impact does a Covenant have on a Property?

By 28/12/2016Buying Tips
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A common question asked is “What impact does a Covenant have on a Property?”

The dictionary defines a Covenant as a rule, an agreement or a promise, creating an obligation.
In real estate it is not uncommon to find that a particular property has a covenant on the title whereby one party, (the purchaser) pledges or agrees to abide by a certain rule to the other (usually the vendor).

Positive or Restrictive Covenant

There are two different types of covenants, positive and restrictive and both covenants affect land in different ways.

positive covenant requires some form of action to be taken e.g. to erect a fence along a boundary. Positive covenants are generally a contract between the original parties to the deed imposing the covenant and do not bind future land owners. However, future owners of the land which has the benefit of a positive covenant can enforce the covenant against the original owner of the land that has the burden of the covenant.

restrictive covenant limits or prevents the use of land in a specified way to the benefit of other land. Restrictive covenants are said to run with the land. This means that the benefit and burden of the covenant relates to land itself and not to the land owner. If one of the original parties to the restrictive covenant sells their property, the covenant will remain enforceable.

Restrictive Covenants might be used in circumstances such as:-

  • Not allowing a house to be used for business purposes.
  • Not allowing non domestic animals to be kept on the property e.g. Chickens, pigs etc.
  • Not allowing building on land without consent of the party who has the benefit of the covenant.

How Restrictive Covenants affect property

The covenant imposed on one parcel of land must actually benefit the other land by protecting its value or enjoyment at the current time.

For instance, the covenant in a particular estate or subdivision may specify that you can only build in certain materials ie. brick veneer.

This then, would have a very positive affect on the neighbourhood and help to protect values. Other covenants might specify no mining or quarrying or perhaps that only one dwelling can be built on that particular piece of land. Should you wish to have a covenant removed there is an established and often expensive procedure.

For a restrictive covenant to be enforceable a buyer must have notice of it. It must:

  • Be registered in the title to the property at HM Land Registry (or as a Land Charge if the title is unregistered.)
  • The covenant must not be too uncertain or ambiguous, be prohibited by competition law or be contrary to public policy

What happens if a Restrictive Covenant is breached?

If a restrictive covenant has been breached (or there is a threat of a breach) the usual remedy sought is that of an injunction to stop the breach (or threat).

The Court also has the power to award damages in lieu of an injunction. There are two types of damages that can be awarded:

  • Compensatory damages to reflect the diminution in the value of the benefited land by reason of the breach
  • Damages awarded in lieu of an injunction

What can I do about a Restrictive Covenant?

There are a number of ways to remove the burden imposed on a property through a restrictive covenant.

One option is to seek a release from the party who has the benefit of the restrictive covenant. The party with the benefit may be unwilling to release the covenant and compensation may be required.

Alternatively, You may seek a review by the Lands Chamber of the Upper Tribunal (previously the Lands Tribunal) whom have jurisdiction to discharge or to modify a restrictive (but not a positive) covenant.

If you believe that your existing property is subject to a restrictive covenant and you want advice on the meaning or enforceability of that covenant, we recommend you seek further legal advice from your solicitor or conveyancer.

If you would like more information please feel free to contact me.

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Paul Basso

Author Paul Basso

Established in 2000, First National Basso is a business based on transparency, honesty, personal service and trust. With a commitment to innovation, First National Basso has continually evolved and grown to become one of the longest running and most trusted real estate teams on the Mornington Peninsula.

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