What is a Restrictive Covenant?

A restrictive covenant is a condition contained within a property’s title deeds which authorise or permit the owner from certain actions. Whilst there are very many kinds of restrictive covenants, the common types are highlighted as below:

• Prohibiting any trade or business on the land.

• Preventing the owners from making certain alterations to the property.

• Prohibiting owners from erecting any other buildings upon the land.

Why are restrictive covenants used?

In a sense, covenants have been designed to uphold a particular set of standards for all properties. Usually, housing developers and property management companies will include restrictive covenants to a Transfer Deed to prevent owners from carrying out any works which could negatively the neighbourhood or cause a property to look irregular. This is usually to avoid the fixture of items to the front of a house, parking of any non-vehicle transport such as boat or caravan, keeping livestock and refusing to maintain the garden.

Landowners also place restrictive covenants on the land which they are selling to avoid any damage to the land and it’s value.

Do restrictive covenants apply to new builds?

Restrictive covenants apply to all homes. The age of a property is not indicative of the restrictive covenants which govern it. Some restrictive covenants are very old and are no longer viewed as enforceable, legally speaking. This could be because the covenants are out-dated, vague or if the landlord can no longer be traced.

How does this affect me?

With restrictive covenants it is important to understand that they are applicable to the land and any successors in title will inherit the covenants concerning the property. When reviewing the draft contracts, your solicitor will usually flag any concerning restrictive covenants and bring them to your attention or seek clarification. It is important care is exercised as when contracts are exchanged you are contractually bound to purchase the property and inherit its covenants.

If the property you are looking to purchase does have restrictive covenants, it is important to investigate the title to enquire whose favour or benefit it is for. This in essence is the landlord who will enforce the covenants and any breaches. This may be a singular person or a delegation to another individual or company who will have day to day responsibility.

Whilst most restrictive covenants do not tend to cause major issues, it is important to  review the detriment it has on the property value. An example could be a restrictive covenant which prohibits any extensions or building work. Lenders are particularly careful about lending in such circumstances to protect their interests.

If there is a restrictive covenant which is particularly unfair, it is worth raising an enquiry for the vendors solicitors to make arrangements for it to be removed or remedied. They are likely to agree with the request as they do not wish to risk the value of the property.

What are the consequences for breaching a restrictive covenant?

If a restrictive covenant is breached, whether it be unintentionally, an order could be made for any work to be removed or apply for retrospective consent and pay the requisite fee or face legal action.

Indemnity insurance can be obtained should the current owner have been continuously breaching the covenant for a period exceeding twelve months should they have had no issues. This will protect against any enforcement for breach.

What can I do if I breached a restrictive covenant and I’m selling?

The first step we always recommend is to speak to a solicitor as a breach can be quite a trivial issue. Your solicitor will be able to review the title documents and confirm it’s enforceability and seriousness.

If there is an issue your solicitor will be able to advise you as to any potential remedies and the possibility of obtaining an indemnity insurance policy to cover liability for any further breach.

It is important to be understand that indemnity insurance is only a possibility where a restrictive covenant has been breached for a continuous period exceeding twelve months, without complaint. The policy will last and can usually be passed to any successors of the property,

Indemnity insurance can vary based on property value and is usually inexpensive compared to other insurance products as it is a one-off fee.

Can I remove a restrictive covenant?

If an indemnity policy is not possible, the vendors solicitors can contact the landlord to obtain either retrospective consent or request the covenant be removed. If the landlord is not agreeable, they can issue a financial penalty for the breach.

Chamber of the Upper Tribunal to modify or discharge restrictive covenants.

Whilst it is a possibility, it is a lengthy and expensive option with no guarantee.

We do not recommend to proceed with any improvements to your property knowingly breaching any restrictive covenants as it could be expensive to rectify and there is no guarantee it will be accepted.

If a restrictive covenant wasn’t disclosed by my solicitor can I take action?

If you find you now own a property with a restrictive covenant that you was not disclosed to you prior to exchange, you may have a legal remedy. Your solicitor has a duty to investigate the title and raise any covenants which may be an issue. The Ombudsmen have capped remuneration at £50,000, however, the cost of breach could cost you more. It is worth consulting with a solicitor if you had issues with your conveyancing transaction.

If you have any issues with restrictive covenants or you wish to obtain a quote, please contact us.