Restrictive Covenants: A Guide

When you finally complete on the purchase of your new home, you may think that is in end to the legal process. You own your own home and can do what you like now, right? If your home is subject to a restrictive covenant then you can think again.

These legally binding conditions, written into the purchase contract and/or title deeds could prevent homeowners from any number of activities including extending their property, selling land for development or even from running a business.

In this guide, we take a look at what restrictive covenants are, how they could affect you and what you can do about them.

What is a Restrictive Covenant?

A restrictive covenant is a legal clause that is written into the deeds of a property or made a condition of sale which determines what the homeowner can or cannot do with either the land or the property.

They can refer to aged conditions placed on the land and/or property but may be recent stipulations.

These are legally binding conditions that may or may not have a bearing on how you wish to use your land and home.

Common examples of a restrictive convent include:

• Preventing the building of other structures on the land.
• Preventing the operation of certain (or all) trades and business on the land.
• Preventing owners from altering the property.

A restrictive covenant is a solemn oath under English Common Law that ties future owners of a property to certain conditions. Image via pxhere.

Why Are Restrictive Covenants Used?

Covenants are usually put in place to restrict future use and development of land and/or a property which may have a detrimental effect on other residents in the area. Typically, landowners would sell off parcels of land to raise cash but would include restrictions in the contract of sale to prevent the new owners from altering the area. You can find examples of older covenants where conditions of sale restrict owners from selling alcohol on the land. In such cases, the land may well have been owned by Quakers (for example) or even may have formed part of the estate of a former public house….a covenant of this kind would therefore have prevented any kind of competition. In Bournville Village (Birmingham), there are no pubs at all and none of the businesses on this former Quaker-owned land are legally allowed to serve alcohol.

In modern law, covenants are often included when homeowners sell a parcel of their land which restricts the amount of development that can occur upon it. Think for a moment if you were to sell the land at the end of your garden. It would make sense to dictate that this could only be for a single storey dwelling and not for a high-rise block of flats!

In principle, a covenant can be included on a title deed for any reason that the seller wishes but is usually in order to maintain uniformity and prevent a negative impact on the neighbourhood.

What Does a Restrictive Covenants Mean When Buying a Property?

If you have put an offer in on a house and find out during the conveyancing process that the property and/or land is subject to a restrictive covenant then there are some things you will need to consider.

Firstly, a covenant is tied to the title deeds and could therefore affect the future sale of your property. Whilst you may not be that fussed about a restriction that prevents an extension of the property, a future buyer could well be put off by it. A covenant lasts ‘in perpetuity’ which means that, unless the owner of the covenant removes it, the conditions apply forever.

If there is a covenant in place then you should instruct your solicitor to thoroughly examine the details and to provide you with all of the information relating to this condition. Certainly, before you complete the transaction, you will need to be fully aware of any conditions as, once the sale has gone through, you will be fully responsible for any breaches of the covenant.

Before proceeding with the purchase, you will need to consider whether the existence of a covenant is likely to affect the value of the property and if there is any reason which could prevent the future resale.

If the conditions are likely to affect saleability in the future then it is worth bearing in mind that some mortgage lenders will refuse to extend borrowing against the property.

Secondly, you should make enquiries about where the ‘benefit of the covenant’ lies and who is responsible for enforcing the conditions applied to the title deeds. If you can locate the beneficiaries of the covenant then there may be some possibility of having this restriction removed or changed.

Image via Pixabay.

Are All Restrictive Covenants Enforceable?

Although the age of a covenant doesn’t affect its validity, very old covenants are not always enforceable, particularly if:

• The wording is open to interpretation.
• The covenant is no longer applicable or has become historically obsolete.
• The original landowners (or, builders) cannot be traced and the covenant is considered onerous and unnecessary.

Otherwise, a restrictive covenant can, most certainly, be enforced in law and, if you are found to be in breach of these conditions then you may face legal action. In addition, if the covenant restricts development, extensions or alterations then the ‘offending work’ would have to be taken down; even if you breach a restrictive covenant unknowingly.

In cases where a covenant has been breached but the work has remained unchallenged for a period of 12 months or more then it is possible to take out Restrictive Covenant insurance which will provide indemnity cover plus legal costs if the owner of the covenant makes a claim.

This kind of insurance is often taken out by developers who proceed with building on a plot of landwhich holds a restrictive covenant but where efforts to locate the current benefactor of the clause have been unsuccessful.

If you weren’t advised of a restrictive covenant when you purchased the home then you should complain to Legal Ombudsman. If you can prove that your solicitor missed this vital information out of the conveyancing process then they could be forced to pay you compensation of up to ￡50,000.

Selling a Property with a Restrictive Covenant

If you have not breached the covenant then you should not face any particular difficulties when selling your property but the value of your home may well be affected by its conditions. This depends on the kind of covenant attached to your property and land and how relevant this is to a modern market. A home that is being marketed as suitable for renovation but which has a restrictive covenant prohibiting this is almost certainly unlikely to proceed through conveyancing without a hitch.

Image via Pixabay.

In instances such as these, it is recommended that you make your estate agent aware of the covenant as early as possible to avoid any delays at a later stage and possible collapse of the chain. You should also make your conveyancing solicitor aware of the need to draw down these details for your buyers.

In some cases, a good solicitor may be able to find fault in the way the original covenant has been drawn up and there are examples of where these conditions have been removed as a result.

If you have breached the covenant during your ownership then this may present a more convoluted process that may not be without problems. If this applies to you then you are advised to seek legal advice and determine whether the conditions you have breached are enforceable and, if so, the best way to proceed. If you do not have an indemnity policy to cover the work you have done then you may have to undo the work you have done as well as pay any legal fees and fines that may result from this action.

In some instances, retrospective consent for the works can be obtained by tracing the benefactor of the covenant.

Can a Restrictive Covenant be Removed?

It is possible to have a restrictive covenant removed but can only be done by the person who holds the benefit of the covenant. If you wish to have the covenant on your property/land removed then you will need to trace the relevant party to whom these conditions relate.

Alternatively, if you believe that the covenant is onerous then you can apply to the Lands Chamber of the Upper Tribunal to have this modified or, even, discharged. Such applications are not always successful and can take considerable time and money to achieve a positive outcome.

Restrictive covenants can only be removed via application to the Upper Tribunal. Image via Wikimedia.

Property Assistant and Buying/Selling a Property with a Restricted Covenant

Here at Property Assistant, we are no strangers to handling the sale and purchase of properties that hold restrictive covenants and we generally find that as long as communication between the buyer and seller is good then these rarely cause issues. Of course, the devil is in the detail but it is our aim to be transparent and to keep all parties duly informed along the way.

We know that our after-sales services is second to none and helping to keep communication is imperative to a smooth conveyancing process and holding a chain together.

To find out more about why we see things differently, contact us today on 0118 312 2370.

This article was first published on Property Assistant UK.