LEGAL
Restrictive Covenants
Legal expert, Graham Dorman explores what they mean for buyers, sellers and tenants.
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Restrictive Covenant is an obligation placed upon a property owner whereby in return for the transfer or lease of property to him, he agrees to do, or not to do, certain acts for the benefit of the land of another. Many freehold titles will be affected in some way by restrictive covenants, and certainly all
leasehold titles, and the interpretation of these covenants and their enforceability, has exercised the minds of property lawyers and the courts for generations. Property lawyers aided by statute, court decisions and in recent years, the insurance industry, now have an array of weapons at their disposal to advise the client upon the enforceability and the discharge of such covenants. On the other hand, this knowledge helps to ensure that lawyers can draft new restrictive covenants and ensure (so far as they can) that they will be enforceable in the future.
CONSIDERATIONS FOR BUYERS AND SELLERS As part of the conveyancing process a buyer of property will be advised by his solicitor of the existence of any restrictive covenants adversely affecting the property. These can impact upon the
property in many ways, common examples are: A restriction not to build or alter without consent A restriction not to use the property for certain purposes A restriction not to use garden ground for any other purpose A restriction not to cut down trees
Restrictions governing the specific height or size of buildings or extensions, types of building materials to be used, colours of paint on masonry and woodwork or even the use of balconies and communal areas are commonly imposed by developers. Common issues are restrictions on the position of trees that might block road users’ sight lines, nuisance restrictions such as the types of pets or livestock that may be kept. Often, the buyer will be content with the restrictions as they may have been imposed for the common benefit of the properties in a certain vicinity by the developer to protect the amenity or character of a neighbourhood. Indeed, in this regard the use of restrictive covenants has been important in retaining many of the most attractive features of some of the famous estates of London and elsewhere. In these instances the existence of the covenants will be attractive to the buyer as they will help protect the value of the property.
In many cases, however, the restrictions affect single properties or small groups of properties and can be considered a nuisance preventing the buyer from doing what he thinks he reasonably ought to be able to do as a property owner. The solicitor will advise his client upon the enforceability of the restrictions and in this regard needs to consider a number of questions:
32 MAY 2011 PROPERTYdrum
HOW OLD IS THE COVENANT? Was the benefi t of the covenant personal to he who imposed it or does it benefi t subsequent owners (does it “run with the land”) What land or property was intended to benefi t from the covenant and did the covenant accurately identify it? Has the owner of the covenant retained some land which could benefi t from it? Does the burden of the covenant affect subsequent owners? Does the covenant still have an achievable purpose or is it obsolete?
Once in possession of the answers to these questions the buyer
can be advised as to whether the covenant remains enforceable or may be enforceable. If clearly enforceable and of recent age then the buyer may be faced with needing to seek the consent of the owner of the covenant to the changes the buyer wishes to make or obtain an express release or variation of the covenant, either of which may prove costly. It is very common to find cases where there has been a breach of a covenant but it is clear that the covenant is either unenforceable or could be enforced but no action has been taken by the owner of the covenant to enforce it – perhaps a blind eye has been turned or the identity of the owner of the covenant cannot be ascertained. Nevertheless the covenant remains on the Land Register and in these cases the buyer will be advised to effect indemnity insurance from a specialist insurer and which will protect the buyer against any claims for breach of covenant that may arise in the future.
Many freehold titles and certainly all leasehold titles will be affected by restrictive covenants.’
The insurers are very careful not to expose themselves to undue risk and will thus ask the buyer’s solicitor for detailed information before they will agree to cover the risk.
A good buyer’s solicitor will ensure that the seller covers the cost of the premium. In certain circumstances a buyer may have grounds for applying
to the Lands Tribunal for the modification or discharge of a restrictive covenant. If it can be shown the covenant is obsolete due perhaps to changes in the neighbourhood or where the original purpose of the covenant cannot now be fulfilled then the Lands Tribunal may find that the covenant is no longer capable of serving its purpose and order it to be discharged or modified. The Lands Tribunal may also intervene where the covenant impedes some reasonable use of the land proposed by the buyer
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