Restrictive covenants on property

Whether you're buying or selling property, restrictive covenants are always something to be mindful of. But what are restrictive covenants, and how do they affect property transactions?

What are restrictive covenants on property?

Restrictive covenants (or negative covenants) are binding legal clauses in contracts that prevent property owners from doing certain actions. They can be simple or complex, with penalties levied against the buyer if they fail to comply. Restrictive covenants are the direct opposite of positive covenants, which are clauses in contracts that require certain actions to be taken.

Why are they used?

There's a lot of different reasons why you might find a restrictive covenant in the deed of a property contract - let's go through some common ones.

To preserve character and value

If you live in a protected building or area, your contract may include a restrictive covenant that prevents any modifications to your property. This is often an attempt by the seller, or council, to preserve an area of natural beauty or architectural significance. For example, Hyndland's (Glasgow) tenement conservation area prevents its iconic apartments from being modified in order to protect their unique appearance.

To prevent noise or nuisance

Some restrictive covenants prevent commercial activities from taking place on land or property. This can result in features such as additional parking being prohibited. These covenants are largely to ensure residential areas are free from any noise or nuisance associated with commercial properties.

To preserve traditional use of the land

To ensure a feature or aspect of the property remains intact, some homesellers draft restrictive covenants into contracts. These usually prevent certain structures, like extensions, from being developed.

Common restrictive covenants

Restrictive covenants are fairly common, but what clauses are you likely to come across in property deeds contracts?

Don't make any developments without consent

Some properties with long leases are subject to covenants that prevent significant developments without written consent from the beneficiary.

Don't use the property for commercial purposes

As mentioned earlier in the article, deeds to residential properties often include covenants that prevent them from being turned into commercial businesses. These are designed to mitigate noise or nuisance in the area.

Don't paint your front door a certain colour

You can find restrictive covenants in the most unexpected places. Gated communities for example, are likely to have covenants that ensure a certain colour or style is maintained to preserve their collective identity.

Don't build walls or fences above a certain height

The boundaries between properties are a typical form of dispute between neighbours, and restrictive covenants often play a role in validating one party's claims.

What happens if I breach a restrictive covenant?

If you breach the terms of a restrictive covenant, the other party has the right to take you to court. If they can prove you’ve breached the covenant's terms, you will be required to pay a fine and deconstruct any developments you have carried out. You will also be responsible for the other party's legal expenses.

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

It depends on how long ago you breached the restrictive covenant, and whether the beneficiary of the restrictive covenant is aware of the changes you've made. For example, if you breached a covenant for over 12 months without challenge, and then decide to sell, you should be able to get insurance to protect what you have built.

Sometimes, restrictive covenants can be removed through payment to the previous owner or seller. An accepted payment should allow you to sell your home without fear of a claim being made. However, the terms of this one-off payment must be outlined by the beneficiary.

Restrictive covenant indemnity insurance

This type of insurance policy covers a variety of matters linked to breach claims. These include the legal costs of defending a claim, a consequent reduction in market value, and the costs in settling the claim.

The cost of insurance depends on the nature of the breach and the value of the property. The cost of a large development that breaches a restrictive covenant will be far greater than the cost of a continuing breach that does not change the function of the property.

Insurance providers are less likely to ensure a property that doesn't have planning permission. This is because the planning process is very public, and some neighbours will review their title deeds to see if there is anything they can use to prevent the proposed development from going ahead.

Remember: Restrictive covenant insurance does not prevent a breach claim from being made. Rather, it covers the costs of a fallout resulting from a claim.

When is a restrictive covenant not enforceable?

While you should always look out for these clauses, there are scenarios where it's impossible for a beneficiaries to enforce covenants:

• If the property or land has come back into common ownership (some time after the restrictive covenant was imposed), the covenant will no longer have any effect, unless it was reimposed when the land was split.
• If the property or land changed hands when the covenant wasn't registered, it can't be enforced against the new owners (provided they weren't aware of its existence).
• If the restrictive covenant is deemed too restrictive by the courts, it will be rendered obsolete.

Remember: You should always seek legal advice if you think that you have breached a restrictive covenant.

Can I remove a covenant from my property?

You might be able to speak to the vendor or successor in title about the potential of removing a covenant from your property, but there are no guarantees. If the beneficiary of the covenant is unknown, or the covenant cannot be enforced, or it is simply unreasonable, you may be able to get it removed by applying at the Upper Tribunal.

How long does a covenant last?

Restrictive covenants are said to 'run with the land', which means they don't have an expiry date. As a result, they can continue long after their original purpose was rendered obsolete. An example of such a covenant can be found in Bath's Rugby Club. The club holds a long lease on their Rec, but the owners have been unable to make any improvements due to a 1922 restrictive covenant that prevents further developments.

Though varying from case to case, a breach of covenant is generally more difficult to enforce after a period of 20 years. This means the more time that passes between a breach and a claim, the less likely the offender will be liable for charges.

How do I find a restrictive covenant on my property?

You should have been made aware of any covenants affecting your property during the conveyancing process when you first purchased your home. If you can't remember, you can check by looking in the Charges Register of your title deeds. It's good practice to double-check for restrictive covenants before making any alterations to your home.

Should you buy a house with a restrictive covenant?

Ultimately, it's up to you whether you purchase a property with a restrictive covenant or not. Some covenants, like those restricting door colour, might not be the worst thing in the world. If the covenant is particularly restrictive (prohibits extensions or future developments), you may want to reconsider your purchase.

While covenants are probably the last thing you'll think of during a property transaction, you should ensure you're fully aware of any before purchasing a house. One of the responsibilities of your solicitor is to locate and highlight covenants during the conveyancing process - if they don't, you can claim legal compensation.