6th November 2017
What is a restrictive covenant?
What is a restrictive covenant?
A restrictive covenant is a contractual obligation attached to the land, regulating what the owner can or can’t do to it.
A covenant has two parties – the party who is restricted by the covenant, and the party who benefits from the restriction (the beneficiary). Covenants usually arise in a contractual agreement between the buyer and seller of the land. So long as the covenant is correctly worded to ‘attach’ to the land itself, it continues to apply if the land is sold on, unless it has been modified or discharged. Covenants are legally binding and enforceable by the court.
What might a covenant restrict?
A covenant can restrict the appearance of a development, for example its height, size or quantity, or it can restrict the activity that takes place on a plot, such as allowing only agricultural or residential use.
It’s important to know that restrictive covenants aren’t considered during applications for planning permission, and so planning permission does not overrule a restrictive covenant.
What happens if you breach a restrictive covenant?
If you breach a restrictive covenant, its terms can be enforced by the court if a beneficiary of the covenant objects to the breach. The court will make a decision on the matter and may grant an injunction that upholds the covenant, prohibits changes being made or forces any completed changes or building works to be reversed or demolished. Alternatively, the court may order you to pay damages to the beneficiary of the restrictive covenant.
You can take out indemnity insurance to protect yourself against attempts to enforce a covenant, but not if an issue surrounding the enforcement of the covenant has already been raised
How long do restrictive covenants last?
If the covenant is attached to the land it is said to ‘run with the land’. That means it continues to apply to the land regardless of whether either the burdened or neighbouring lands have been sold on. This means a restrictive covenant can last indefinitely even if its purpose now seems obsolete.
What the beneficiary needs to prove
To enforce a covenant, particularly against a successive land owner, the beneficiary will need to prove that the covenant ‘touches and concerns’ their land, i.e. it must affect their land and relate to its use, value or nature. If they can show the value of their land would be negatively affected by removing the covenant, they should be able to enforce it.
They must also prove that they are the owner of the land, that they are the beneficiary of the restrictive covenant, that the covenant was registered correctly and devised to protect the land, and that its burden was intended to be carried forward with the land.
How can I remove or modify a restrictive covenant?
If you want to modify or discharge a covenant, your first course of action is to check whether the covenant is actually enforceable by examining its terms and determining its full scope. Consider whether the covenant definitely applies to what you are doing and if there is an identifiable beneficiary of the covenant.
Finding the covenant will depend on if your land is registered or unregistered. If the land is registered, you should find the title deed via the HM Land Registry. If it is unregistered, the covenant will be registered as a D2 land charge, visible on the Land Charges’ register.
Once you have established that the covenant is restrictive, you should contact its beneficiary and lay out your argument for modifying or discharging it. If you intend to develop the land and continue doing so without an agreement in place, the beneficiary could seek an injunction that stops or reverses your work after you’ve already invested in architects’ fees, planning costs and building work. You may therefore need to negotiate in order to reach a private agreement or settlement.
If this can’t be done, we always recommend embarking on mediation or other forms of alternative dispute resolution (ADR) before initiating litigation, as court proceedings can be costly and time consuming. Speaking to a solicitor early can help pave the way for negotiations and ADR, and ensures that your case is properly put forward to the beneficiary of the restrictive covenant.
Heading to court
If ADR fails, you can seek a declaration from the court that the covenant is unenforceable – letting the court decide. Or you can go to the Upper Tribunal (Lands Chamber) and ask them to consider modifying or discharging the covenant. The Tribunal will examine whether it is in the public interest, review the covenant’s rationale and validity, and assess whether there are grounds to develop or modify the land use.
As some covenants are very historic, the character of the plot and surrounding land may have changed so much that there isn’t any value in allowing the beneficiary to enforce the covenant. For example, if flats surround a single plot of land which has a restrictive covenant on it for agricultural use only, the Tribunal may decide it is in the public interest to allow residential development of the land, as the nature of the area has changed.
If the Tribunal does modify or discharge the covenant, it will usually order that you pay a sum of money to the beneficiary. This will be a percentage (typically around 30%) of the increase in the land’s value that has occurred as a result of lifting the covenant.
As the process for discharging restrictive covenants can have significant financial consequences, it is always advisable to involve a lawyer from the beginning, so that you have a legal view on the covenant’s enforceability and you fully understand your negotiating position.
If you’d like to discuss any of the issues covered here, or receive advice on restrictive covenants, please get in touch with Matthew Smith on 0117 9309518.