RESTRICTIVE COVENANTS – WHAT ARE THEY AND WHAT DO THEY MEAN FOR A BUYER?
RESTRICTIVE COVENANTS – UNDERSTANDING THEM
Restrictive covenants can take many forms, they can give a right or forbid certain actions.
If you are a looking to purchase a property when your legal team make the searches they can sometimes identify a restrictive covenant attached to the property. They are often attached to older properties that may have sold off buildings or land in the past. Also they can be a restriction from a neighbour’s land forbidding you to do a certain thing. Alternatively the property may have a right of way attached to it over a neighbouring property.
Whatever the covenant contains has legal standing. Breaching a covenant can have serious legal ramifications. Ensure, that if your legal team find any covenants you fully understand what it restricts or allows and what it entails legally. It may be that it answers the question as to why that lovely little cottage is so reasonably priced!
Once you know about the covenant then you must ask yourself does it affect the appeal of the property? If the answer is no then you can carry on with the purchase. If you are unsure then perhaps its time to chat the matter through with the vendors. For example, if it is a right if way across the land ask how often is it used? It might be very little used and of no consequence.
However, what ever information of this nature the vendor gives you ensure it is confirmed in writing between the legal teams. This gives you some protection against the vendor who is perhaps a little elastic with the truth.
WHAT IS A RESTRICTIVE COVENANT
The name itself explains that the covenant, in normal circumstances, restricts an action or requires that you allow an access, for example. It is a legal obligation which is placed upon the property owner, often by a neighbouring property owner. Some covenants can have been placed there many years ago and are no longer relevant. An example could be that the neighbour can draw water from a well on your property. If the well is no longer in existence, the restrictive covenant has no real value to the neighbour and will not cause the property owner any issues.
These covenants also continue to apply to the land and pass from owner to owner. This is known as passing with the land. They are usually written in the deeds of the property and pass on when the property is sold to someone new.
However modern day restrictive covenants can be placed on land or property by a developer. They could, after sub dividing land, limit the number of houses that can be built on that land. They could limit the size of a house to be built or, in fact anything they feel that is reasonable or relevant to the development, down to the colour of the paint used on the outside.
Legally it is the passing on of an enforceable right and/or obligation from one landowner to another. Generally these covenants restrict or forbid something such as a behaviour, for example, no keeping of pets in a block of flats. The information on a restrictive covenant can be found in the Section C Charges Register with the title deeds to a property or on the Charges Register.
WHAT HAPPENS IF A RESTRICTIVE COVENANT IS BREACHED?
Sometimes a restrictive covenant can be breached unknowingly. When buying a property this breach may come to light. For example the vendor may have added an extension and the restrictive covenant requires that they obtain the developers permission. The vendor can request permissions, for the breach, retrospectively and usually on payment of a fee and presentation of the plans to the developer, it will be granted. Alternatively if the breach took place some time ago say 12 years or more, the vendors may offer to provide restrictive covenant indemnity insurance to cover the breach. After a period of 20 years it would be difficult to enforce a breach in any event. Under the Limitation Act 1980 claims in land need to be brought to court within 12 years.
The main remedy for a breach of a restrictive covenant or the threat of it is the application to the courts for an injunction to prevent any further breaches. If an injunction is not appropriate the courts may award damages instead as an alternative to an injunction.
However before it becomes a legal issue it is perhaps better to try and resolve the matter with the owner of the restrictive covenant. Having a discussion can often clear things up before costly legal action is undertaken. You may find that you could negotiate with the owner of the restrictive covenant and have it removed. This is usually accompanied by a payment to compensation for the removal.
It is also possible to apply to the Lands Tribunal to remove a restrictive covenant. The circumstances which the tribunal may consider could be where an estate on which the restrictive covenant is placed has changed in character such that the restrictive covenants is no longer relevant. However, be warned, this is both a lengthy and costly process.
WHAT DO I DO IF A RESTRICTIVE COVENANT IS FOUND AGAINST THE PROPERTY I WANT TO BUY?
Some covenants are simple, for example, you must do certain maintenance to the property, for example paint the window frames every five years. Another popular covenant is one which prevents caravans being parked at the front of a property. Alternatively the covenant may say you can paint your house this colour but not that colour.
Sometimes a restrictive covenant can prevent a property from being used as a business, so if you want a home office and to run your business from your home, this could cause a problem. Some restrictions could prevent certain types of extensions or alterations to a property, often of an architectural nature. There may be a certain type of roofing tile that must be used or window shape or frame.
Generally, restrictive covenants give a benefit to an adjoining piece of land or neighbourhood. Developers often find that when an old estate was sold off many years previously and they try to apply for planning to build extra houses in the large gardens there are restrictions in place which prevent more than one house being built on each plot.
Before you go ahead and buy any property your legal team will raise any issues such as restrictive covenants with you. It is for you to decide whether or not you are happy with the restriction or you feel you couldn’t live with its consequences. There is sometimes a possible option to approach the owner of the covenant to see if you can both agree that the covenant can be removed from the property.
The old adage buyer beware could not be more true in respect of restrictive covenants on property.