Restrictive covenants, what property buyers need to know

Picture this; you have had your offer accepted and the conveyancing is progressing smoothly, but before exchange of contracts, your solicitor tells you that the property you are buying is subject to a restrictive covenant.

‘That scenario is more common than you might think,’ admits Louise Davis, Senior Associate and Head of Residential Property in Malton. ‘It is important to be aware of any adverse title issues, and our pre-contract searches and enquiries are designed to reveal these. A restrictive covenant may sound worrying but, in most cases, it should not derail your purchase.’

Here she answers some of the most frequently asked questions about restrictive covenants.

What is a restrictive covenant?

A restrictive covenant is a restriction on the use of one plot of land for the benefit of another.

For example, a farmer who sells part of a field to a neighbouring homeowner (so they can extend their garden) may require the homeowner to promise not to build on that land.

The original agreement was between the seller and the buyer: the farmer and the homeowner. The restriction though attaches to the land, so it will also apply to future owners provided it meets certain criteria. In this example, if the buyer, or any future homeowner, builds on that land they will breach the covenant. The farmer, or their successor, would have the right to go to court to ask for an order for them to stop.

What sort of things do restrictive covenants prevent?

Restrictive covenants can cover a wide range of uses. For example, they may prevent:

• building or building without the consent of the adjoining landowner;
• carrying out a business or trade from the property;
• using the property other than as a single residential dwelling;
• making alterations or additions to the original property or doing so without the consent of a neighbouring landowner; or
• keeping a caravan, boat, trailer or trade vehicle on your drive.

Many restrictive covenants were created a long time ago, so they can appear strange today. For example, you still sometimes find covenants against:

• keeping pigs, poultry, or other livestock;
• using the property as an alehouse or laundry; or
• hanging washing outside.

Others can be quite specific. For example, on a modern estate, the developers may seek to maintain a certain uniformity by including covenants against installing satellite dishes or fencing around front gardens.

The restriction will not affect me personally, so should I be concerned?

This depends. For example, you may think a restriction against building does not affect you if you have no plans to build. However, there are three things to consider:

• the impact on the property’s value;
• whether there are any historic breaches, as the person with the benefit of the covenant could take enforcement action against you and in a worst-case scenario, this could mean having to remove any existing buildings; and
• while the restriction may not affect you personally, it could influence future would-be buyers who see the space to build an extension as an attractive feature of your property.

On the other hand some covenants, such as the one against using the property as an alehouse, are unlikely to cause you issues. It is important to consider each case on its individual merits.

The restrictive covenant is very old, is it still enforceable?

A restrictive covenant runs with the land, affecting successive owners. It will not cease to be enforceable just because it was created a long time ago.

However, the covenant may be unenforceable for another reason. For example, where the seller failed to observe the relevant registration formalities. In addition, a breach of covenant which has continued, unchallenged, for more than 20 years, is unlikely to be enforceable in practice; the court is likely to consider the party with the benefit of the covenant to have acquiesced.

As part of their title investigations, your solicitor will look more closely at the circumstances surrounding the covenant. For example, they may ask the seller for confirmation they are not aware of anyone seeking to enforce it. This allows you to assess any residual risk and whether you need to take any additional action.

There has been a breach of restrictive covenant, what should I do?

Your solicitor can advise you of your best course of action. Even if the breach is relatively recent, it is usually possible to obtain insurance against the risk of enforcement action or the decrease in your property value as a result. This can often be the most pragmatic solution; your solicitor may even be able to negotiate for the seller to pay for the policy. The cost will depend on the value of the property but is usually a couple of hundred pounds.

Very occasionally though, you may need to consider other options. For example, insurance cover may not be available if someone has tried to rely on the covenant in the past. In this case, you could try negotiating a release from the restrictive covenant. However, establishing the identity of all the benefiting parties can often prove difficult. Moreover, this requires careful handling so as not to precipitate enforcement action or otherwise prejudice your position.

Alternatively, it may be possible to apply to the Lands Tribunal to discharge or modify the restrictive covenant. You would need to satisfy one of four specific grounds, for example, that the covenant is obsolete. You would also need to factor in the time and cost this would take. However, there are advantages to this approach, particularly if you plan on developing the land.

Does it make any difference if I am buying with a mortgage?

Yes. If you are taking out a mortgage, you must also consider your lender’s requirements. These will vary depending on your provider, and your solicitor will be able to clarify this. Usually, your lender will require confirmation that any restrictive covenant is not enforceable or for an insurance policy to be in place.

How we can help

For further information about how we can help with your next properrty purchase, please contact Louise Davis in the Residential Property team on York 01904 716000, Wetherby 01937 583210 or Malton 01653 692247 or email louise.davis@warekay.co.uk.