What is a Restrictive Covenant?

When buying and selling a home, there are many different things that you may have to navigate, and that includes certain restrictions that you may have to adhere to even though you own your property, such as restrictive covenants.

What are restrictive covenants?

Restrictive covenants are legal obligations or conditions written into a property’s deeds or land registry title that dictate how the property can be used or what alterations can be made. These covenants are commonly applied to maintain a certain aesthetic, prevent alterations such as extensions, protect property values, prevent businesses from operating on the land or preserve a specific land use.

Purpose of Restrictive Covenants

Developers and original landowners often use restrictive covenants to exert control over the use and appearance of properties within a development. This may include an open-plan estate restricting the building of high fences, which would spoil the aesthetics of the estate. These restrictions aim to maintain a cohesive neighbourhood, avoid any changes that may have a negative impact on the neighbourhood or protect specific features like green spaces. Other common restrictions may include limitations on building height, external modifications, or the type of business that can operate from a property.

Applicability and Identification

As a seller, you are responsible for disclosing these covenants, and buyers should thoroughly review property documentation to make sure they are fully aware of any restrictions. Restrictive covenants apply to various property types (not just new builds), including residential, commercial, and industrial. 

Restrictive covenants apply to all future purchasers of a property, so homebuyers should be aware of any restrictions on the property they are buying. Homebuyers can identify these restrictions by reviewing the property deeds, title register, or land registry documents. If, however, the covenant is so old the landowner cannot be traced or the original purpose or justification of the covenant becomes obsolete, it may be unenforceable. Your conveyancer will identify any restrictive covenants during the coneyancing process and will check they are enforceable.

Impact on Homeowners

While restrictive covenants can safeguard property values and maintain a cohesive neighbourhood, they may restrict homeowners’ freedom to modify or develop their homes. Homeowners should carefully assess the implications of these restrictions and seek legal advice if uncertain. Removing a restrictive covenant typically requires a legal process and agreement between the affected parties. Property owners can attempt to negotiate with the party benefiting from the covenant. If both parties agree, they can execute a deed of release or modification to remove or alter the covenant. In the absence of an agreement, a property owner can apply to the Upper Tribunal (Lands Chamber) under Section 84 of the Law of Property Act 1925 to modify or discharge a restrictive covenant.

Selling a Property with Restrictive Covenants

It is possible to sell a property with a restrictive covenant. However, the presence of a restrictive covenant may affect the property’s marketability and value, as potential buyers may be limited in their use of the land. When selling a house with a restrictive covenant, transparency is key and it is important to disclose all relevant information to potential buyers and consider how these restrictions might affect the property’s marketability.

Navigating and Breaching Restrictive Covenants

The beneficiary of a restrictive covenant is typically the party or entity that benefits from the restrictions placed on a property. This could be an individual property owner, a homeowners’ association, a developer, or another entity that holds an interest in maintaining specific conditions or preventing certain uses on the land. If homeowners wish to make changes contrary to a restrictive covenant, they may seek legal avenues for modification or removal. Breaching a covenant can lead to legal action, fines, or the reversal of unauthorized alterations, which could see you having to pull an extension down. It’s crucial for property owners to be aware of and comply with any existing restrictive covenants to avoid complications further down the line.

Restrictive covenant insurance

Restrictive covenant insurance, also known as indemnity insurance for restrictive covenants, is a type of insurance policy designed to protect property owners from potential financial losses or legal issues arising due to a breach of restrictive covenants. Restrictive covenant insurance doesn’t remove or invalidate the covenants but provides financial protection in case legal issues arise. Restrictive covenant indemnity insurance can only be obtained when a covenant has been breached for at least 12 months without complaint.

When buying or selling property, it is important to understand whether there is a restrictive covenant written into the deeds of the property, as this is something that all buyers need to be aware of and it can affect the ability to sell your home quickly. Seeking legal advice is important to understand the specific circumstances and options available for dealing with a restrictive covenant.