What Is a Deed of Covenant? Explained for Homebuyers

A Deed of Covenant is a legally binding agreement in property transactions, most commonly required in leasehold sales. It ensures that the new owner complies with service charges, property maintenance, and lease restrictions set by the freeholder or management company. If your lease requires one, failing to sign could delay or even block your sale, making it essential to understand how they work.

Key Takeaways:

A Deed of Covenant is often required in leasehold transactions to ensure the buyer follows lease obligations.
Costs typically range between £150-£300, and buyers are usually responsible for the payment.
Failure to sign or comply with a Deed of Covenant can lead to delays, fines, or legal disputes.

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What Is a Deed of Covenant?

A Deed of Covenant is a legally binding agreement between a leaseholder and a freeholder or management company, ensuring that the new owner agrees to follow the obligations set out in the lease. It is typically required when a leasehold property is sold or transferred to confirm that the new owner will continue paying service charges, maintaining communal areas, and adhering to any property restrictions.

Who Needs to Sign a Deed of Covenant?

The following parties may be required to sign a Deed of Covenant:

Leaseholders buying or transferring ownership of a leasehold property.
Freeholders or management companies enforcing lease obligations.
Buyers of leasehold properties where the lease states a Deed of Covenant must be signed before completion.

This is what a deed of covenant looks like:

When Is a Deed of Covenant Required?

A Deed of Covenant is typically needed in leasehold property transactions to ensure that the new owner complies with the lease terms. The most common situations where it is required include:

When a leasehold property is sold or transferred, ensuring the buyer agrees to the existing obligations.
If the lease states that a Deed of Covenant must be signed upon transfer or assignment.
When the freeholder or management company requires it before accepting the new leaseholder.

For freehold properties, a Deed of Covenant is rarely required unless a covenant was imposed in a previous transfer agreement. In such cases, buyers should review the title deeds to check for any existing restrictions.

According to Gov.uk, as of 2021-22, there were approximately 4.98 million leasehold dwellings in England, making up around 20% of the housing stock. This highlights the prevalence of leasehold properties and the importance of understanding Deeds of Covenant in property transactions.

Expert advice from our Property Expert Paul:

I've lost count how many times our conveyancing team has told me a leasehold sale has been delayed because buyers weren’t aware of Deed of Covenant requirements until the last minute. If your lease states you need one, get ahead by checking with your solicitor early. For freehold properties, don’t assume you’re in the clear—always review the title deeds, as historic covenants can still apply.

Proactively addressing these issues can save weeks of hassle and keep your sale on track.

What Does a Deed of Covenant Cover?

A Deed of Covenant outlines the responsibilities and restrictions that a leaseholder must follow as part of their lease agreement. These covenants protect the freeholder or management company and ensure that all leaseholders maintain the property and meet financial obligations.

While the specific terms vary from lease to lease, they typically fall into the following categories:

Common Obligations in a Deed of Covenant

Category	Typical Obligations
Financial	Paying service charges, ground rent, and maintenance fees
Property Maintenance	Keeping the property and communal areas in good condition
Usage Restrictions	No subletting, commercial use, or major alterations without consent
Behavioural Restrictions	No pets, limits on noise levels from bad tenants, and restrictions on disruptive activities

Since every lease has unique terms, reviewing the Deed of Covenant carefully before signing is crucial. Some covenants can be negotiated with the freeholder, but ignoring or breaching them can lead to legal disputes or financial penalties.

Types of Covenants in a Deed of Covenant

Covenants in a lease are generally divided into two types: Positive Covenants and Negative Covenants. These define the responsibilities and restrictions that a leaseholder must adhere to.

Positive Covenants

These require the leaseholder to take specific actions to maintain the property and shared spaces. Examples include:

Paying service charges promptly.
Contributing to maintenance and repair costs.
Keeping communal areas in good condition.
Agreeing to major works (e.g., roof repairs or external renovations).

Negative Covenants

These restrict leaseholders from taking certain actions that could impact the property or its residents. Examples include:

No pets: Some leases prohibit animals in the building.
No subletting: Renting out the property may be restricted.
No commercial use: Running a business from the property may not be allowed.
Noise restrictions: Leaseholders may need to limit noise after certain hours.

Related Read: How to sell your tenanted property fast

Do I Have to Sign a Deed of Covenant?

In most cases, yes - if the lease specifies that a Deed of Covenant is required, the buyer must sign it before completion. Without it, the freeholder or management company may refuse to recognise the new leaseholder.

What Happens If You Don’t Sign?

Delays in selling the property: The transaction cannot be completed until the deed is signed.
Freeholder may refuse service charge payments: This can lead to financial penalties and accumulation of unpaid fees.
Legal consequences: The freeholder may take legal action to enforce compliance, which could result in court proceedings.

From our experience at Housebuyers4u, leasehold transactions often stall when buyers aren't aware they need a Deed of Covenant until late in the process. We've seen cases where last-minute delays cost sellers weeks or even caused deals to fall through entirely. If you're selling a leasehold property, check with your solicitor early to confirm if a Deed of Covenant is required, and ensure your buyer understands their obligations upfront. Proactive communication can prevent unnecessary complications and speed up the sale.

How Much Does a Deed of Covenant Cost?

In most cases, the buyer (new leaseholder) pays for the Deed of Covenant, as it is a condition of taking over the lease. The cost typically ranges from £150 to £300, depending on the freeholder’s requirements.

What Happens If You Breach a Deed of Covenant?

Failing to comply with a Deed of Covenant can lead to serious legal and financial consequences. The freeholder or management company has the right to enforce the terms, and penalties can include:

Fines and financial penalties: Unpaid service charges or maintenance fees may result in additional costs or interest charges.
Legal disputes: The freeholder may take action over breaches related to property upkeep, subletting, or other lease obligations.
Court injunctions: A legal order may be issued to force compliance with the covenant, potentially leading to further legal costs.

Can You Remove or Change a Deed of Covenant?

Yes, but it requires the freeholder’s consent. Leaseholders can request modifications if a covenant is outdated, overly restrictive, or no longer relevant. However, approval is not guaranteed, and the process depends on the freeholder’s willingness to negotiate.

We recently helped a homeowner who was struggling with conveyancing while trying to sell their home, here's what they had to say:

"Jackie guided and assisted me through the whole process, I reluctantly used the recommended solicitor for conveyancing but I needn’t have worried, it was all quite straightforward in the end."

John Richardson on Housebuyers4u

Click here to read their full review on Trustpilot

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Frequently Asked Questions

1What happens after signing a Deed of Covenant?

Once signed, the Deed of Covenant is returned to the freeholder or management company, who records the agreement and confirms that the new leaseholder has agreed to the lease terms. This ensures the buyer can take over responsibilities such as service charges and property maintenance, allowing the sale or transfer to proceed without delays.

2What is the difference between a deed and a covenant?

A deed is a legally binding document that formalises an agreement between parties, while a covenant is a specific promise or obligation within that deed. In property transactions, a Deed of Covenant is a deed that contains enforceable covenants, usually requiring a leaseholder to follow certain rules set by the freeholder.

3How long do covenants last on a property?

Covenants can last indefinitely unless they have a set expiration date, are formally removed, or become unenforceable over time. Restrictive covenants, in particular, “run with the land,” meaning they continue to apply even when the property is sold unless legally discharged or modified by agreement with the benefiting party.

4Do you register a Deed of Covenant at the Land Registry?

No, a Deed of Covenant is not typically registered at the Land Registry. However, a restriction may be placed on the property’s title, requiring future buyers to enter into a new Deed of Covenant before ownership can be transferred. This ensures compliance with lease terms and obligations.

5Who draws up a Deed of Covenant?

A Deed of Covenant is usually prepared by the freeholder, management company, or their solicitor and provided to the buyer’s solicitor during the conveyancing process. The buyer then reviews, signs, and returns the deed, often paying an administration fee for processing.

6What is a Deed of Covenant Freehold?

A Deed of Covenant in a freehold property is a legal agreement that requires a freehold owner to comply with specific obligations, such as maintaining shared driveways, contributing to private road upkeep, or following estate management rules. Unlike leasehold covenants, which are typically tied to service charges and lease terms, freehold covenants may be included in title deeds or transfer agreements and can remain enforceable even after a property is sold.

7What is a Deed of Mutual Covenant?

A Deed of Mutual Covenant (DMC) is a legal agreement between property owners, often in shared developments like flats or gated communities, outlining their rights and responsibilities. It typically covers maintenance of communal areas, shared facilities, and financial contributions for repairs or upkeep. Unlike a standard Deed of Covenant, which usually involves a leaseholder and freeholder, a DMC applies to multiple property owners, ensuring all parties uphold agreed-upon terms for the benefit of the community.

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