What is a Restrictive Covenant: Impact on Property & How to Handle Them
Restrictive covenants: The conveyancing curveball that could change your property game. Understand their impact before you buy. Our guide reveals:
- The common pitfalls of buying a property with a restrictive covenant – and how to avoid them
- Expert advice on how to navigate covenant issues without the stress
- Proven strategies for removing or modifying restrictive covenants when necessary
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- What is a Restrictive Covenant?
- Should I Buy a House With a Restrictive Covenant?
- Enforcement of Restrictive Covenants
- Deed of Release of Restrictive Covenant: How It Works
- Restrictive Covenant Indemnity Insurance: Purpose and Process
- Seeking Professional Help
- Final Thoughts & Key Takeaways
- FAQs on Indemnity Insurance
What is a Restrictive Covenant?
A restrictive covenant is a legal agreement placed on a property that limits what the current and future owners can or cannot do with it, such as prohibiting certain types of construction, limiting the number of buildings, or even dictating the use of materials for building work.
Restrictive covenants are put in place for various reasons:
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Preserve neighbourhood character
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Protect property values
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Ensure land is used for its intended purpose
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Prevent harmful or disruptive activities
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Control the appearance of buildings
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Maintain uniformity in the community
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Protect natural features or landscapes
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Limit commercial activities in residential areas
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Prevent overcrowding or overdevelopment
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Safeguard historical or cultural sites
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Manage shared access or communal spaces
You’ll typically find restrictive covenants listed in the title deeds of a property. These deeds are the official documents that outline ownership and any legal obligations tied to the land.
Types of Restrictive Covenants
Covenants can be broadly classified into positive and negative types.
Positive covenants require the property owners to take certain actions, such as maintaining or contributing to communal areas.
Negative covenants, on the other hand, restrict the owner from doing specific things, like building additional structures or using the property for commercial purposes.
Positive Covenants:
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Maintenance of shared walls or fences
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Upkeep of communal gardens or green spaces
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Contributing to private road repairs
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Providing access to utility services
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Installing specific types of landscaping
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Maintaining a shared driveway
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Constructing and maintaining boundary walls
Negative Covenants:
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Prohibition of commercial use in residential areas
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Restriction on building additional structures
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Limitations on altering the exterior appearance
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Height restrictions on buildings
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Prohibition of certain materials in renovations
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Restrictions on subdividing the property
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Prohibition on keeping certain types of animals or livestock
If you want to learn about the specific areas with restrictive covenants, you can access the dataset of all the registered land and property in England and Wales here.
Should I Buy a House With a Restrictive Covenant?
Buying a house with a restrictive covenant can be a bit of a balancing act. On one hand, these covenants can protect the character of a neighbourhood and maintain property values.
On the other hand, they can also limit your freedom to make changes or use the property as you wish. It's important to weigh the pros and cons before making a decision.
Pros of Properties with Restrictive Covenants
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Neighbourhood preservation: Helps maintain the look and feel of the community, which can be appealing if you value consistency and aesthetic appeal.
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Property value protection: By controlling development and use, these covenants can help preserve or even boost property values in the area.
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Peace of mind: Knowing that certain disruptive activities or developments are prohibited can offer a sense of security.
Cons of Properties with Restrictive Covenants
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Limited flexibility: You may face restrictions on making changes or improvements to the property, which could be frustrating if you have specific plans.
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Potential legal issues: Violating a covenant, even unintentionally, can lead to legal disputes, fines, or costly adjustments to comply.
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Resale complications: Some buyers may be put off by the limitations imposed by covenants, potentially making the property harder to sell in the future.
How Restrictive Covenants Could Affect Property Value
Restrictive covenants can have both positive and negative effects on property value.
On the positive side, they can enhance the value by ensuring that the neighbourhood remains desirable and well-maintained. Properties in areas with well-enforced covenants may benefit from higher demand and better resale value.
However, restrictive covenants can also have a downside. If the restrictions are too limiting or seem overly burdensome, they might discourage potential buyers and negatively impact the property’s value.
Additionally, if the covenant restricts something that could increase the property’s utility or appeal, such as building an extension, it might lower the property’s market value.
Related: How house buying companies value your property
What If I Breach a Restrictive Covenant?
If you accidentally breach a restrictive covenant, it could cause some real trouble. The person or group that benefits from the covenant might take legal action, which could mean you’re ordered to stop what you’re doing, face fines, or even have to undo any changes you’ve made.
Sometimes, you might also have to pay compensation, depending on how serious the breach is.
To avoid all this hassle, it’s really important to understand any restrictive covenants tied to a property before you make changes or buy it.
Enforcement of Restrictive Covenants
When it comes to enforcing a restrictive covenant, it’s important to know who holds the power and what the process entails.
Who Can Enforce a Restrictive Covenant?
A restrictive covenant can typically be enforced by:
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Original covenantee
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Successors in title
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Neighbouring landowners
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Housing associations or management companies
Process of Covenant Enforcement
Enforcing a restrictive covenant involves several steps, which can vary depending on the specific situation:
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Identify the covenant breach: First, you’ll want to confirm that a breach has actually occurred. This means taking a close look at the property deeds and comparing them with what’s currently happening on the property.
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Contact the covenant beneficiary: Next, get in touch with the person or party who has the right to enforce the covenant. This could be the original creator of the covenant, someone who inherited the right, or even an adjoining or neighbouring land owner.
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Attempt resolution: Before things get too heated, see if you can resolve the issue in a friendly way. Sometimes, a bit of negotiation or mediation can sort things out without needing to go any further.
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Seek legal advice: If you’re not making progress, it might be time to bring in a solicitor who specialises in property law. They can give you the best advice on how to move forward.
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Formal notification: If the breach isn’t resolved, you’ll need to send a formal notice to the party in breach, outlining what the covenant says and what needs to be done to fix the situation.
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Apply for an injunction: If the breach continues, you might have to go to court to get an injunction. This could force the other party to stop what they’re doing or even undo any changes they’ve made.
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File a claim for damages: If the breach has caused you financial losses, you can also file a claim to recover those costs.
Costs Associated with Enforcing a Restrictive Covenant
If you want to enforce restrictive covenants come just know that it comes with various costs, depending on the complexity of the case:
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Legal fees: Solicitor fees for advice, preparation of documents, and representation can range from £500 to £2,000 or more, depending on the case’s complexity.
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Court fees: Filing an application for an injunction or damages typically involves court fees, which can range from £200 to £1,500, depending on the nature of the claim.
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Expert witness fees: If the case requires an expert witness, such as a property surveyor, their fees can add another £500 to £1,000 or more to the costs.
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Mediation costs: If you opt for mediation to resolve the dispute, this could cost between £300 and £1,000, depending on the mediator’s experience and the duration of the mediation.
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Administrative costs: There may be additional costs for obtaining copies of deeds, serving notices, or any other necessary paperwork, typically ranging from £50 to £200.
Tip: These costs can add up, so weigh the potential expense against the benefits of enforcing the covenant. Seeking early legal advice can help you understand your options and the likely costs involved.
Related: Conveyancing fees explained
Deed of Release of Restrictive Covenant: How It Works
If you want to get rid of a restrictive covenant, you’ll need a Deed of Release. This is a legal document that officially removes the covenant from your property’s title.
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The first step is to figure out who benefits from the covenant—they’re the ones who need to agree to let it go.
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Once you’ve got their agreement, usually involving some negotiation, a solicitor will draft the deed.
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After it’s signed and registered with the Land Registry, the covenant is off your title, and you’re free from those restrictions.
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If there was no agreement between the two parties, you can take it to the Lands Chamber (part of the Upper Tribunal) and ask them to modify or remove the covenant. This is done under Section 84 of the Law of Property Act 1925.
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In some cases, you might need to negotiate compensation in return for the covenant’s removal.
There are some challenges to keep in mind. The beneficiary might resist, which could lead to a legal battle. The process can get pricey, especially if you need to go to a tribunal, and it can take time—think months rather than weeks.
As for costs, you’re looking at legal fees ranging from £1,000 to £5,000 or more, depending on how complicated things get. If you’re applying to the Lands Tribunal, expect fees between £500 and £1,500, plus any extra costs for expert witnesses or legal help.
And if you need to offer compensation to the beneficiary, that’s another cost to factor in, which can vary widely depending on the situation.
This should give you a clearer picture of how to handle restrictive covenants and what to expect if you need to remove one.
Restrictive Covenant Indemnity Insurance: Purpose and Process
Restrictive covenant insurance is like having a backup plan in case you unknowingly break one of these property rules.
If someone enforces restrictive covenants to you, this insurance can help cover the costs—whether it’s legal fees, damages, or sorting out any necessary fixes.
The process is pretty simple: a solicitor or insurance broker will check the risk, you apply for the policy, pay a one-off premium, and you’re good to go. It’s especially useful if the covenant is old or if you’re unsure whether it’s still enforceable.
Related: What is indemnity insurance?
Seeking Professional Help
If you’re buying or selling a property with a restrictive covenant, planning changes to your property, facing enforcement action, or looking to remove or modify a covenant, it’s best to consult a solicitor.
They can provide clarity on the covenant’s terms, your rights, and the potential impact on your property. A solicitor’s advice is especially valuable when dealing with complex or unclear covenants.
A solicitor will help you understand the legal language of the covenant, provide tailored advice, and manage any necessary negotiations or legal proceedings. They can also represent you in court if disputes arise, ensuring that your interests are protected throughout the process.
Costs of Legal Assistance for Covenant Issues
The cost of legal help varies, but here’s a general idea:
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Initial consultation: This can range from free to around £200, depending on the solicitor.
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Detailed advice and document review: Typically costs between £500 and £1,500.
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Negotiations and document drafting: Expect to pay between £1,000 and £3,000.
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Court or tribunal representation: Costs can range from £3,000 to £10,000 or more, depending on the complexity of the case.
If a Restrictive Covenant Wasn’t Pointed Out by My Solicitor Can I Take Action and Get Money Back?
If your solicitor didn’t inform you about a restrictive covenant that affects your property, you might be able to take action for professional negligence. This could allow you to claim compensation for any losses you’ve suffered, such as costs related to the covenant or a decrease in property value.
To pursue this, you’ll need to gather evidence and consult a solicitor who specialises in professional negligence. They can help you understand your options and guide you through the process.
Final Thoughts & Key Takeaways
Handling restrictive covenants doesn’t have to be stressful. The key is to stay informed, seek advice when you need it, and tackle any issues early on. With a bit of knowledge and the right support, you can confidently manage these agreements and make smart decisions about your property.
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Understand the impact: Make sure you know what any restrictive covenants mean before buying or making changes to a property.
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Get professional help: A solicitor can guide you through covenant issues, helping you avoid mistakes and unexpected costs.
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Consider the costs: Breaching a covenant can lead to legal and financial headaches, so it’s important to be aware of the potential expenses.
Frequently Asked Questions about Restrictive Covenants
