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Restrictive Covenants

Restrictive covenants may limit what the owner can legally do with their property. Ensure you don't fall foul of these restrictions with our handy guide to covenants and how they work.

Restrictive covenants are restrictions that are put onto land to prevent people from performing certain actions on it. The most common restrictive covenants are;

  • To disallow any building on a section of land
  • To disallow any business activity on the land
  • To disallow any use of the land which is not agricultural

If the covenant has been properly prepared it can restrict the use of the land for any future buyers or developers. This means that the value of the land is likely to remain the same. An example of this would be if there was a covenant restricting building on a section of land which prevented the owner from extending their house or from building a new one. This would mean that the value of the land and property would be unlikely to have a drastic increase in value as the owner would only be able to carry out internal renovations. This can put landowners as significant losses compared to if their land did not have a restrictive covenant placed on it.

In many cases, a restrictive covenant will be written into the title of the property and will not be legally enforceable due to the way that they have been written. If there is a covenant on your property that you wish to look into, you should seek legal advice on the issue.

Restrictive covenants on ex-council houses

Many ex council houses have restrictive covenants placed on them. This was a cause for concern for many homeowners until a recent decision which was passed by the Lands Tribunal.

The basis of the case involved former local authority properties which had restricted covenants placed on them which prevented their use from anything other than a coach depot and an associated residential bungalow.

The local authority received an application for residential development but refused it on the basis of the covenant and they also refused any modifications to the covenant. The applicant then appealed the decision which went on to be approved by the Secretary of State.

When the appeal was made, the Lands Tribunal was asked to consider that the covenant be modified based on Sec 84 (1) of the Law of Property Act 1925. When the Lands Tribunal looked at this they decided that the covenant did not allow for reasonable use of the land and that the local authority, who would be the party that benefitted from the covenant, would not actually gain anything from the covenant being upheld. For this reason they lifted the covenant from the land and awarded the local authority with the difference between the amount of money that they sold the property for with the covenant and the amount that they would have expected to receive if they had been able to sell it without the covenant.

As a result of this ruling, many owners of ex council properties will be more likely to have the covenant which had been placed on their property lifted than before the ruling was made.

If you own an ex council property which has a covenant on it and you local authority makes planning permission available for developments, this might be enough of a factor to argue that the covenant on your property is ineffective.

Building extensions and alterations

Many restrictive covenants will have clauses in them allowing alterations or buildings on land as long as the new owner seeks permission of the person that made the covenant.

If you believe that you have such a covenant on your property the first thing that you will need to do is examine the wording of the covenant to measure its strength and to see if it is enforceable. You will also need to work out who will enforce the covenant if it is broken or who you will need to approach to ask permission to do the work you want to undertake.

The majority of covenants will be enforced by the current owner of the land that the property sits on. However there are occasions when it is the original owner of the land who will need to be approached. These circumstances can pose difficulties to the person wishing to seek approval as they may struggle to find the original land owner or the executors to their estate.

If the covenant requires prior consent for alterations to be made to the property, it will need to be considered whether the alterations are reasonable and thus require consent at all. You will have to ensure that you carefully look over the covenant as they are often vague about the levels of work or alteration that will require consent.

There have been many legal cases which now support homeowners who want to go ahead with work without consent but the consent is being upheld.

Restrictive covenants on nuisance and annoyance

One of the most common forms of covenant is one which sets restrictions on nuisance and annoyance. These covenants were often included on property to protect neighbouring land and neighbours

A recent case which was based on a covenant of this nature was the 2008 case of Dennis vs. Davies. Davies planned to build a 3 storey extension to his property which Dennis refused on the grounds of a nuisance covenant. The covenant did not specifically stipulate that building work could not be carried out.

Dennis claimed that if Davies was to build the extension, it would have a negative effect on their views of the river Thames. Dennis was successful and the court ruled that by building the extension, Davies would cause significant annoyance to other residents whose enjoyment of their homes would be affected if the proposed work took place. The court saw that an obstruction of the view would be enough to breach the covenant and refused Davies the right to build the extension.

Restrictive covenant insurance

Legal indemnity insurance can prove useful if you have a restrictive covenant on your property. It can usually offer some type of solution for restrictive covenant issues or at the least some protection if things go wrong. You should ensure that you go over the covenant thoroughly before taking out legal indemnity insurance to check that there are no other options that might be appropriate for your issue. Many insurers offer insurance for restrictive covenant risks as long as there are no other methods of getting around the problem. There are several cases where restrictive covenant insurance will be appropriate.

To begin with one of the most common types of restrictive covenant is one put in place by the previous owner or the land owner which requires a new owner to seek their consent if they wish to build further on the land or to make any alterations to any existing structures. This can pose many difficulties to current owners. If the covenant was put in place by the original land owner, it can be very difficult to trace them if the covenant was put in place a long time ago. More often than not in these circumstances, the person that is selling the property is unaware that there is even a covenant on the property until the property is sold or they try to remortgage it. If work has been done to the property over 12 months ago, without the current owners being aware that a covenant was in place and this work was not challenged by the person who wrote the covenant, the current owner will be able to get restrictive covenant insurance to protect what they have done.

Another one of the most common restrictive covenant issues regards restricted uses of the property. In this instance the restricted activity must have been taking place for a considerable amount of time. An example of this would be if the owner of a shop had a covenant on their premises disallowing the sale of alcohol. If the owner of the shop was unaware of the covenant or had been selling alcohol for a considerable length of time without any complaints they would be eligible for restrictive covenant insurance.

Some properties have titles which state that there is a covenant placed on the building but the paperwork which describes what the covenant is has been lost. In cases such as these, it would be advisable to get restrictive covenant insurance.

An insurance policy of this kind will insure that a claimant will receive damages or compensation, the cost of altering or demolishing the property and the reductions in value of the property between the market value at when the covenant was enforced and what the value would have been on the current open market had it not been enforced. You may wish to ask for a custom made insurance policy that will cover the specific details of the covenant on your property. You can also request that the insurance cover not only you but future owners of the property as well.

The cost of a restrictive covenant insurance policy will depend on the value of the property at the time the insurance was taken out and the number of factors which it will cover. They can vary from hundreds of pounds to thousands depending on the buildings size, value and use. You should not contact anyone that you believe might be the original covenant owner before you try to take out a policy. If an insurance company finds out that contact has been made, they will usually refuse to ensure you. 

Rights of way and easements

The definition of the term easement is a right that a person has over some property or land which does not belong to them. Most commonly an easement will be a right of way which allows a neighbour to pass through a property in order to get to their home.

Sometimes this right of way will be expressed in the deeds to the property and other times the rights will be implied or have been gained over long standing use. There may be specifications on the right of way, for example it may only give access to pedestrians. If your property has a right of way running through it but you do not have any legal paperwork defining the terms and conditions of its use, it can be a good idea to draw up an easement in order to clarify the use should it need to be questioned. If there is not already legal paper work in place, it will mean that it can be more difficult to establish the exact details of the rights.

An easement will need to be created by writing out a contract using the correct legal terms. If you are planning to create an easement with another party, perhaps a neighbour, it is advisable to meet with them to discuss what rights of way that they wish to use and any restrictions that you may want to place on them. A solicitor will have to draw up the final draft in order to make it legally binding.

Converting a house into flats

A very common restrictive covenant is one that states that a house must only be used as an individual dwelling. This means that it would break the covenant should a new owner wish to renovate the property into flats.

In recent years there has been a drastic shortage in the amount of affordable housing on the market and for this reason a provision was included in the 1985 Housing Act (Section 610) which made it a lot easier for single dwellings to be converted into flats. Before this provision was introduced, a person wishing to change a single dwelling into flats would have had to apply to the Lands Tribunal in order to seek to get the covenant lifted. This would have to be supported with the requirements stipulated in Section 84 of the Housing Act.

Section 610 could be put into play once planning permission had been granted to turn the property from a single dwelling to one of multiple dwellings. The court would look at the leasehold or freehold of the building and decide whether to change the covenants that were put in place if they believe it is fair to do so. This type of application would also be appropriate if it can be proven that the property in question is in an area which has changed and would thus be more likely to be let out if it was converted to a multiple dwelling. This loophole can be particularly useful for developers that are worried they will be unable to convert a single dwelling into flats due to a covenant being in place.