Restrictive covenants: what are they and how do they affect development.
A restrictive covenant is a formal obligation, lurking within a title deed, that attaches to a piece of land and restricts or limits the rights and use of the land. Here, Aisha Dambam explains the common features of a restrictive covenant, and how a solicitor can help you to challenge them.
The covenant stays with the property no matter how many times it has exchanged hands. It may seem like a hassle and a burden; however, restrictive covenants have been around for a long time and are there to protect the design or use of land. The most common example of a restrictive covenant tends to include the following:
Preventing owners from making alterations to a property
Preventing a specific trade or business from operating on the land
Preventing buildings or other structures from being erected
Forbidding undesirable activities or potential nuisances
How can a restrictive covenant affect my development?
Developers tend to identify land which looks appealing on the face of it, only to later discover that there are restrictive covenant preventing the land from being developed or used the way they had intended to.
Can I challenge a restrictive covenant?
The short answer is yes, a restrictive covenant can be challenged and therefore a restrictive covenant does not mean that all developments are doomed. One way to challenge a restrictive covenant it is to show that it no longer has a useful purpose. Another way is to show that it is ambiguous or uncertain, or on the grounds that it is prohibited by competition law, or even contrary to public policy. Additionally, a covenant that does not “touch and concern” or benefit the benefitting land may not be necessarily enforceable by the person or entity with the benefit of the covenant.
If the nature of the restrictive covenant cannot be challenged the following options are as such:
Make a payment or negotiate a release or a variation of the restrictive covenant with the person who has the benefit of the covenant.
Apply to the Land’s Tribunal under s 84 of the Law of Property Act 1925, which gives the court the power to discharge or modify the covenant.
Take out an indemnity insurance against the possibility of a claim arising in the future.
What can a solicitor do to help?
Restrictive covenants are complex and can easily be contentious. Restrictive covenants need to be considered carefully, particularly where you intend to develop and or change the way the property is used. Ignoring a restrictive covenant could result in costly litigation and possible reputational damage.
If you would like any advice on restrictive covenants please contact our Real Estate Team, we would be happy to help.
By Aisha Dambam