Restrictive covenants – what they mean for you
You may own your home but that doesn’t mean you can do with it as you choose - not if there are restrictive covenants attached to it. We take a look at how they work, why you want to avoid breaching them and what to do if you do.
What is a restrictive covenant?
Restrictive covenants are binding conditions that are written into a property’s deeds or contract by a seller to determine what a homeowner can or cannot do with their house or land under particular circumstances. They can cover a wide range of issues, but the most common examples tend to include:
- preventing owners from making alterations to a property (such as building an extension or converting a house into flats, for example)
- preventing buildings or other substantial structures from being erected on a section of land or
- preventing trades or businesses from operating on the land.
Why are they used?
In many cases, covenants are designed to uphold certain standards for all residents. Housing developers and property management companies will often add restrictive covenants to a Transfer Deed in order to prevent owners from undertaking work or other practices which could impact negatively on a neighbourhood or undermine a desired level of ‘uniformity’ and/or maintenance.
This can mean anything from prohibiting the fixture of satellite dishes or security cameras to the front of the house, parking a caravan or boat in the front garden, keeping chickens or other livestock or allowing a garden to become overgrown and untidy.
Alternatively, landowners may place restrictive covenants on the piece of land they are selling in order to protect value, minimise damage and retain a degree of control.
Do restrictive covenants only apply to new builds?
Not at all. Restrictive covenants can be placed on older properties too and the age of the covenant doesn’t necessarily affect its validity.
However in some cases, very old covenants are considered as unenforceable because the original landowner or builder cannot be traced, because the wording is ambiguous and therefore difficult to apply or because the covenant has become historically obsolete.
How do restrictive covenants affect homeowners?
The important thing to remember about restrictive covenants is that they ‘run with the land’. This means that they are applicable to all future purchasers of the property and not just the original purchaser. If you are thinking of buying a house therefore, it is imperative that you instruct your conveyancing solicitor to examine the property deeds thoroughly and to flag up the existence of any covenants before you close the transaction as once the title deeds are signed you will be held accountable for any incurred breaches.
In addition, it is important to check where the ‘benefit of the covenant’ resides (usually with the current land owner) or whether it has passed onto another individual or private company, as they will be responsible for enforcing any breaches or answering any queries or applications.
Another important factor to consider before purchase is whether the value of a property could be affected going forward because, for example, the provisions of a covenant prohibit the building of an extension or other such work. In some cases, mortgage lenders can refuse to lend on properties where a covenant is deemed to adversely affect future saleability.
In this instance, one option would be to contact the vendor or ‘successor in title’ and advise them that you cannot proceed with a purchase if they insist upon a covenant. If the vendor believes that a covenant could affect their own ability to sell they may be tempted to remove the restriction.
What happens if I breach a restrictive covenant?
If you own a property and unknowingly (or otherwise) breach a restrictive covenant then you could be forced to undo any offending work (such as having to pull down an extension), pay a fee (often running into thousands of pounds) or even face legal action. In cases where an owner has breached a covenant for over 12 months without challenge and subsequently decides to sell the property, they should be able to get restrictive covenant insurance to protect what they have done.
What can I do if I breached a restrictive covenant and I’m selling?
Because the issues surrounding restrictive covenants can often be highly technical or convoluted it is advisable to seek legal advice as soon as possible.
Your conveyancer will check to see that the relevant covenants are recorded on the land charges register as well as look at the wording of a covenant to ensure that it is correctly drawn up and therefore enforceable.
Having established likelihood of enforceability, a conveyancer will usually look for options where insurance can be obtained to cover the liability of any further breach of contract (including any possible damages or compensation, alteration costs, reduction in value of the property as well as legal expenses incurred).
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Restrictive covenant indemnity insurance can only be obtained when a covenant has been breached for at least 12 months without complaint, but once procured the policy will last in perpetuity and can usually be passed on to future owners of the property. The cost of these policies will depend upon the number of covenants breached and the perceived level of enforcement risk. Fees will range accordingly from around £40-50 up to hundreds of pounds.
Can I remove a restrictive covenant?
If no insurance policy can be obtained, then owners could approach the person with the benefit of covenant in order to obtain ‘retrospective consent’ for work. If that person cannot be traced, refuses permission, seeks compensation for the breach or charges a fee which is prohibitive then an owner can apply to the Lands Chamber of the Upper Tribunal to modify or discharge restrictive covenants. However, this process can be both costly and time consuming with no guarantee of success. Even if you are successful, your costs will not be paid by the beneficiaries of the covenant. If their objection is successful, however, you may be forced to pay their costs.
What are my options for handling a restrictive covenant if I’m doing home improvements?
As above, if you feel a restrictive covenant is unreasonable, you can make an application to the Lands Chamber of the Upper Tribunal to have it modified or discharged however as noted this is can be a costly endeavour.
That being said proceeding with home improvement work in spite of a restrictive covenant can be extremely risky. In a worse case scenario, you could be forced to completely undo the work and pay compensation to your beneficiary.
If a restrictive covenant wasn’t pointed out by my solicitor can I take action and get money back?
Your solicitor is responsible for highlighting any covenants so if they miss one you are within your rights to complain to the Legal Ombudsman and the solicitor could be forced to pay compensation. However, the Ombudsman can only award up to £50,000 and, depending on the covenant breached, you could be much more out of pocket than this. In these cases it is worth consulting a private litigator.
If you would like to discuss your concerns with us, become a member of the HomeOwners Alliance and we’d be happy to help