About Restrictive Covenants
Are restrictive covenants always enforceable?
Restrictive Covenant Disputes – Can they be resolved by mediation?
First: What is a restrictive covenant?
A restrictive covenant is a provision in a conveyance preventing the owner of a property from doing something. It is usually for the benefit of the adjoining property, where part of the land has been divided, for example for development, to build another house.
Types of restrictive covenant
There is really no end to the variety of restrictive covenants that can, and have been, put in place. Covenants can prevent new property owners from developing a particular type of business on a site or in a property.
Limitations on usage
For example, restrictive covenants may prohibit the use of a property for public entertainment purposes, such as a nightclub. A covenant may restrict the type and quantity of buildings that can be erected on a site, or one could restrict all development to single storey private housing. There may be a covenant that prohibits the entry of commercial or private vehicles into a property or site.
Problems when selling
If a property or site is sold with one or more restrictive covenants, it is clear that that could pose major problems for the purchaser. Furthermore, restrictive covenants are nearly always tied to the property. This means if the new owner wants to sell the property in the future, the restrictive covenants will be binding on the new purchaser. This can make it very difficult to dispose of a property.
Suppose planning permission has been obtained
Even if planning permission has been obtained from the Council for a change of user, or for a new building or extension, if the covenant prohibits it, the adjoining owner can still enforce the covenant.
What should I do about it?
First: Check the title deeds for restrictive covenants. When it comes to buying land or property, it is vital to check the title deeds for any restrictive covenants associated with the property. As their name implies, restrictive covenants place restrictions on how the land or property can be used or modified. While every individual intending to purchase land or property should ask legal experts to check for such covenants, it is even more imperative for purchasers who intend to carry out development work on the land or property to do so.
The risks of not checking the title deeds
Failure to do so could mean investing heavily in the property only to find that a restrictive covenant that prevents the proposed development may be in place. Worse still, if a restrictive covenant comes to light after development has begun, or a new owner decides to ignore the restrictions, the financial consequences could be enormous. This has happened in many cases, and developments have been ruled illegal because they broke the restrictions. Orders have been issued to restore properties to their previous state, or to pay massive compensation amounts to those holding the benefit of the covenants.
The Land Registry
Uncovering restrictive covenants is fairly straightforward if the property to be purchased is registered with the Land Registry, as the covenants will be referred to in the entry on the register. Where property is not yet registered, the covenants will form part of the title deeds. Your solicitor will inspect the entries at the Registry or request copies of the title deeds as part of the conveyancing process, and should let you know immediately if there are covenants in place.
If your legal team discovers that there are covenants in place that will seriously hinder your intended use of the property, you may want to negotiate with the property owner to have the covenants set aside. Because of the possible complex legal issues involved, you may wish to instruct a barrister with experience in the area of restrictive covenants to handle the negotiations.
The property owner might be willing to have the restrictive covenants set aside, but may want financial compensation for doing so. Clearly, this could have a major impact on the purchasing budget. If the owner will not agree to have the covenants set aside, then you should seriously consider looking for a different purchasing opportunity.
Contesting restrictive covenants
If you have purchased a property and only afterwards discovered that there are restrictive covenants in place you should also seek expert legal advice. There could be grounds for challenging the covenants in court, or for arguing a less restrictive interpretation of the wording in the covenants.
Some are unenforceable
One aspect of restrictive covenants that is worth noting is that only those who benefit from the covenants can apply to the courts to enforce the restrictions. The covenants are not only for the benefit of the original owner of the adjoining property, but are often expressed as “running with the land”. This means that they will benefit whoever is the current owner of the property. However, otherwise third parties are unable to have restrictive terms enforced. If there are no longer any people who benefit from a covenant, then there is nobody to apply to enforce it, so the new property owner can decide to ignore the terms of the restriction.
However, this action should not be taken without sound legal advice and thorough research to ensure that there really is nobody who can apply to enforce the restrictive covenants associated with the property, and it is also advisable to arrange indemnity insurance in such instances.
Sometimes there are mutual covenants between the owners of property which is the subject of a planned development. This is in order to ensure that the character of the neighbourhood is preserved. Such covenants can often be enforceable by the current owner of any of the plots in the development.
Lifting a covenant
It is sometimes possible to get a restrictive covenant removed by applying to a Tribunal. There could be grounds for doing this, if it is not of substantial benefit to the adjoining owner, of if the character of the neighbourhood has changed since it was originally imposed. If the Tribunal agrees to this, it could order payment of compensation. The possibility of this can provide an argument in any negotiation.
Mediation in cases of restrictive covenant
It is always better to reach agreement than resort to legal proceedings, which may go on for months or even years, and can cost a fortune. This is particularly so in a case involving neighbours, who may still have to live next to each other afterwards. Negotiations between the parties may have failed, as they often do in such cases, precisely because neighbours are involved, and relations between them may have broken down. Then the intervention of a neutral mediator can make all the difference.
This is particularly the case if the question of possible compensation arises. The Mediator will bring the parties together and help each in seeing the other’s point of view. If this results in a settlement, it can avoid all the stress and anxiety involved in neighbours going to court, as well as the costs, which are likely to be substantial.
It also has the advantage that the parties can choose somewhat with experience of this type of case to conduct the mediation. More than anything, settlement by way of mediation can enable the parties to continue to live together as neighbours.
Full descriptions of my services that relate to this can be found here: Building & Construction problems or Mediation and Arbitration Services You can find more general information on civil law (common law) on the Wikipedia Civil Law page http://stewartpattersonbarrister.co.uk