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What is a Restrictive Covenant?

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Written by
Henna Malik-Shabbir

Restrictive Covenants in freehold and leasehold registered land are legally binding provisions incorporated into the title deeds of property, outlining what a buyer can and cannot do. They can bind or benefit subsequent landowners and any breach of these covenants can lead to enforcement action by the person with the benefit; the covenantee.

The most common restrictive covenants seen in practice are the following:

1. Not to use the garage for anything other than storing a vehicle

2. Not to use the property for business or trade

4. Not to build an extension or develop a garden area 

Some covenants will require prior written consent, and this is usually highlighted within the covenant.

When a prospective purchaser is in the process of buying property and uncovers restrictive covenants which will restrict their proposed use of the property, then the current law has made available the following:

1. To obtain retrospective consent from the original covenantee

2. An indemnity policy can be obtained for any breach of the restrictive covenants.

3. An application can be made to the Upper Tribunals Land Chamber for the removal or modification of the restrictive covenant.

If a purchaser is to approach the original covenantee for retrospective consent then, the covenantee can demand payment for such consent which is given at their discretion or refuse altogether and apply to the courts for damages which could lead to them being awarded compensation/financial penalties.

It is not always possible to obtain retrospective consent for the covenant if the original covenantee is untraceable. This can be if the property has been resold subsequent times, or if significant time has passed since the covenant was made. It can be time-consuming and costly to track down the covenantee.

Although, there is no time limit set on pursuing a breach of a restrictive covenant, the age of the covenant itself doesn’t affect its validity. Therefore, very old covenants are considered unenforceable, making it harder to enforce after 20 years if no one has challenged the breach. In the case of Hepworth v Pickles [1900] ‘where a covenant affecting real property has been openly and uninterruptedly broken for more than 20 years, a waiver or release of such covenant will be presumed’.

In view of the above, Indemnity policies become the next best option for breaches within the 20-year period.

An indemnity policy does not prevent a breach of covenant claim but it deals with any claim that will arise from the breach. A policy offers insurance-backed protection to the purchaser, protecting against the payment of damages, legal fees, loss in value and any demolishing/rebuilding as required.

The policy will only cover the breach it is intended to be for and this must be made clear to the insurer from the outset. A purchaser can only obtain a policy if the original covenantee is not made aware of the breach. If, during the search for the covenantee, it comes to their or the successor’s attention even if the purchaser did not manage to approach them directly, that there is to be a breach or if the covenantee has refused to provide the retrospective consent then obtaining a policy is out of the question.

However, obtaining insurance is a quick and simple solution to any breach. It is a legally acceptable solution to such problems often found in practice and various insurers provide competitive quotes to please any purchaser. Where a breach is already in existence, the seller often covers the cost of the policy.

The final option available to the purchaser is to apply to the Upper Tribunals (Lands Chamber). They have the power under section 84(1) of The Law of Property Act 1925 to modify or remove a restrictive covenant affecting land. They will look at the restrictive covenant and scrutinise the wording to see if it is considered obsolete and if the words are ambiguous or vague then to modify. They do not have the power, however, to determine the validity of the restrictive covenant.

The powers extended to the Upper Tribunal are limited in themselves unless the matter then proceeds to court if a challenge to the validity of a restrictive covenant comes into play.

Applying to the Upper Tribunals (Lands Chamber) is a very costly and lengthy procedure with no guarantee of success therefore not common in practice. There is always a risk of losing the property because a seller may not wait for the purchaser to obtain consent in order to proceed with the transaction. It is always in the best interest of the buyer to obtain all necessary consents for their proposed use of the property before the transaction completes.

Please get in touch with Miah Law at info@miahlaw.co.uk or call 0113 350 3007 if you have any questions – we are happy to help.