For most people, owning your own home means the freedom to do whatever you want with it. You can paint it any colour you want, attach security cameras wherever you please, and add an extension onto any side of the house you like. However, this may not always be the case. For some homeowners, their dream homes come with a restrictive covenant in tow.
But what does a restrictive covenant do? How does it affect homeownership and what happens if you breach it?
Looking for a quick answer? Check out our drop-down menu below!
- What Is A Restrictive Covenant?
- When Would You Apply A Restrictive Covenant?
- Do Restrictive Covenants Effect Homeowners?
- What Happens If You Breach A Restrictive Covenant?
- Selling With A Breached Restrictive Covenant
- Removing Restrictive Covenants
- What If My Solicitor Did Not Flag The Restrictive Covenant?
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What Is A Restrictive Covenant?
A restrictive covenant is a binding condition that is written into a property’s deeds or contract by a seller. It dictates what a homeowner can or can’t do with their property or land and cover a wide range of homeownership issues.
Common Restrictive Covenants
Whilst there are a range of issues that the restrictive covenant can cover, more issues crop up than others. The most common restrictive covenants prevent:
- Homeowners from altering a property (such as with an extension or converting a house into flats)
- Buildings or other substantial structures from being erected on a section of land
- Trades or businesses from operating on the land
When Would You Apply A Restrictive Covenant?
A restrictive covenant is used in order to uphold certain standards for all residents. Restrictive covenants are often implemented on a Transfer Deed by housing developers and property management companies in order to prevent owners from undertaking work or other practices which could impact negatively on a neighbourhood or would take away a level of ‘uniformity’.
This means that you may be prohibited from fixing a satellite dish or security cameras on the front of the house, parking a boat or caravan outside your property, or maybe even from keeping livestock on your land.
Landowners may also place a restrictive covenant on a piece of land that they are selling in order to protect the value, retain a degree of control, and to minimise the potential damage caused.
Are New Builds The Only Property Type That Are Affected By Restrictive Covenants?
Restrictive covenants can be placed on properties regardless of their age. The age of a covenant does not affect its validity.
However, in the cases where the original landowner cannot be traced, the wording is ambiguous, or if it has been rendered obsolete, the covenant can be considered unenforceable.
Do Restrictive Covenants Effect Homeowners?
The main thing to remember about restrictive covenants is that they ‘run with the land’. This means that rather than running out after the property is sold, the covenant goes on and is applicable to all future purchasers of the property and not just the original purchaser.
If you are considering buying, it is critical that you instruct your conveyancing solicitor to examine the property deeds carefully and flag up any covenants before you close the purchase. Once you have signed the title deeds, you will be held accountable for any incurred breaches.
It is also very important to check where the ‘benefit of the covenant’ resides. It can usually be found with the current landowner and they will be responsible for enforcing any breaches or answering any queries or applications.
You also need to consider if the value of the property will be affected moving on from the sale. It could be a case that the restrictive covenant prohibits the building of an extension. Mortgage lenders can refuse to lend on some properties if the covenant is deemed to adversely affect future saleability.
A way you can get around this is by contacting the vendor or ‘successor in title’. If you can explain to the vendor that you will be unable to proceed with the sale if they insist on keeping the covenant, they may be tempted to disregard the covenant in favour of a sale.
What Happens If You Breach A Restrictive Covenant?
Whether you do it accidentally or not, if you breach a restrictive covenant, you may have to undo any of the work that has caused the breach, pay a fee that could run anywhere into the thousands, or even face legal action.
If you have breached the covenant for over 12 months with no complaints and subsequently decided to sell the property, then you should be able to get restrictive covenant insurance to protect what you have done.
Selling With A Breached Restrictive Covenant
If you are selling your property with a breached restrictive covenant then you should seek legal advice as soon as possible as it can often be highly technical or convoluted.
Solicitors will check to make sure that the relevant covenants are recorded on the land charges register. They will also look up the wording of a covenant to ensure that it is correctly drawn up and enforceable.
Once your conveyancer has weighed up the enforceability of the covenant, they will look at options where insurance can be obtained to cover the liability of any further breach of contract. This will include any possible compensation or damages, alteration costs, reduction in values as well as legal expenses incurred.
Restrictive covenants indemnity insurance is obtained when a covenant has been breached for 12 months without complaint. Once you have your restrictive covenants indemnity insurance approved, the policy will last in perpetuity and can usually be passed onto future owners of the property.
The cost of restrictive covenants indemnity insurance depends entirely upon how many covenants have been breached and the perceived level of enforcement risk. Fees for the indemnity insurance can range anywhere from £50 up to the hundreds.
Removing Restrictive Covenants
If you cannot obtain the restrictive covenants indemnity insurance, then there are other routes that you can take. One of the ways you can go about removing restrictive covenants is by approaching the person with the benefit of the covenant in order to obtain ‘retrospective consent’ for any changes made to the property that breach the covenant. In the case that you cannot track this person, they refuse permission, seek compensation for the breach, or charges a fee that is prohibitive, then as an owner, you 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 they object and are successful, then you may end up paying their costs.
What If My Solicitor Did Not Flag The Restrictive Covenant?
Your solicitor’s role is to flag up any restrictive covenants that may be found within the title deeds. This means that if they miss one, or do not alert you of its presence, you are within your rights to take your case to the Legal Ombudsman and the solicitor could be forced to pay up to £50,000.
Whilst it depends on the covenant breached, you potentially could end up being more out of pocket if you go down this route. Because of this, it is always worth consulting a private litigator.
This covers everything you need to know about restrictive covenants. If you have any questions, queries, or insight into the subject then please feel free to get in touch!