Real Estate: Restrictive Covenants Affecting Land

07/01/2020

A restrictive covenant imposes an obligation to do something or requires expenditure e.g. an obligation to erect a boundary wall. This article looks at the benefits, how to enforce them and also how to modify restrictive covenants.

A positive covenant is a different type of agreement and does not generally bind successors to the original party that signed the deed. Positive covenants are a separate topic not considered in this article.Typical examples of a restrictive covenant might be:

  • To limit possible uses of land e.g. to residential purposes only
  • To prohibit certain trades or businesses
  • To restrict the number or type of buildings that can be erected on land
  • The wording of the covenant must be considered carefully to decide whether a covenant is positive or negative.

Any potential purchaser of land will need to check if there are any restrictive covenants which might be enforceable. This is particularly relevant to anyone purchasing at auction.​ 

Is there a restrictive covenant?

In cases of registered land, the restrictive covenant would normally be registered against the restricted land (often called “the burdened land”).

The situation where the land is not registered is more complex and not covered in this article. You will need to consult a specialist property solicitor on how to move forward.

Restrictive covenants created before 13 October 2003 should be registered as a minor interest on the title in the charges registered of the burdened land (Land Registration Act 1925, Section 50).

Post 13 October 2003, protection is via a notice in the charges register (Land Registration Act 2002, Section 32).​ 

The benefit rule

If land is subject to a restrictive covenant, it is then necessary to find who has the benefit of it. It is not enforceable if no one has the benefit.

In practice, this can be difficult to establish as the benefitting land will not usually have the benefit registered against its title.

A conveyancer will need to embark on quite a complex search of neighbouring titles and title documents including pre-contract enquiries and historical HMLR information.​

Passing the benefit of a restrictive covenant to subsequent buyers

The Courts, over a very long period of time, have established rules which can be summarised as follows:

  • The restrictive covenant must benefit the land, not the person. The Courts refer to this as the “touch and concern the land” requirement. A case setting out what is required to prove this is Swift Investments v Combined English Stores [1988 UKHI3]. So for example, a restrictive covenant aimed at preserving the character of land or a view or prohibiting nuisance would be of a type which does touch and concern the land.
  • The person enforcing the restrictive covenant must have sufficient interest in the land, normally they would need to be a freehold owner or long leasehold owner.
  • It must be proved that the benefit has passed to the enforcer which could be by way of annexation, assignment or a scheme or development.

In practice, most post 1925 covenants are annexed to the land by Section 78 Law of Property Act 1925. Proving assignment can be a complex conveyancing search.

Schemes of development are sometimes known as building schemes and a restrictive covenant may be enforceable. These are often referred to as “local law”. Where they exist, the restrictive covenants are mutually enforceable by all in the scheme. Schemes of development are outside the scope of this article.

Summary of requirements to enforce a restrictive covenant against burdened land

  • Covenant must be negative and registered.
  • Covenant must protect land that the original covenantee retained (often called “the dominant land”).
  • The covenant must benefit land owned by the person enforcing it.
  • The burden of the restrictive covenant must have been intended to run with the land, which is assumed under Section 79 Law of Property Act 1925, unless the contrary is shown.
  • There must have been no common ownership of the two parcels of land since the restrictive covenant was created.
  • Where each successor to the benefit and burden land have given indemnity covenants when the property has changed hands.​

Case Law

Even if a restrictive covenant is enforceable and satisfies all the tests set out above, they can still be challenged if the wording is not clear. In Queen Elizabeth Grammar School v Banks Wilson [2001 EWCA1360] a covenant prohibiting any new build to the height of an existing building failed because it was unclear if this meant the roof line of the building or the chimney tops which were much higher.​

Remedies and injunctions

An injunction from a Court is the primary remedy for breach of a restrictive covenant and a Court will impose an injunction to prevent a restrictive covenant being breached if it is equitable to do so.

An injunction is a Court order that a party must not do something (it is negative in character).

A Court can take all circumstances into account when considering whether to grant an injunction and if a Court feels it is too severe to make an injunction order, it can order damages instead.​

Methods to avoid a valid restrictive covenant

The first way to avoid the effects of a restrictive covenant will be to negotiate with those that have the benefit of it and come to an agreement that it be extinguished. Money is a great persuader!

Not strictly in the same category as the above, but achieving a similar practical purpose, is obtaining a policy of indemnity insurance against the chances of anyone seeking to enforce the restrictive covenant. This is very useful where the restrictive covenant is registered but it is unclear whether anyone has the benefit of it. Frequently, lenders will not lend mortgage monies without an indemnity policy. Pinney Talfourd’s conveyancers have expertise in this area and deal with these issues on a regular basis. It is essential that no approach is made to any third parties who might have the benefit of the restrictive covenant. 

Application can be made to the Upper Tribunal (Lands Chamber) to extinguish the restrictive covenant by way of discharge, or alternatively to modify it. This is best illustrated by examples:

  • A building had a restrictive covenant that it could only be used as a public house or hotel. The owners proposed to convert it into a shop which would breach the restrictive covenant. No planning permission was required and the local authority would grant a change of use so the only restriction on converting to a shop was the restrictive covenant. The Upper Tribunal modified the restrictive covenant to allow shop use. James Hall and Company (Property) Limited v Maughan and Others [2017 UKUT240].
  • A disused sports ground had a restrictive covenant that it could only be used as a sports ground or for the building of detached residential houses. The landowner applied to the Upper Tribunal to modify the restriction because it was impossible to obtain planning permission to build solely detached houses. The local planning authority required mixed housing stock. The Upper Tribunal modified the restrictive covenant to allow residential developments of mixed use housing. Derreb Limited v Blackheath Cater Estate Residents Limited [2017 UKUTLC].
  • Another case involved an application to modify a restrictive covenant which restricted the use of a building to office premises on the basis that the restrictive covenant did not secure any practical benefits or financial value for the local authority which had the benefit of the restriction. The owners of the building were seeking to convert it to residential use. The Upper Tribunal granted the Claimant’s application so as to allow for residential use and noted this would actually increase the value of the Local Authority’s freehold reversion. Shaviram v Normandy Ltd v Basingstoke and Deane Borough Council.

Obsolete restrictive covenants

Section 84(1)(a) of Property Act 1925 allows the tribunal to conclude a restrictive covenant is obsolete and in that event it can be discharged.

Many historical restrictions are now obsolete and pointless.The physical neighbourhood has often changed beyond recognition since the restrictive covenant was imposed. Generally, it would be necessary to prove that the restrictive covenant was of no practical benefit anymore. 

Conclusion

Restrictive covenants are a complex area and can be very contentious. These issues normally arise in the course of conveyancing transactions. All property developers need to be aware of the significance of restrictive covenants and they need to utilise solicitors who have expertise in dealing with them.

The complexity of the law is reflected by the fact that the Law Commission reported on 8 June 2011 with a proposed major law reform and in 2016 the then Government said it would proceed with this law reform. At the time of writing, there are no concrete plans for a green paper or white paper on the matter.​

More information

To find out more about restrictive covenants, to identify any against your land, and to modify or remove them, please contact our specialist Property Litigation Team or read more on our Restrictive Covenants Service Page.​

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.

07/01/2020

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