The law of restrictive covenants is a complex area and a mystery to many landowners, some of whom believe that restrictive covenants cannot be challenged, however, this is not the case.
Restrictive covenants affecting land arise out of an agreement that one party will restrict the use of its land in some way for the benefit of another’s land. The restrictive covenant is capable of being enforceable by one party’s successors in title against the other’s successors in title, as well as between the original contracting parties. Therefore, if your property is subject to a restrictive covenant and you wish to modify or develop it, you may discover that you are prevented from doing so if the covenant remains on the title.
Checking the title deeds to your property will quickly reveal whether there is a valid restrictive covenant which affects the land. If you find that your property is affected by a restrictive covenant, you should firstly consider whether indemnity insurance is available in order to provide you with protection in the event that someone with the benefit of the covenant takes legal action against you for breaching the covenant. If insurance is not available then you should try and identify the owners of the land which benefits from the covenant and try to reach a compromise with them which will usually involve the payment of money for the release of the covenant. If neither of the above are possible, then an application can be made to the Lands Tribunal seeking an order, which wholly or partially discharges or modifies the restriction.
The most common grounds for the Lands Tribunal agreeing to discharge or modify the restriction are that the restriction is obsolete due to the change in the nature of the neighbourhood since the time it was originally imposed, or that the restriction prevents the reasonable use of the property and modification would not result in those entitled to the benefit of the covenant losing something which provided a practical benefit of substantial value, and, money would be an adequate compensation for any loss suffered.
An application to the Lands Tribunal is a lengthy process sometimes taking in excess of 2 years and can prove to be very costly. Also, the result of an application to the Lands Tribunal is by no means certain, there is a great deal of discretion given to the Lands Tribunal to assess what they believe to be a practical benefit of substantial value.
An applicant will need to instruct an expert to report on whether the person entitled to the covenant would loose any practical benefit of substantial value. It is the expert’s responsibility to calculate any decrease in value which the proposed development might have on the land entitled to the benefit of the restrictive covenant.
Communication and negotiation are key in these situations, it is important to approach those with the benefit of the covenant and try to reach some sort of compromise. Providing them with a copy of the expert report is a good starting point. This may reassure the objector that they have nothing to fear in loosing the benefit of the covenant. If a compromise cannot be reached in the early stages and an application to the Lands Tribunal is made, negotiations between parties can continue right up to the final moments. Trial should be the absolute last resort for all parties concerned.
Compensation resulting from the removal or modification of a restrictive covenant is based upon the reduction in value of the property that had the benefit of the restrictive covenant.
It is also left to the Lands Tribunal to decide who pays the costs of the proceedings, more often than not the applicant will usually end up paying the costs of those who benefit from the covenant, whatever the outcome.
Restrictive Covenant Report
If you have a restrictive covenant which may affect your freehold land, our property litigation team can consider your circumstances, by way of written report. The written report will set out our advice and identify a strategy to achieve your objectives moving forward on the basis of our advice.
Our report will consider all the circumstances giving rise to your query, undertake a full review of all relevant documentation and apply the information gleaned from this review to the appropriate legal provisions. We estimate our fees to prepare our Restrictive Covenant Report will be in the region of £1,000.00 – £1,500 plus VAT and disbursements. Please be aware that cost estimates are provided to give you an idea of the likely costs involved only and costs will vary depending upon the level of papers and complexity involved.
For more information on our Restrictive Covenant Report, please contact a member of our team on 01772 258321.
I have a restrictive covenant on our meadow which adjoins our house. I am in the process of having it removed which may involve the Land Tribunal as appropriate so I found this discussion thread interesting.
It is imposed on our 2 acre meadow that adjoins a footpath owned by the previous owner. He retained the footpath from our purchase for the restrictive covenant to be given the benefit of 20 years ago. It is worded for us not to carry out any business on the meadow or to build anything other than domestic structures associated with the house.
As the footpath for which the covenant is for the benefit of, is just that – a footpath, used by dog-walkers (The owner lives some 20 miles away), am I right in thinking we can apply to have the clause removed under grounds (c):- [There can be no injury to the owner of the adjoining land] for which the clause is for, and the clause impedes us from reasonably using the land for our own purposes?
Also am I right in assuming that there should be be no sum by way of compensation, payable to make up for any loss or disadvantage suffered to the vendor as this clause is for the benefit of just a footpath that, to my knowledge, they have not visited for some 20 years?
Re comment by Lyn 6Oct2009.
I understand the use of a value of the land etc (whole proposed development) may come into play if the party proceeds to develop and ignors the covenant. Those with the benefit of the covenant may then act to enforce it. They can seek damages for the breach may then be calculated by reference to the total value of the development, and no longer related to any incident effect on the property of the person who benefited from the covenant.
Hence extreme pressure to settle before development starts – usually with many threats about costs.
Afterall – if any developer was that confident the covenant was either flawed, out of date or valueless, then they would simple go ahead with the development and see if any neighbour was brave enough to take them to court.
As this rarely happens there must be a clear incentive for the developer to be suddenly concerned about resolving issue first – which I believe is the way any compensation would be calculated.
As I am involved in such a long dispute (9 years)-be prepared for any developer to disrupt and agrivate all neighbours for a very long time.
Also carefully check any waiver you are asked to sign – if it is meant to be a road access for 4 houses make sure it says exactly that. Such waiver agreements are usually very vague to allow developer to change their proposal after you have agreed to not enforce a covenant.
I have also seen a suggestion that a Mortgage may not be granted on a new property with covenant issues. A new home that cannot obtain a Mortgage will not sell for the market rate (reduction in developer profit!).
Hello, reaaly interested in this topic, and particularly in the sense of compensation being based on the loss of value on the affected property if a covenant is removed. How about the other way around? ie the increase in the value of the covenanted land if a covenant is removed? We are beginning the process of perhaps removing a residential development covenant on some adjoining land to enable a property company to develop. I’m sure I’ve read somewhere about the value of the removal of the covenant being connected to the increased commercial value of the piece of land. (Sorry if this goes on a bit)
Hi Dawn, I agree that this area of law is interesting but pretty complex. If you would like to give me a call to discuss the matter or alternatively drop me an email, I would be more than happy to assist.
Kind regards.
Kate
Hello, this was a very interesting topic but a little over the top of my head. We are currently looking on the internet for possible help and information about this area and you have helped us learn a little more. We are not sure if this has anything to do with an issue we have currently where we live and have the local council investigating but not as quick as we would like as the issue has affected lots of people on our estate. We would like to let you know but we are unsure if it would be of interest in relation to your area?