A restrictive covenant affecting freehold land usually restricts the use of its land in some way for the benefit of another’s land.
There are generally two types of covenant affecting land. A positive covenant, generally, imposes an obligation to carry out some positive action in relation to land or requires expenditure of money. In contrast, a restrictive covenant restricts the use and enjoyment of the land.
The distinction between restrictive or negative covenants and positive ones is important. That’s because the burden (the obligation to observe a covenant) does not generally bind successors in title where a covenant is positive in nature, but it may do so if the covenant is negative.
How are restrictive covenants used?
There are a number of ways that restrictive covenants may be used. These include:
- Limiting possible uses of the land, for example, to residential purposes only
- Prohibiting particular trades or businesses
- Forbidding undesirable activities or potential nuisances
- Restricting the number or type of buildings that can be erected
- Restricting the height of buildings
Examples of positive covenants on the other hand may include those requiring:
- Expenditure of money
- Works of repair or maintenance
- Erection of buildings or boundary fences
- Payment of further money on planning consent being granted
The meaning and effect of a covenant must be carefully considered to see if it is genuinely negative in nature as many covenants can be found expressed in ambiguous terms.
When is a restrictive covenant not enforceable?
A restrictive covenant will generally be enforceable between the original contracting parties as a matter of contract. There can be situations where this is not so, for example, where:
- The covenant is too uncertain or ambiguous to be capable of enforcement
- The covenant is prohibited by competition law and is unenforceable
- The covenant is contrary to public policy, for example, it contravenes equality laws
- The covenantee assigned the benefit of the covenant to a third party
Where the person seeking to enforce the covenant and the owner of the burdened land are successors in title to the original contracting parties, there are several pre-conditions that must be met for the covenant to be enforceable.
When is a restrictive covenant enforceable between successors in title?
For the covenant to be enforceable between the successors in title to the original parties the following rules for the passing of the benefit and the burden of the restrictive covenant must be complied with:
- The covenant benefits land owned by the person seeking to enforce it
The covenant must “touch and concern” or relate to the land owned by the person seeking to enforce the covenant. It must affect the land and not merely be of personal benefit to the original contracting party. A covenant is deemed to touch and concern land where all of the following apply:
- The covenant benefits only the owner for the time being of the land and if separated from the land ceases to be of benefit.
- The covenant affects the nature; quality; mode of user; or value of the land
- The covenant is not expressed to be personal
The covenant must actually benefit or preserve the value of the land. The courts assume that a covenant is capable of benefiting particular land for which the covenant was imposed unless it can be proved otherwise.
- The person seeking to enforce the covenant owns the benefiting land
The person seeking to enforce the covenant must either be the legal owner or a person with some lesser interest that is recognised in equity. For example:
- A person who has contracted to buy the freehold
- A beneficiary under a will
- A trustee in bankruptcy
- The benefit of the covenant has passed to the person seeking to enforce it
The benefit can pass in one of three ways:
- Annexation
- Assignment
- Scheme of development
It is also important to consider the application of Competition Act 1998 and Land Agreements Exclusion Order as certain restrictive covenants are prohibited and will be unenforceable.
Although the benefit of a restrictive covenant can pass at common law, the burden of a restrictive covenant cannot. However, the law of equity developed to allow the burden of a restrictive covenant to be enforceable against successors in title in certain circumstances.
How do I challenge a restrictive covenant?
There are a number of ways of challenging a restrictive covenant.
Express release: It may be possible to negotiate the release or variation of a restrictive covenant.
Indemnity insurance: It is possible to obtain indemnity insurance to protect against the risk of a person with the benefit of a restrictive covenant seeking to enforce it. Usually, the cover is for an indefinite period, at a one-off premium and also covers successors in title and mortgagees of the policy holder. However, if there is a proposed change of use or planning application it may not be possible to obtain cover for the new use/development until the consent has been granted and no objections relating to the restrictive covenant have been raised.
Upper Tribunal (Lands Chamber): If agreement cannot be reached with the beneficiaries of a restrictive covenant, or if insurance is not available, an application can be made to the Upper Tribunal (Lands Chamber), formally the Lands Tribunal, for the modification or discharge of a restrictive covenant. An application to the Upper Tribunal is often a lengthy and costly process. If no objections are raised, an application can take three months but much longer in a disputed case. The Upper Tribunal has power to order the applicant to pay compensation to the person entitled to the benefit of the covenant. The Upper Tribunal can discharge or modify the restriction if satisfied that one of the following grounds applies:
- The covenant is obsolete
- The covenant impedes some reasonable use of the land
- The beneficiaries expressly or impliedly agreed
- No injury will be caused by the modification/discharge
Applications/releases pursuant to statute: It may be possible to utilise the provisions of the Housing Act 1985 or the Competition Act 1998.
Civil Procedure Rules (CPR): In challenging the covenant there is also the option of court proceedings under section 8 of the CPR for declaratory relief, although most parties will go through the Lands Tribunal process.
As always it’s important to seek specialist legal advice at the earliest opportunity to best protect your interests.
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 – £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.