What Is A Deed Of Covenant?
If you’re thinking of purchasing a leasehold property, one term you’ll uncover quite quickly is “Deed of Covenant.” What is a Deed of Covenant, though? How does it affect how you use your property? What happens if you sign the deed and then regret it? This guide will help you understand more about a covenant deed and whether or not purchasing a property with one is the right choice for you.
What Are Deeds Of Covenant?
To better understand the common deed of covenant meaning, it may help to break the terminology down a bit. What is a deed? Meaning of a deed – in terms of property in the UK – is a legal document that formally transfers, conveys, or confirms ownership or other rights related to a property. Property deeds are essential instruments used to establish, record, and protect property interests, and they serve as evidence of ownership or certain legal obligations. There are lots of different kinds of deeds, including the Deed of Property Conveyance, the Deed of Certificate Release, and the Deed of Covenant.
The deed isn’t the only part of this phrase, though. There’s also “covenant,” meaning a legally binding agreement or promise that imposes specific obligations, restrictions, or requirements on the owner or occupier of a property.
What is a covenant deed, then? It’s a deed used to impose restrictions, obligations, or requirements on the property owner.
Why Do Leasehold Properties Usually Come With Covenant Deeds?
Leasehold properties usually come with a deed of covenant because they are part of the legal framework that governs the relationship between the leaseholder (meaning the person who holds the lease) and the freeholder (the owner of the land). These covenant deeds are included in the lease agreement and outline the rights, responsibilities, and restrictions that both parties must adhere to during the lease term. They are essential for maintaining order and harmony within the property and protecting the interests of all parties involved.
Here Are Some Reasons Why Deeds Of Covenant Are Commonly Present In Leasehold Properties:
- Property Management: Covenant deeds help regulate the use and maintenance of the property, ensuring that it is well-managed and properly cared for by the leaseholder.
- Shared Spaces: Many leasehold properties are part of developments with shared spaces or facilities. Covenant deeds outline the rules for the use, maintenance, and contribution to these shared areas.
- Preventing Nuisance: Covenant deeds can include clauses that prohibit activities that may cause a nuisance or disturbance to other residents within the development.
- Property Value Protection: By including restrictions and obligations in covenant deeds, the freeholder aims to protect the value of the entire development and maintain the overall appeal of the property.
- Consistency: Covenant deeds provide a consistent set of rules and guidelines that all leaseholders within the development must follow, ensuring fairness and uniformity.
- Avoiding Conflicts: Covenant deeds help prevent disputes and conflicts between leaseholders and the freeholder by establishing clear expectations and obligations.
- Compliance with Planning and Zoning Regulations: Some covenant deeds are imposed to ensure that the property’s use and development are in line with local planning and zoning regulations.
- Shared Responsibilities: Covenant deeds may outline the responsibilities of the leaseholder and the freeholder for various aspects of property maintenance and management.
Overall, covenant deeds play a crucial role in leasehold properties by establishing a structured and regulated environment that benefits both leaseholders and freeholders. It is essential for leaseholders to thoroughly understand and abide by these covenant deeds to maintain a harmonious living environment and comply with their contractual obligations.
Positive And Negative Covenants
Some of the covenants you’ll find in these deeds are positive, and some can be quite negative. Those that are positive are those that are designed to help all live together peacefully. These are the entries that cover who is required to pay for maintenance, what larger works should be put in place, how to pay service charges, how to care for communal areas, and how to maintain certain aspects of the property (like the cladding, for instance).
There are also negative covenants, though. These are those that bar leaseholders from doing certain things like sub-letting the property, owning pets, running a business, or restrictions on certain parts of the leasehold property.
What Does It Mean When You Sign A Deed Of Covenant?
When you buy a leasehold property and sign the Deed of Covenant, both types of covenants (positive and negative) are transferred to you (the leaseholder). Essentially, it’s a contract that comes from the freeholder, and it requires you to comply with these covenants. A signed deed is legally enforceable.
Failing to adhere to any terms outlined in that contract could lead to a claim for damages or even an injunction. Since leasehold properties under the same freehold can vary significantly, each one likely has unique details and requirements.
This is why it is crucial to have a qualified conveyancer or conveyancing solicitor with the appropriate expertise carefully review this and other legal documents before you proceed with signing. For instance, it’s essential to understand the implications of any certificates of compliance if present.
Sometimes, problems come up if one requirement depends on another. For example, if there’s some type of restriction on the Title Deed, registering that property might force you to get a certificate of compliance because you have to demonstrate that you’ve followed the requirements listed.
What If You Violate A Deed Of Covenant?
If you violate the Deed of Covenant, you could face various consequences, depending on the nature and severity of the breach, as well as the terms outlined in the specific covenant. If the breach results in financial losses or damages to the party enforcing the covenant, they may seek compensation from you to cover their losses. Moreover, the injured party may seek a court injunction to stop you from continuing the violation or to enforce specific actions required by the covenant.
In severe cases, repeated or significant breaches of the covenant may result in the freeholder seeking to terminate the lease agreement, leading to the loss of your leasehold rights.
Keep in mind that if the injured party takes legal action against you for the breach, you may be responsible for covering their legal costs in addition to any damages or other remedies sought.
Where Do I Find The Deed Of Covenant?
If you need to review the Deed of Covenant, you can usually find it attached to the management pack for the leasehold near the LPE1 Law Society Leasehold Form. If you don’t find a deed of covenant in the leasehold paperwork, you should ask for a completed leasehold management pack, as it is legally required that you be able to view it.
Inside, you’ll find the details of the freehold and the leasehold, any background information that surrounds the contents of the deed, those who are parties to the agreement, any definitions you need to know, the terms the covenant covers, and an execution clause.
You cannot choose not to sign the deed. That act, in and of itself, breaches the contract. The freeholder won’t allow you to move forward with the transaction in that case.
Should I Choose A Property That Requires A Deed Of Covenant?
Whether or not you should choose a property with a Deed of Covenant depends on various factors, including your preferences, needs, and willingness to comply with the specific terms outlined in the covenant. Before you do so, carefully review and understand the terms of the Deed of Covenant.
It’s important to remember that deeds of covenant aren’t always restrictive. They typically accompany properties with shared spaces or amenities, such as communal gardens or parking areas. If access to such shared facilities is essential to you, a property with a covenant may be worth considering. More than that, though, some properties with Deeds of Covenant may have historical significance or be part of conservation areas, which can offer unique character and charm. If you appreciate such features, the covenant may be a minor trade-off for the property’s uniqueness.
As you work to decide what is right for you, consider whether you are comfortable with the obligations and restrictions imposed by the covenant. If you prefer the freedom to make significant changes to the property or use it as you see fit without restrictions, a property with a Deed of Covenant may not be the best choice for you. Be sure you consider your long-term plans for the property. If you envision staying in the property for a relatively short period, the covenant’s restrictions may have a lesser impact on your overall experience. The most important thing you should do, though, is seek advice from a qualified conveyancer or legal professional to understand the implications of the Deed of Covenant fully. They can help you evaluate the covenant’s impact on your property ownership and lifestyle.