What Is A Restrictive Covenant?
Think you own your home? It doesn’t mean the same thing for every person, especially if you have a restrictive covenant in place. What are restrictive covenants? What does covenant mean when it comes to what you can and can’t do with your house? Where do you learn how to get around restrictive covenants so you can do what you’d like with your house? This guide can help you sort it all out.
What Is A Restrictive Covenant?
What does a covenant mean when it comes to real estate? The best way to define covenant is to use the word condition there instead. Solicitors and estate agents use the term restrictive covenants meaning conditions that are included in a property’s deeds that prohibit certain actions you can take about your home or your land in certain circumstances. Covenants on the property can include several things. Covenants might mean you can’t make any changes to the property itself. For example, if you wanted to convert your home into flats instead, and you have certain property covenants in place, making that conversion would make you guilty of breach of covenant.
You could have other kinds of property covenants in place too. You could have one that prevents you from building on some land that you own. You could also have one that prevents any kind of business from being operated on your land. The key to remember is that the covenant def means there are certain things you simply cannot do. Restrictive covenants on property mean you have actions you cannot take on that property that many others take on a routine basis with their home on their property.
Why Covenants On Property Exist
There are several reasons people have restrictive covenants on their property. In most situations, it’s so the property stays at a certain standard for everyone who lives there. For example, developers or property management companies might add a restrictive covenant to a transfer deed so the owners don’t create a change that would negatively impact a neighbourhood, especially if the development has a certain uniformity to it. This could be something like ensuring security cameras aren’t in the front of the house or making certain no one parks a boat in the front garden. You could even have a restrictive covenant against keeping livestock in the backyard. Developers and managers do this so the property value of all of the homes in that area doesn’t plummet as a result of one person’s actions.
There’s one other key reason covenants might be placed on a home or a piece of property. In some cases, landowners may place them on a part of the property they intend to sell to help them retain some control. For example, if a landowner has quite a large piece of property, and they intend to allow one small section to be developed, they may have some ideas about how it should be developed and what the final product should look like. As a result, they play a covenant, meaning they still have some control over what the final product might be.
Where You Might Restrictive Covenants
Some believe restrictive covenants are only placed on a new home in new developments. That simply isn’t the case, though. Instead, they can be on almost any home or property in the UK. The time the covenant was set into action doesn’t affect whether or not it’s valid. While some very old covenants are not considered enforceable because the original party cannot be found or even traced or the covenant is tough to apply because it’s no longer historically appropriate, you’ll still find some very old restrictive covenants across the UK.
What Does The Covenant Mean For Potential Homeowners?
If you buy a home with a restrictive covenant, know that they always go with the property. They won’t just apply to you or the original purchaser. They apply to everyone who ever owns the property. Many people ask “Should I Buy a House with a Restrictive Covenant?” It depends so much on the covenant itself. If you’re considering a purchase, it’s crucial that you direct your conveyancing solicitor to thoroughly scrutinise the property deeds and bring attention to any covenants before finalising the transaction. Once you’ve signed the title deeds, you’ll bear responsibility for any breaches that may arise.
You’ll be able to see those covenants listed in the deed of covenant. What is a covenant deed? Officials use the term deed of covenant meaning the legally binding agreement or obligation that is attached to a property’s title. In other words, it lists the restrictions or requirements that the property owner must adhere to. If you’re working to purchase a property, your solicitor might be able to gain access to the deed of covenant for you. In most situations, you’ll find the covenant deed on the TP 1 form. Completed example TP1 forms are available online if you want to better understand where to look for these covenants. If you’re just browsing properties online, you’ll have to work through HM Land Registry to see the deeds of the covenant on various properties you’re considering. There is no way to view house deeds online for free in the UK. You will have to pay a fee to see a covenant on a house you’re considering.
Remember that these deeds don’t just apply to freehold properties. Instead, you can have a deed of covenant on a leasehold, too.
If you’re still not sure whether to make this kind of purchase, it is essential to verify the current holder of the “benefit of the covenant.” Typically, this lies with the present landowner, but it could have been transferred to another individual or a private company. The party possessing this benefit will be responsible for enforcing any breaches of the covenant and addressing any inquiries or applications.
It is also crucial to consider whether a property’s value may be impacted in the future. This scenario may arise if there is a covenant in place that prohibits certain alterations or construction work, such as building an extension. In some instances, mortgage lenders may refuse to provide loans for properties where a covenant is believed to have a detrimental effect on potential future sales.
In such a situation, one possible course of action would be to communicate with the seller or the “successor in title” and inform them that you cannot proceed with the purchase if they insist on upholding the covenant. If the seller realises that the covenant could impede their ability to sell the property, they might be tempted to remove the restriction.
Who Enforces Restrictive Covenants?
If you’re thinking of buying a property with a restrictive covenant, or you already own one, you probably have lots of questions about enforcement. Do councils enforce restrictive covenants? If so, how do councils enforce restrictive covenants? Can a neighbour enforce a restrictive covenant? In most cases, the answer to both of these things is no. Typically, only the person entitled to the benefit of the covenant can enforce it.
If there is someone who is entitled to that benefit, though, they can enforce it and take action against you. If you possess property and unintentionally or intentionally violate a restrictive covenant, you may be compelled to reverse any unauthorised alterations (like dismantling an extension), incur a substantial financial penalty (often amounting to thousands of pounds), or even encounter legal consequences if the other person is entitled to that benefit. It’s important to note, though, that in situations where an owner has breached a covenant for more than a year without any objections and subsequently intends to sell the property, they should have the option to obtain restrictive covenant insurance as a safeguard for their actions.
How To Remove Restriction On Property
Imagine you bought a property with a restrictive covenant, but you’d like to have it removed so you can make some changes or alterations. In the UK, removing a restrictive covenant on a property can be a complex legal process. First, you need to understand who benefits from the covenant. You’ll also need to find out who may be negatively affected by it. This typically requires examining the original documentation, such as the property deeds or title register. Once you’ve done that, you’ll want to contact the parties benefiting from the covenant and negotiate their agreement to remove or modify it. This can involve demonstrating that the covenant no longer serves its intended purpose or that the circumstances have significantly changed. If an agreement is reached, a legal document called a “Deed of Release” or “Deed of Variation” is prepared. This document outlines the agreed-upon changes to the covenant and is signed by all relevant parties. If an agreement cannot be reached or if one of the parties refuses to cooperate, you may apply to the Lands Tribunal to either remove or modify the covenant. This requires presenting a case with supporting evidence and legal arguments. If the Lands Tribunal or a court determines that the covenant is obsolete, unenforceable, or unjust, they may issue a court order for its removal or modification.
What If You’ve Already Made Changes?
If you make changes that go against your restrictive covenant, no one may notice until you sell your house. During the process of transferring property ownership, your solicitor will verify if the relevant covenants are recorded on the land charges register. They will also examine the wording of the covenant to ensure its accuracy and enforceability.
Once the likelihood of enforceability is established, the conveyancer will typically explore insurance options to cover potential liabilities in case of future breaches. This insurance can encompass damages, compensation, costs of alterations, reduction in property value, and legal expenses incurred.
Obtaining restrictive covenant indemnity insurance is only possible if a covenant has been violated for a minimum of 12 months without any complaints. Once secured, the insurance policy remains in effect indefinitely and can usually be transferred to subsequent property owners. The cost of these policies varies based on the number of breached covenants and the perceived level of enforcement risk. Fees can range from approximately £50 to several hundred pounds.
Who Should Notify You Of Restrictive Covenants?
Your solicitor is the individual wholly responsible for pointing out any restrictive covenants on a property you’re considering for purchase. If they miss one, they’re responsible for the problem. You can complain to the Legal Ombudsman if they didn’t point that out to you, and they could be required to compensate you up to £50,000.
If you find yourself in that situation, before involving the Legal Ombudsman, it is advisable to try resolving the issue directly with the solicitor. Express your concerns in writing and provide them with an opportunity to address the matter. Next, you’ll want to collect all relevant documentation related to your complaint, including correspondence, contracts, invoices, and any other supporting evidence. Make sure to have the details of the solicitor and their firm readily available. Make sure you’re aware of the time limit for making a complaint. Typically, you have six years from the date the problem occurred or within three years from when you became aware of it to complain to the Legal Ombudsman. When you’re ready, visit the Legal Ombudsman’s official website and locate the complaint form. Fill it out with accurate details about your complaint. You can also contact the Legal Ombudsman directly to request the complaint form or seek assistance in filling it out. Once the complaint form is completed, submit it to the Legal Ombudsman. You can do this online, by email, or by post. Ensure that you provide all the necessary information and supporting documents. The Legal Ombudsman will acknowledge receipt of your complaint and assess whether they have jurisdiction over the matter. If they determine that your complaint falls within their remit, they will investigate it further. The Legal Ombudsman will reach a decision based on the evidence and information provided. If they find it in your favour, they may recommend remedies such as compensation or an apology from the solicitor.
Making The Decision To Purchase A House With A Restrictive Covenant
If you’re thinking of purchasing a home that has a restrictive covenant, the first thing you’ll want to do is talk to your solicitor. They will help you understand not only what it means, but also how enforceable it is and the risks if you do something that violates it. Once you have that information, consider the significance of the covenant about your intended use of the property. Determine if the restrictions are acceptable and if they align with your long-term goals and plans for the property. If you intend to make alterations or changes to the property that are prohibited by the restrictive covenant, you may need to seek legal advice, apply for a modification or removal of the covenant, or obtain necessary permissions. These processes can involve additional costs, such as legal fees or surveying expenses, which can impact your budget.
Don’t forget, too, to understand how the presence of the restrictive covenant may affect the future saleability of the property. Some covenants can impact marketability and reduce the pool of potential buyers, potentially affecting the property’s value. Just as important is the fact that lenders may have concerns about properties with restrictive covenants. If a covenant restricts certain uses or alterations, lenders may perceive a higher risk associated with the property. This could make it more challenging to secure financing or limit the number of mortgage options available to you.
Ultimately, the decision to buy a house with a restrictive covenant depends on your specific circumstances, risk tolerance, and long-term plans for the property. Seeking professional advice and carefully consider the potential consequences will help you make a decision that aligns with your needs and objectives. A house with a restrictive covenant shouldn’t necessarily be off your list of properties to purchase, but it’s something you’ll want to consider before you make a property purchase. It can simply affect so much of what you do with the property and what you hope to do with the property. Often, buying a home with a restrictive covenant in place is not the best way to start your journey down the path of home ownership, but make certain that you talk to a solicitor to get several different opinions on the issue before you finally make a purchase. If you truly believe the house is perfect for you despite the restrictive covenants, understand what they are and what they will limit for you before you make that purchase.