Buying a home, especially your first, is one of life's major milestones. While it's exciting and aspirational to be a house-buyer, the process can be fraught with pitfalls and problems.
For some buyers, a major problem is emotion: your heart takes over when house hunting and you fail to see all the issues with a property and the land upon which it is built. Some things may be fairly easily rectified, such as removing an olive green bathroom suite, or a clearing a garden full of brambles, but there are some parts of property law which can be a little more thorny. For example, restrictive covenants.
What Does a Restrictive Covenant Do?
A restrictive covenant is a clause in a property deed which imposes a limit or restriction on what the buyer is allowed to do with the land.
Common examples of restrictive covenants include restrictions or vetoes on the following:
- Development of land
- Extensions to buildings
- Business activity from the land or property
- The building of fences or walls above a specified height
- Keeping animals or pets
Restrictive covenants are handed down with the land each time it is sold. The owner of the land benefits from the restrictive covenant and the buyer of a building on that land is burdened by the restrictive covenant.
Do New Builds Come With Restrictive Covenants?
Many buyers assume that because a property is new it will not be subject to restrictive covenants. However, this is not the case. The Property Ombudsman frequently hears cases involving restrictions placed on new builds.
For example, in 2018 the Independent newspaper reported on the case of a couple who were assured that they would be able to keep their dog in the £550,000 new-build house they were interested in purchasing. However, after they had paid a £2,000 reservation fee, they were told they would need to apply for a dog permit. This meant that had the dog permit had not been granted, the dog would not have been allowed to live on the land.
Other examples of new-build restrictive covenants imposed by developers include restrictions on:
- Washing lines
- Garden sheds
- Parking caravans or motorhomes
- Certain types of garden plant
Developers sometimes suggest that restrictions are in place to maintain a particular layout or visual appeal. However, they may seem unfair, unclear or detrimental to the interests of owners. It is important that house buyers take legal advice before proceeding when a restrictive covenant is in place.
Check Before you Sign
While it's important to seek legal advice before signing any contract which relates to a property purchase, if your contract contains a restrictive covenant, it is essential to have the terms checked and explained to you.
As keen as you may be to buy the property, restrictive covenants can mean that the property might not be right for you in the long-term.
Can a Restrictive Covenant be Removed?
There are a number of ways to remove a restrictive covenant, even after the point of purchase.
- By applying to the lands chamber of the upper tribunal. However, this can be a long process which may prove costly.
- By applying to the land registry to remove a restrictive covenant if the freehold title shows the benefiting land and the burdened land have merged and are owned by the same person.
- By speaking directly to the owner of the land who has benefit and asking them to sign a deed of release.
- For very old deeds containing a restrictive covenant or in situations where the land has been transferred and split on many occasions, you, as the burdened party, can take out indemnity insurance. (See below).
Restrictive Covenant Insurance
Applying to end a restrictive covenant via the lands chamber can be problematic and time-consuming, and it can be even more difficult attempting to seek release from the land owner who has benefit. Taking out legal indemnity cover against the risk of a restrictive covenant being enforced may be appropriate in certain instances.
For instance, if a restrictive covenant had been put in place requiring you to seek consent for any building work on the land, this can prove problematic, particularly when the restrictive covenant was put in place many years ago. In many instances, new owners don't even realise a restrictive covenant is in place. If you carried out building work more than 12 months before deciding to sell your property and you were not aware of any restrictive covenant, you could be eligible to take out restrictive covenant insurance to protect you from any claim in respect of the new buildings.
The cost of such a policy and whether you would be eligible to purchase cover will depend on your individual circumstances. If you are thinking about taking out restrictive covenant indemnity insurance, it is important to seek legal advice at the earliest opportunity.
Does it Matter if a Restrictive Covenant is Ignored?
Many people ignore restrictive covenants in the hope they will not be monitored or enforced. This is risky and, if you breach a restrictive covenant, the land owner with benefit can apply to the court for damages.
The land owner could also apply for an injunction to stop you from carrying out certain actions on the land, for example if you have started trading from a building on land with a restrictive covenant in place prohibiting commercial activity, then the court could force you to cease trading.
Solicitors Have a Duty of Care to Inform Their Clients About Restrictive Covenants
If your conveyancing solicitor failed to notice and inform you of a restrictive covenant, you have the right to make a complaint to the Legal Ombudsman. However, the Legal Ombudsman only has the power to award compensation of up to £50,000 and, in some cases, the imposition and/or breach of a restrictive covenant can result in losses that far exceed this sum.
Legal Advice on Restrictive Covenants
When it comes to dealing with restrictive covenants, it is important that buyers employ the services of a good solicitor and do not simply take advice from the seller's legal representative.
Oratto's member lawyers are able to assist and advise on all legal issues relating to the purchase of property, including residential conveyancing contracts and Deeds of Trust. Contact Oratto today.