Restrictive covenants and your options

Commercial property lawyer Graham Goldspink outlines the options for purchasers of freehold property when there are enforceable restrictive covenants.

When buying freehold land, it is important to identify as early as possible whether there are any existing binding restrictive covenants. A covenant can affect the potential use of the land and ultimately its development and resale value.

A restrictive covenant may not be a complete barrier to buying and using the land for your purposes. Commercial property lawyer Graham Goldspink outlines the options for negating the effect of the covenant on freehold land. (Covenants within leases and leasehold land are outside the scope of this article.)

A restrictive covenant is created by deed, where one party agrees with another to restrict the use of its land for the benefit of the other party or parties. By its nature, such a covenant is negative rather than positive. The obligation to observe a restrictive covenant may bind successors in title.

Typical restrictive covenants include:

As part of the due diligence process in acquiring the land, your solicitor will initially check if any restrictive covenants exist and, if they do, whether the restrictive covenant is enforceable. It is important to realise that, whilst these covenants are enforceable between the original parties as a matter of basic contract law, they can also be enforceable by successors in title.

If a problem arises due to an enforceable restrictive covenant on your land, there are a number of options:

Insurance is particularly useful where a long term solution is required or a funder or mortgagee is involved.

Please note that if insurance is contemplated, this should be investigated as the first option before any approach is made to any third party (see below).

This option will only be effective and should only be attempted in limited circumstances where there is a high degree of certainty as to the covenant, the relevant parties and the extent of the lands involved.

The Lands Tribunal can discharge or modify the restriction if one of the following grounds applies:

However, an application to the Lands Tribunal is often a long process particularly in a disputed case where months of preparation and process must be followed.

To conclude, the existence of a restriction may not be a barrier to using the land for a prohibited use or for breaching the terms of the restriction. Care should be taken to carry out due diligence to determine the extent of the restriction but in a manner that does not negate possible solutions. Keystone Law can assist you in carrying out the correct due diligence and finding a solution to any problem covenants where possible.

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This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.

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