Demystifying Restrictive Covenants for Landowners

The law of restrictive covenants is a complex area and a mystery to many landowners, some of whom believe that restrictive covenants cannot be challenged, however, this is not the case.

Restrictive covenants affecting land arise out of an agreement that one party will restrict the use of its land in some way for the benefit of another’s land. The restrictive covenant is capable of being enforceable by one party’s successors in title against the other’s successors in title, as well as between the original contracting parties. Therefore, if your property is subject to a restrictive covenant and you wish to modify or develop it, you may discover that you are prevented from doing so if the covenant remains on the title.

Checking the title deeds to your property will quickly reveal whether there is a valid restrictive covenant which affects the land. If you find that your property is affected by a restrictive covenant, you should firstly consider whether indemnity insurance is available in order to provide you with protection in the event that someone with the benefit of the covenant takes legal action against you for breaching the covenant. If insurance is not available then you should try and identify the owners of the land which benefits from the covenant and try to reach a compromise with them which will usually involve the payment of money for the release of the covenant.  If neither of the above are possible, then an application can be made to the Lands Tribunal seeking an order, which wholly or partially discharges or modifies the restriction.

The most common grounds for the Lands Tribunal agreeing to discharge or modify the restriction are that the restriction is obsolete due to the change in the nature of the neighbourhood since the time it was originally imposed, or that the restriction prevents the reasonable use of the property and modification would not result in those entitled to the benefit of the covenant losing something which provided a practical benefit of substantial value, and, money would be an adequate compensation for any loss suffered.

An application to the Lands Tribunal is a lengthy process sometimes taking in excess of 2 years and can prove to be very costly. Also, the result of an application to the Lands Tribunal is by no means certain, there is a great deal of discretion given to the Lands Tribunal to assess what they believe to be a practical benefit of substantial value.

An applicant will need to instruct an expert to report on whether the person entitled to the covenant would lose any practical benefit of substantial value. It is the expert’s responsibility to calculate any decrease in value which the proposed development might have on the land entitled to the benefit of the restrictive covenant.

Communication and negotiation are key in these situations; it is important to approach those with the benefit of the covenant and try to reach some sort of compromise. Providing them with a copy of the expert report is a good starting point. This may reassure the objector that they have nothing to fear in losing the benefit of the covenant.  If a compromise cannot be reached in the early stages and an application to the Lands Tribunal is made, negotiations between parties can continue right up to the final moments. Trial should be the absolute last resort for all parties concerned.

Compensation resulting from the removal or modification of a restrictive covenant is based upon the reduction in value of the property that had the benefit of the restrictive covenant.

It is also left to the Lands Tribunal to decide who pays the costs of the proceedings. More often than not the applicant will usually end up paying the costs of those who benefit from the covenant, whatever the outcome.

Categorised in: Residential Property

This post was written by Colemans Solicitors LLP