Considering the purchase of a property burdened by a restrictive covenant? Thoughts from industry professionals
In the world of property transactions, restrictive covenants are legal restrictions that can significantly impact a property's use and value. These private limitations, often attached to the land, are binding obligations that typically run with the title, meaning all subsequent owners must comply with them.
When buying a property, it is crucial to be aware of any restrictive covenants that may be in place. A solicitor should provide a "report on title" detailing any such covenants and their associated risks. Common examples include prohibitions on using the land for anything other than a private residential dwelling, limits on the number of properties constructed, restrictions on building height, and rules around fencing, parking, or keeping certain animals.
Restrictive covenants can affect property use by restricting development options, such as preventing commercial use or limiting building size, layout, or density. This can complicate obtaining planning permission or require modifications to proposed developments, sometimes leading to additional costs or delays. If a covenant is valid and enforceable, developers or owners may have to seek formal release from it or obtain indemnity insurance if the beneficiary cannot be identified.
Regarding property value, restrictive covenants may decrease value if they overly limit potential uses or development of the land, reducing the market's appeal or utility. However, they can also maintain or enhance value by preserving neighbourhood character or preventing undesirable developments that could detract from nearby properties. For instance, a covenant limiting land use to parking only restricted a developer from fully utilizing a prime site until successfully modified through legal channels.
When selling a house with a restrictive covenant, it is obligatory to declare it at the earliest reasonable opportunity. Buyers should take advice from their solicitor about how restrictive or enforceable the clauses are. Some restrictive covenants may have religious restrictions, forbid certain types of businesses, or limit the number or type of pets that can be kept.
Removing a restrictive covenant can be a lengthy and expensive process and is not normally considered worth the trouble. However, if a covenant is found to be unreasonable or if it conflicts with other legal obligations such as planning laws, it can be challenged or overturned with legal help. In some cases, a court application may be made to the Upper Land Tribunal if the person who put the covenant in place cannot be found, or there is a dispute.
It is essential to note that most properties do not have any restrictive covenants, but those that do must be taken seriously as they can be enforced by law. Liz Williams, a land and property acquisition specialist with over 30 years of experience in housing, land, housebuilding, construction, and property, emphasises their commonality.
In a recent case (Cheung & Anor v Mackenzie in 2022), a single property with a 1947 restriction was successfully modified by the courts. This serves as a reminder that while restrictive covenants can pose challenges, they are not insurmountable obstacles.
In summary, understanding restrictive covenants is crucial for both buyers and sellers in property transactions. They can significantly impact a property's use and value, and it is essential to declare them and seek legal advice when necessary.
- In the realm of real-estate, certain legal restrictions known as restrictive covenants often impact a property's potential uses and value.
- These private limitations are typically attached to the land and are binding obligations that subsequent owners must comply with, as they run with the title.
- When buying a property, it is advisable to be aware of any restrictive covenants and their associated risks, which a solicitor should detail in a "report on title".
- Restrictive covenants can affect property use by limiting development options, such as preventing commercial use or restricting building size.
- If a covenant is found to be unjust or conflicts with other legal obligations like planning laws, it can be challenged or overturned with legal assistance.
- Removing a restrictive covenant can be costly and time-consuming, but it may be necessary if the covenant is deemed unreasonable or if it conflicts with other legal obligations.
- When selling a house with a restrictive covenant, it is obligatory to declare it at the earliest possible opportunity, and buyers should seek legal advice regarding the covenant's enforceability.
