166 thoughts on “Restrictive covenants on property”
Hi I’ve inherited my parents property and hoping to sell but have noticed a restrictive covenant in the deeds stating no trade or business allowed .As a lot of properties in the area have changed from residential to business would an indemnity insurance be a good idea to appeal to both residential and business buyers in case of a possible breach of covenant?
Whether or not insurance is a good idea or not will really depend on what your buyer is prepared to accept and whether or not any buyer’s mortgage lender would accept it.
Old and obsolete restrictive covenants are fairly regularly insured against. However, it really comes down to what anyone buying the property is prepared to agree.
I inherited a cottage from my mother which I am now planning to sell. The Land Registry document prominently features a restriction on building on part of the land. Digging back in time through the Deeds turns up a Deed of Partition from 1899! This indicates an area in the corner of the front garden next to an alleyway between the partitioned properties. But no reason is given for the restriction.
I’m concerned that having this ban on development (even in an area unlikely to be built on) could affect the value. How easy is it to remove such a covenant? I assume it’s obsolete but that’s hard to prove if there’s not a reason – or person who knows – why it’s in place?
How easy or difficult it is to ‘remove’ a restrictive covenant will depend on a whole number of circumstances. Further, if there needs to be an application to the Tribunal to do this, there would be a cost implication in terms of legal fees.
It sounds as though the restriction is very old. Sometimes insurance is available to cover the risk of enforcement. Because restrictive covenants do not simply disappear after a period of time, as you have now discovered, very old restrictions can remain binding, or at least are a relevant consideration for a buyer in case they are enforced. Whilst you can never be sure whether or not someone with the benefit of a restrictive covenant might not try to enforce it at some point in the future, often very old and/or obsolete restrictions can be insured against. This sort of insurance policy is fairly commonplace in conveyancing and normally the cost of such a policy would be a fraction of the cost of trying to remove the restriction via a Tribunal application. As long as such a policy would be acceptable to a buyer and any lender (and they usually are) that normally is all that is required to proceed with the sale.
We suggest you have a chat with your conveyancing solicitor with respect to the availability of insurance in your circumstances
When I sold a freehold house I had a restrictive covenant put on the large rear garden, stating that if any of the land was ever sold off for building purposes, I would be entitled to 50% of the current market value of that land.
The house / garden in its entirety is currently being sold to a new owner. How do I ensure that the covenant continues or is this just something that will be picked up by the purchasers solicitor through Land Registry searches.
That does not sound like a restrictive covenant. A restrictive covenant is a requirement for the owner of the land subject to it not to do something (positive obligations do not pass with land).
What it sounds like has been agreed is some sort of overage agreement. These are not uncommon but can cause headaches for property owners. In short, an overage is normally a right for a seller of land to ask for something more in the future. For example, a sale of development land at a particular low price might be subject to a promise on the part of the buyer that if they obtain planning permission to develop, something more is paid to the buyer. That promise is normally protected with a restriction registered at the land registry.
We personally would not leave matters to chance and would make contact with the seller now. Whilst there is every possibility that a buyer of the land would identify the matter and want to see evidence that any restriction protecting the overage agreement has been complied with, and may even want it removed, things can sometimes go wrong and it is not guaranteed that it will be picked up.
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Hi I’ve inherited my parents property and hoping to sell but have noticed a restrictive covenant in the deeds stating no trade or business allowed .As a lot of properties in the area have changed from residential to business would an indemnity insurance be a good idea to appeal to both residential and business buyers in case of a possible breach of covenant?
Thank you for your comment.
Whether or not insurance is a good idea or not will really depend on what your buyer is prepared to accept and whether or not any buyer’s mortgage lender would accept it.
Old and obsolete restrictive covenants are fairly regularly insured against. However, it really comes down to what anyone buying the property is prepared to agree.
I inherited a cottage from my mother which I am now planning to sell. The Land Registry document prominently features a restriction on building on part of the land. Digging back in time through the Deeds turns up a Deed of Partition from 1899! This indicates an area in the corner of the front garden next to an alleyway between the partitioned properties. But no reason is given for the restriction.
I’m concerned that having this ban on development (even in an area unlikely to be built on) could affect the value. How easy is it to remove such a covenant? I assume it’s obsolete but that’s hard to prove if there’s not a reason – or person who knows – why it’s in place?
Thank you for your comment.
How easy or difficult it is to ‘remove’ a restrictive covenant will depend on a whole number of circumstances. Further, if there needs to be an application to the Tribunal to do this, there would be a cost implication in terms of legal fees.
It sounds as though the restriction is very old. Sometimes insurance is available to cover the risk of enforcement. Because restrictive covenants do not simply disappear after a period of time, as you have now discovered, very old restrictions can remain binding, or at least are a relevant consideration for a buyer in case they are enforced. Whilst you can never be sure whether or not someone with the benefit of a restrictive covenant might not try to enforce it at some point in the future, often very old and/or obsolete restrictions can be insured against. This sort of insurance policy is fairly commonplace in conveyancing and normally the cost of such a policy would be a fraction of the cost of trying to remove the restriction via a Tribunal application. As long as such a policy would be acceptable to a buyer and any lender (and they usually are) that normally is all that is required to proceed with the sale.
We suggest you have a chat with your conveyancing solicitor with respect to the availability of insurance in your circumstances
Many thanks, Mark,. Very useful.
When I sold a freehold house I had a restrictive covenant put on the large rear garden, stating that if any of the land was ever sold off for building purposes, I would be entitled to 50% of the current market value of that land.
The house / garden in its entirety is currently being sold to a new owner. How do I ensure that the covenant continues or is this just something that will be picked up by the purchasers solicitor through Land Registry searches.
Thank you for your comment.
That does not sound like a restrictive covenant. A restrictive covenant is a requirement for the owner of the land subject to it not to do something (positive obligations do not pass with land).
What it sounds like has been agreed is some sort of overage agreement. These are not uncommon but can cause headaches for property owners. In short, an overage is normally a right for a seller of land to ask for something more in the future. For example, a sale of development land at a particular low price might be subject to a promise on the part of the buyer that if they obtain planning permission to develop, something more is paid to the buyer. That promise is normally protected with a restriction registered at the land registry.
We personally would not leave matters to chance and would make contact with the seller now. Whilst there is every possibility that a buyer of the land would identify the matter and want to see evidence that any restriction protecting the overage agreement has been complied with, and may even want it removed, things can sometimes go wrong and it is not guaranteed that it will be picked up.