Your property is likely to be one of your most valuable assets and it is important that you know what you can and cannot do on your property and what your neighbours can and cannot do on their properties.
When you buy a property there will often be covenants affecting the land. There are two types of covenant. A Positive Covenant imposes an obligation to do something, such as to maintain and repair a fence or to build something or to incur expenditure on the land. A Restrictive Covenant prevents you from doing something to or on the property, such as making alterations or building on the property, without the consent of an identified person, or limiting the use of the land. However, establishing whether the covenant is positive or restrictive is not always easy. For instance, a covenant to keep and maintain a building in proper repair, whilst on the face of it imposing a positive obligation, could be interpreted as a Restrictive Covenant not to further build on the land.
If you breach any restrictive covenants (even if planning permission is granted for the works) you could be faced with the prospect of expensive court proceedings and the possibility of an injunction being made against you. If you have already built something on the land then you could be ordered to remove it at considerable expense.
What is a Restrictive Covenant?
A restrictive covenant is an agreement between the owners of two neighbouring properties, Party A and Party B, to the effect that Party A shall not use their land in a particular manner. For example, Party A may covenant that they will not erect or make any external alterations to the property without Party B’s consent. There may be very good reasons for such a restrictive covenant, for instance, to protect a view or preserve the locality. That would constitute a contract between Party A and Party B and be enforceable by Party B against Party A if Party A were to make alterations.
As a matter of contract law, no third party purchasing either Party A’s land or Party B’s land would be affected by an agreement to which they was not a party. However, as a matter of land law, Party B’s interest in the performance of Party A’s promise not to do something (the restrictive covenant) is not regarded as a purely contractual interest. Party B has in some sense a proprietary interest in Party A’s land to the extent that they enjoys a contractual right to control activities over that land.
In order to examine whether third party purchasers of Party A’s and Party B’s land will be affected by the restrictive covenants, we have to examine whether (a) the benefit (i.e. Party B’s right not to have any alterations made to Party A’s property); and (b) the burden (i.e. Party A’s obligation not to make alterations to their property), of the covenants are transferred.
The Burden
The burden of the restrictive covenant only passes if the purchaser has “notice” of the restrictive covenant. Therefore, any purchaser who has no notice of the restrictive covenant will not be bound by it. However, a purchaser would normally have notice of such a covenant if, for instance, it had been registered at the Land Registry.
If the purchaser did not have notice of the covenant and breached it, Party B would have no claim against the purchaser; but Party B would have a claim for breach of contract against Party A. For their reason, Party A would have an interest in notifying the purchaser of the property of the restrictive covenant, to ensure that the purchaser was bound by it. Further, Party A would normally seek in the contract for sale of the property an indemnity from the purchaser so that if the purchaser were to breach the covenant, and if Party B were to sue Party A, Party A could then sue the purchaser.
The Benefit
The benefit of a restrictive covenant is not normally registered at the Land Registry. Often in the case of historical covenants, it can be very difficult to identify who has or may have the benefit of a restrictive covenant if, for instance, the land has been sold off and divided up.
In order for the benefit of a restrictive covenant to pass to a subsequent purchaser, the covenant must “touch and concern” the land and not merely be of personal benefit to Party B. In Sutton and East Surrey Water Plc v Kilby [2017] land was subject to an historical covenant that no building should be erected except for a house whose elevations needed to be approved by an individual and also not to cause annoyance to the named individual or adjoining owners. The Upper Tribunal decided that there was no evidence of an intention to benefit the land rather than the named person personally.
Not only must the covenant “touch and concern” the land, but the covenant must either be annexed to the land or the benefit of the covenant must have been expressly assigned by Party B to the purchaser.
Annexation involves the attachment of the benefit of the restrictive covenant to the land forever as opposed to assignment which involves the conferment of the benefit of the covenant upon a person. Annexation can arise either (a) expressly, for example, if the conveyance containing the covenant contains a clear and formal expression of intention that the benefit should run with the land; or (b) under section 78(1) of the Law of Property Act 1925 which provides that a covenant which “touches and concerns” the land shall be deemed to be made with the covenantee and their successors in title.
Even if a purchaser of Party B’s land cannot claim to enforce the restrictive covenant on the basis of an effective annexation, they may be able to show that the benefit of the covenant has been expressly assigned to them. Their involves a formal assignment of the benefit of the covenant as part of the sale contract between Party B and the purchaser. Since assignment involves the conferment of benefit upon a person (rather than attachment of a benefit to land as with annexation), an assignment is required for each new purchaser of the property. If there is a break in the chain of assignments then the benefit of the restrictive covenant would not pass on assignment.
Is a Restrictive Covenant enforceable?
Clearly restrictive covenants are important since they affect the way in which property owners can deal with their properties. A restrictive covenant preventing Party A from making structural alterations to a property without Party B’s consent can be particularly problematic if, for instance, Party A has sold their property to a purchaser, the property is in a state of disrepair and requires improvement. The purchaser of Party A’s property can be in a very difficult position, particularly if Party B or any successive owner of the property withholds consent.
Restrictive covenants do affect the value of properties. Party B, or a purchaser of their property, will be keen to ensure that the restrictive covenant is enforceable to allow control over Party A’s property. Party A, or a purchaser of their property, will be keen to ensure that the restrictive covenant is not enforceable.
The law relating to restrictive covenants is complicated and, since each case turns upon its own facts, legal advice should be sought immediately. However, the existence of restrictive covenants does not necessarily mean they are binding or enforceable and, in recent years, restrictive covenants have been successfully attacked in the courts. Successful challenges to the enforceability of restrictive covenants includes those made on the basis that the restrictive covenant does not “touch and concern” the land which involves questions relating to the construction of the particular restrictive covenant.
In Churchill v Temple [2010] in which one of our partners, John Turner, acted for the successful claimant, the High Court held that a covenant requiring consent from the Vendors did not extend to a requirement to obtain consent from successors in title to the Vendor’s property and that the covenant was discharged on then death of the original Vendor.
The Upper Tribunal (Lands Chamber)
The existence of a restrictive covenant affecting land can, in certain circumstances, place a long-term fetter upon the kinds of activities which may be conducted on that land. At the time of drafting the restrictive covenant, the parties rarely include any proviso for the covenants to cease in the event of later changes in circumstances. Where there appears to be a valid restrictive covenant, an individual can apply to the Upper Tribunal (Lands Chamber) to discharge or modify a restrictive covenant under section 84(1) of the Law of Property Act 1925. The Upper Tribunal has power to discharge or modify any restrictive covenants on the grounds:
- that by reason of changes in the character of the property or the neighbourhood or other circumstances of the case, the restriction ought to be deemed obsolete;
- that the continued existence of the restrictive covenant would impede the reasonable user of the land for public or private purposes without securing practical benefits to other persons;
- that the persons entitled to the benefit of the restrictive covenant have expressly or impliedly agreed to the modification or discharge;
- that the proposed discharge or modification will not injure the persons entitled to the benefit of the restriction.
Where a restrictive covenant is modified or discharged the party with the benefit of the restrictive covenant may be entitled to compensation to reflect any actual losses sustained as a result. Typically, compensation (if any) is for the diminution in value of the property which loses the benefit of the restrictive covenant.
Key Contacts
If you are considering carrying out building works to your property and require advice on covenants, our experienced team can help you through all stages of the process.
For more information about how we can help you in relation to property disputes or for advice on covenants please contact John Turner on 020 7462 6029 or Mark Brassey on 020 7462 6027.
