How Restrictive is a Covenant?
March 2004
In these days of decreasing numbers of homes for sale, and an increasing population, many people are trying to snap up land to build upon.
There aren’t many plots available and those there are go very quickly, but a leading law firm has warned potential buyers to beware of pitfalls such as covenants before rushing into a purchase.
Covenants could not only just affect the small one-off home builders, they could also affect large scale property developers and commercial land buyers – who might find there not be able to do what they want with their new land because of existing restrictions.
An example of a covenant could be a land owner selling off land in plots for domestic development. Upon each sale he imposes a restrictive covenant that no greenhouse may be built upon that plot without his prior written consent.
He sells the entirety of his land. Therefore he is no longer able to enforce his covenants; the benefit of the covenants will probably have passed to the purchaser of the plots and they would be able to enforce the respective covenants against each other.”
Stuart Palmer, partner at Crutes Law Firm, explained: “It is almost invariably the case that an owner of land is faced with restrictions on what he or she can do on, or with it. Some restrictions are imposed by statute, for example the Town and County Planning Acts. But others are imposed as covenants by the former owner of the land.
The question is, to what extent is the present owner of that land bound by such covenants?”
The situation is straightforward where it is the original purchaser (who is known as the covenantor) who entered into the covenant. The restriction may be enforced against him or her by the person (known as the covenantee) for whose benefit the covenant was actually given in the first place.
But what if either the current landowner is not the covenantor or the person seeking to enforce it is not the covenantee?
Stuart said: “If the present landowner is not the covenantor the general rule is that where a covenant is restrictive or negative in nature (a covenant which imposes an obligation to spend money is unlikely to be restrictive or negative), relates to land and the current landowner has notice of it prior to purchasing the land, then he or she will, on the face of it, be bound by that covenant.
“Where the person seeking to enforce the covenant is not the original covenantee, the situation is even less straightforward. First, he or she must be able to show that the benefit of the covenant has passed to them.
“Secondly, he or she must own the land (or part of it) which was intended to be benefited by the covenant. Thirdly, and depending on the nature of the covenant, it may be relevant to consider the proximity of that land to the land subject to the covenant.
“The matter of covenants is far from straightforward; the lesson is simple – if in doubt, seek legal advice.”
Crutes is a law firm with offices in Newcastle, Middlesbrough and Carlisle. The multi-site practice has grown steadily since it was founded in 1907 and employs 160 staff with 18 Partners.
Crutes specialises in work for insurers, the public sector, the Government, housing associations and commercial organisations and has scored a succession of new client wins in recent months. It has continued to grow its reputation, increase fee income and recruit new employees in the last 12 months, making the move a necessity.
« Back to 2004 Archives |
