Breaching property restrictive covenants

A restrictive covenant is an obligation that can affect freehold land because conditions have been placed on its use in the past.

For example, a family may own a large field, which they sell to a house builder. However, because they intend to live next door on their farmland, they may insist that a covenant is included that prohibits the field land from being used for anything other than residential purposes.

Alternatively, a covenant may be included that states no houses built on the new site can ever be used for a business. In modern times, and given the advent of homeworking post-COVID, this restriction can cause an issue for many homeowners.

Another example of a restrictive covenant is when a building plot is sold, and the seller imposes a covenant that states only one house can be built on the plot. Many years later, a developer wants to do some infill building and build additional properties on the site. If the person with the benefit of the covenant is still around, they may be able to stop any further building and enforce the covenant.

This area of law is complex and fraught with difficulty and if you are the owner of land that has a covenant imposed and you are concerned that you might be breaching the covenant, or if you own a piece of land that has the benefit of a covenant that you might want to enforce in relation to neighbouring land, then you should always seek legal advice at the earliest opportunity from a lawyer who specialises in property disputes.

Are all restrictive covenants the same?

The simple answer is no. In this context, it is important to identify whether the covenant is negative or positive.

A positive covenant imposes an obligation to carry out some positive action concerning that land or requires the expenditure of money. It obliges the party with the burden of the covenant to actively do something rather than not do something.

In contrast, a negative and restrictive covenant restricts the use and enjoyment of the land.

This distinction is really important because when land is sold, depending on whether or not it is a positive or negative covenant, will determine whether the burden (the obligation to abide by the covenant) passes with the sale and whether or not it binds the new owners.

In brief terms, if it is a positive covenant, it does not automatically pass onto the new landowners and legally bind them. In contrast, if it is a restrictive covenant, it will bind a new landowner. Extreme care should be taken when the property is being passed on to a new owner as to whether positive covenants will be enforceable in the future.

How do I know if I'm affected by a restrictive covenant?

It should be obvious from the Land Registry title whether or not restrictive covenants affect a particular parcel of land. However, even if there is a restrictive covenant noted on the title register, the next question to consider is whether or not the covenants are enforceable and between which parties? 

Covenants are enforceable between the original parties, but for a restrictive covenant to be enforceable between the parties' subsequent owners, various points need to be checked before you can be sure that it is still an enforceable covenant. 

Those points include whether the restrictive covenant is correctly protected by registration against the Land Registry title for the burdened land and, if registration is irrelevant, whether the owner of the burdened land had notice of the covenant when they bought the land. 

There are also complex rules in place regarding whether land is still subject to the burden of a restrictive covenant, depending on whether the covenant was imposed before or after January 1926.

How can I enforce a restrictive covenant?

The usual remedy for a breach of a restrictive covenant is an award of financial damages. However, if you benefit from a restrictive covenant, you are likely to want any potential breach to be stopped by a Court order or injunction and the law will, in some cases, step in to offer that remedy.

It is important to take prompt action if you're seeking an injunction because the Court can refuse to grant that order if there has been a delay in seeking its enforcement. 

Even if the Court is satisfied that there are circumstances where an injunction could be granted, they can still award damages instead. This is usually in cases where it is considered that the injury to the claimant's rights is small, the value of the injury can be calculated in monetary terms, a financial payment can adequately compensate the injury, and it would be oppressive to grant an injunction.

How are damages calculated in restrictive covenant claims?

Damages awarded are based on the sum that would have been reached in negotiations between the parties if each reasonably used their respective bargaining positions without holding out for unreasonable amounts. This is also known as the hypothetical negotiation amount.

How can I get a covenant released?

There are various ways of dealing with a restrictive covenant. It might be possible to negotiate the release or variation of the covenant, but this should only be attempted where:

• It can be established that the covenant does burden a parcel of land
• The full extent of the land that benefits from the covenant can be ascertained
• All of the owners of the benefitting land can be identified and located
• The restrictive covenant is still believed to be enforceable
• The proposed development or activity will breach the restrictive covenant.

Obtaining indemnity insurance is a possibility in some circumstances, but if you are considering taking any insurance, you should not make any approach to the potential beneficiaries of the covenant first.

The beneficiary of the covenant might ask for a payment to release or vary it, and the amount to be paid is a matter for negotiation. If terms for a release or variation are agreed upon, they should be properly documented in a deed of release or variation.

It might also be possible to apply to the Upper Tribunal of the Lands Chamber to ask them to modify or discharge the covenant.  There are limited grounds upon which the Upper Tribunal can make such an order, and it should be noted that the application can only apply to restrictive covenants, not positive covenants.  The tribunal's grounds for potentially modifying or discharging a covenant include where:

• "the covenant is obsolete"
• "the covenant impedes a reasonable use of the land"
• "by agreement"
• "no injury will be caused"

However, the Upper Tribunal's power to discharge or modify covenants is discretionary.