My property is subject to a restrictive covenant prohibiting my intended use. Now what?
In this article our Real Estate team looks at the options available for dealing with problematic restrictive covenants.
Insure
Where your property is subject to a restrictive covenant preventing your intended use the most cost-effective solution is often to insure against the costs arising from any breach and the risk of enforcement. However, it is worth being aware that there are other options available.
It is important to remember that title insurance is only available where no contact has been made with the person who has or may have, the benefit of the restrictive covenant and, where you need planning permission is required for development, usually only after that permission has been granted. Insurance is a contract of “utmost good faith” so you cannot hide anything from the insurers, and there is a lot of small print that you need to comply with, otherwise the insurers can void your cover, which can get you back to an expensive square one.
So what are the other options?
Do nothing
You might consider just ignoring the prohibition, in the hope that the person with the benefit will not enforce it. The owner of the relevant land may not realise that they have the benefit of it or may not have the funds or desire to enforce it. Even if they are aware, any delay on their part reduces the risk of an injunction although it does not preclude it. If you take this option then you would be wise to budget a potential damages payment into your operational or development costs.
After 20 years of clear non-enforcement the Council of Mortgage Lenders allows a ‘view’ to be taken to proceed without a solution, but that does not mean that in law the beneficiary cannot still take action
Investigate
Our commercial property and property disputes teams can investigate for you, to see if the benefitting and burdened land is identifiable and that the restrictive covenant was correctly drafted and properly registered.
Check whether the benefitting and burdened land ever came into the same ownership, because that results in the restrictive covenant being extinguished.
Is the restrictive convent actually enforceable? This analysis can take some time (and so legal costs) and may ultimately be inconclusive, but it can be a legitimate alternative if insurance is not available.
Negotiate a release
If you can identify all of the benefiting land then you may be able to agree a release by the beneficiaries. There is an obvious risk in bringing the restrictive convent to the attention of the beneficiary, especially if they decide to be unreasonable in demanding too large a fee for that release. You should also remember that discussing the restrictive convent with the owner of the benefiting land usually closes the door on the insurance option and so needs careful consideration or the insurer’s prior approval.
Apply for its discharge or modification
It is possible to apply to discharge or to modify a restrictive covenant at the Lands Tribunal – a court-like process that our property disputes team can guide you through. The most commonly used grounds are that the covenant has become obsolete or it impedes reasonable use or development of the burdened land. The downside is that this is neither quick nor cheap and you are likely to have to pay some compensation, even if you are successful. However, if (as in some of the reported cases) it allows you to build extra houses on your land, that can be money well spent. There is also a procedure to obtain a declaration that the covenant is unenforceable. Again, adopting this route rules out the insurance option.
If you have these issues, or you want to enforce covenants in your favour against a neighbour, then get in touch and we can help you with that.
