An introduction to restrictive covenants affecting land

In this article, Russell-Cooke's property litigation experts unpack what they are, how they are enforced or removed, and what happens if they are breached. 

Restrictive covenants are surprisingly common. A 2008 Law Commission paper noted that 79% of registered freehold titles were subject to one or more restrictive covenants, based on data from HM Land Registry. Restrictive covenants limit, or ‘burden’, how land can be used by one landowner, for the intended benefit of a neighbouring piece of land (there must always be at least two pieces of land involved).

Restrictive covenants generally prevent certain types of activity from taking place. Common examples include prohibitions on trade or business being conducted, limiting building works or preventing activities that might amount to a nuisance. The underlying purpose is often to protect the value or character of the land in question, or commercial interests.

It is important to note that restrictive covenants can affect land even once the original owners have transferred or sold their interests. Restrictive covenants created before 1 January 1926 are only binding on subsequent owners if specifically provided for in the conveyance that created them. Restrictive covenants created on or after 1 January 1926 are presumed to bind the land for successors in title.

They are ‘negative’ in the sense that they prevent something from happening on the land. Positive covenants, such as those requiring some kind of financial expenditure to comply with them, do not usually bind successors in title. A common example is maintaining a fence.

In terms of enforceability, restrictive covenants created prior to 1 January 1926 will only bind a purchaser if they have actual notice of it, whereas those created on or after 1 January 1926 will not bind a purchaser if they have actual notice unless the restrictive covenant is also registered as a charge in the property register.

Successors in title with the benefit of a restrictive covenant can enforce against those with the burden, or their successors in title. The usual legal remedy for breach of covenant is damages, but an injunction may be sought, and may be preferable, in order to prevent an undesirable activity from occurring. Delay in applying to court is a factor that can be taken into account by the court in deciding whether to grant an injunction.

The existence of restrictive covenants can clearly cause issues for any purchaser, but especially for developers purchasing land with development potential. It is beneficial to seek legal advice at an early stage when purchasing or developing land to gain an understanding, firstly, of whether the land has the benefit or burden of a restrictive covenant and, if so, the best method of dealing with it. It is sometimes possible to obtain restrictive covenant insurance.

Restrictive covenants can be removed in a number of ways. Firstly, getting the express agreement in a formal deed signed by all those with the benefit of the covenant. Secondly, where the parts of land that have the benefit and the burden of the covenant are owned by the same person, then generally the covenant will come to an end automatically. Thirdly, if the covenant is expressed in a way that requires consent to be given by a person who is no longer alive or a company that no longer exists, the court might treat it as discharged.

If a developer is not able to secure a negotiated release of the covenant and if there is no other argument that the covenant should be treated as discharged, section 84 of the Law of Property Act 1925 provides a route for developers to have covenants modified or discharged in certain circumstances.

For an application to discharge or modify a restrictive covenant to be successful, the Upper Tribunal must be satisfied that one of the grounds set out in statute is established for all those with the benefit of the covenant. In brief, the grounds are: the covenant is obsolete, or it impedes some reasonable use of the land, or no injury will be caused, and/or that those with the benefit of the covenant expressly or impliedly agreed to its discharge or modification.

Applicants should be aware that the Upper Tribunal will take a wide range of issues into account, including the conduct of the parties. This again underlines the benefit of seeking legal advice at an early stage. The Upper Tribunal has a discretion as to whether to discharge or modify a restriction even if a ground is established, it is not bound to provide a certain outcome and may not take a positive view of developers if, for example, they choose to “build first and apply later”.