Restrictive Covenants: Ultimate Guide

When purchasing a property, or seeking to make a change to your property, ‘restrictive covenants’ can be a real bogeyman, these are rules which seek to restrict what you might do on, and with, your property.

While, ideally, you will be informed about these before you purchase a property, and take out restrictive covenant indemnity insurance, this is not always the case. In this comprehensive guide, we shed light on restrictive covenants and what you need to be aware of. Specifically, we look at:

• What is a covenant
• What a ‘restrictive’ covenant is
• How long they last
• Why they are necessary
• How do they work
• What they protect against
• Who they affect
• How you can find out about them
• How they can be enforced
• Who may enforce them
• How they may be removed or modified
• The possibility of restrictive covenant indemnity insurance

What is a covenant?

In simple terms, a covenant is a promise. By entering into a covenant, one person (the ‘covenantor’), promises to do, or not to do, something to another person (the ‘covenantee’).

Of course, not every promise someone makes is protected by law. For legal recognition, a promise must satisfy certain formal requirements set out in law (usually legislation or decisions of the courts, ‘case law’).

Generally speaking, the key legal requirement for a promise is ‘consideration’ – one person must provide something (usually money, but anything could be consideration), to secure that promise.

But the law also allows for ‘covenants’ to be protected in other ways. For example, deeds with a ‘seal’ have traditionally been enforceable without consideration. In some cases, legislation itself can enforce contracts in the absence of consideration.

For example, the Electricity Act 1989 ‘deems’ an individual to be in a contract for the supply of electricity under certain circumstances even though they never signed anything.

What is a ‘restrictive’ covenant?

When a covenant requires that a person actively does something, it is called an ‘affirmative’ or ‘positive’ covenant. When it restricts an individual from acting, this is called a ‘restrictive’ or ‘negative’ covenant. The latter covenants are the focus of this guide.

One area where restrictive covenants are common is in employment contracts. When signing such a contract, it is common for the prospective employee to agree not to do certain things for a period after leaving the employer (for example, a hairdresser agrees not to work with clients of their former employer for a period of time after ceasing employment with that employer).

Another area where restrictive covenants are common is with respect to leases. It is common for leases to contain a restrictive covenant prohibiting the tenant from subletting the premises (e.g., putting it up on Airbnb).
The focus of this guide is restrictive covenants that apply to the title to land and the buildings that are erected on that land.

Restrictive covenants can apply to such land to prohibit certain activities. In broad terms, a restrictive covenant over land can occur when one party agrees to not do something for the benefit of someone else’s enjoyment or occupation of their land. Common subjects for restrictive covenants are:

• The number and type of premises/buildings that may be erected on the land;
• The kind of business (if any) that may be carried out on the property;
• Which alterations can be made to a dwelling.

The question of enforcing a restrictive covenant may arise where one party is concerned about an ongoing breach, or when there is a change or proposed change of the use of the land that appears as though it would breach the covenant.

A restrictive covenant may apply directly to a specified person – an individual person may be restricted from doing something on that land. More typically, in the case of covenants impacting property, they ‘attach’ to the land itself.

Whoever owns that land, as long as certain legal conditions are met, is subject to the restrictive covenant.
A purchaser should be informed of the existence of restrictive covenants on purchase (though this does not always happen).

If the property is registered, the existence of a restrictive covenant can be determined by a search of the Land Registry.

They have no official expiration date. As long as the legal requirements for a restrictive covenant are otherwise met, a restrictive covenant could be hundreds of years old and could still be enforceable.

However, with older restrictive covenants, it may be much more difficult to establish their existence.
Once established, the restricted covenant will continue until the covenantor and covenantee agree to discharge it via a deed, or it is cancelled or modified by a court or tribunal. More on this below.

There are many different reasons why restrictive covenants might be applied to land.

One common situation is for a property developer to wish to establish certain ground rules for all those who will purchase in the development. Or, someone selling part of their land might wish to ensure that trees do not obscure their sunlight or view.

While the subject matter will vary, what all restrictive covenants have in common is a covenantee seeking that a covenantor not do something with respect to the covenantor’s property.

How do they work?

In some cases, a restrictive covenant will be a matter of simple contract law. If you purchase an apartment in a building and, and as part of that agreement, explicitly agree not to play loud music after 10pm, then that ‘restrictive covenant’ applies through a straightforward operation of contract law.

There are some reasons, under contract law, why the restrictive covenant may not apply. Including:

• If the covenant lacks ‘certainty’. If it is too vague or ambiguous then it may be unenforceable;
• If the covenant is illegal/part of an illegal contract. For example, racist or sexist restrictive covenants will usually be unenforceable;
• When there were misrepresentations that caused the covenant to be entered into.

But what if you never explicitly entered into such an agreement, could restrictive covenants still apply?

Yes, in some cases. It depends on whether or not the restrictive covenant is ‘attached’ to or ‘runs with’ land.

The applicable law was set out in a 19th Century ‘equity’ court case called Tulk V Moxhay. The requirements in that case (which still apply) are:

• That the covenant be restrictive (not positive);
• There must be land which benefits, and land which is burdened and they must be close enough in proximity to each other;
• There must be actual benefit;
• There must have been intention for the burden to run with the land;

The existence of restrictive covenants may also, if the parties wish, be captured in a separate document, called a ‘deed of covenant’. There has been a legal requirement for a long time now that restrictive covenants be registered with the Land Registry. More on this below.

A restrictive covenant can protect against many different things. Usually, they protect people from the disturbances or otherwise unwelcome actions of others. Common cases include restrictions on noise, building/construction, parking and use of the premises.

Yes, where a restrictive covenant applies to a piece of land and ‘runs with it’, it can apply to subsequent owners of that land. Note, however, that the individual needs to have ‘notice’ of the restrictive covenant for it to apply.

More on the requirements for notice are set out below.

If the restrictive covenant was created on or after 1 January 1926, then it is required to be entered into the Land Charges Register. Before purchasing a property, a check should be conducted of any ‘charges’ applying through that Register.

In addition, you may become aware of restrictive covenants from existing neighbours, former owners, lawyers, surveyors or other members of the public.

Note that the existence of a restricted covenant is not always noted on the title records of the property that benefits from it.

Even if the legal grounds for a restrictive covenant are met, how might its existence be proven in court?

If the restrictive covenant was created on or after 1 January 1926, and the land is unregistered, then the restrictive covenant is required to have been registered as a Land Charge under the Law Property Act 1925.

If the land is registered, and the covenant was created before 13 October 2003, registration of a notice in the Charges Register with respect to that land is required under Section 50 of the Land Registration Act 1925.

If the land is registered, and the covenant was created after 13 October 2003, protection via a notice in the Charges Register under section 32(1) of the Land Registration Act 2002 is required.

What about older covenants prior to 1926? It gets a bit more complicated. The individual needs to find documentary evidence.

This might be contained in a Title Register, an ‘Abstract’ (summaries of legal activity relating to premises written by lawyers), or an ‘Epitome of Title’ (a collection of the title documents with respect to those premises).
For more about this process, see Conway, Lorraine (2019). Covenants on freehold land. House of Commons Briefing Paper Number 8560.

The original covenantee can directly enforce the restrictive covenant. If the restrictive covenant ‘runs with the land’, then it will be enforceable by subsequent owners of the land as well.

Note also, as outlined above, in some cases, even a non-owner may be able to enforce the restrictive covenant if they can make the case in equity under the rules in Tulk v Moxhay.

Note also that equitable principles can go the other way: If the breach has continued for an extensive period of time without complaint, an individual might be ‘estopped’ in equity from bringing a claim enforcing the restrictive covenant.

If a restrictive covenant seems to apply to you, what can you do about it?

In some cases instinctively it may feel as though a first natural step would be to seek the consent of the covenantee. They may be willing to release the restrictive covenant in return for compensation. This may not though be the best approach as is set out later.

A individual who owns property that is subject to the restrictive covenant may also make an application under section 84 of the Law of Property Act 1925 to modify or discharge that covenant.

This involves applying to the Upper Tribunal (Lands Chamber) (the ‘Tribunal’). The Tribunal may release the covenant if:

• Due to changes in the character of the property or the neighbourhood, the restriction is obsolete, or
• It would impede a reasonable user and does not secure a practical benefit of substantial value or advantage to the beneficiaries, or is against the public interest, and monetary compensation would be adequate.

If the Tribunal rules that the restrictive covenant be modified or released then, the Land Registry will remove that entry from the Register or otherwise modify it.

It should be born in mind that this is a lengthy and expensive process with no certainty that the covenant will be released.

The alternative to seeking release of the covenant is to take out insurance against a breach of the restrictive covenant (whether this is an existing breach or a proposed breach).

It should be born in mind that this should be considered before any other route is pursued. If insurers know that an approach has been made to the beneficiary of a covenant or to a Tribunal, they will not normally provide cover.
Typically restrictive covenant indemnities cover for the risk of:

• Damages that need to be paid;
• Loss of market value;
• Cost of any demolition or remedial activity;
• Agreed legal costs and expenses.