Restrictive Covenants on a Property, When They Cause Problems in a Sale

What is a Restrictive Covenant?

A restrictive covenant is a legally binding promise in the title deeds of a property that restricts what the owner can do with the land. Unlike a planning restriction, which is imposed by the local authority and applies broadly to all landowners, a restrictive covenant is a private agreement between individuals (or their predecessors in title) that runs with the land.

The critical feature of a restrictive covenant is that it **binds future owners**. If the original owner of a plot of land sold it subject to a covenant saying it could only ever be used as a private dwelling, that restriction can bind every subsequent owner indefinitely, regardless of whether they knew about it when they bought.

How Are Restrictive Covenants Created?

Most restrictive covenants arise when land is sold off from a larger estate. The seller (the "covenantee") places a restriction on the land being sold (the "covenantor") to protect the value or use of the land they are retaining.

Common examples:

• An estate developer sells plots and includes a covenant preventing any owner from building additional dwellings, to ensure the estate remains exclusively residential
• A landowner sells a field but covenants that it can only be used for agricultural purposes
• A former owner sells a house but requires that the new owner maintain a boundary fence in perpetuity
• A neighbour sells part of their garden but includes a covenant preventing any structure being built that would overlook their windows

Once registered against the title at HM Land Registry, the covenant is visible on the charges register (Section C) and must be disclosed to all future buyers.

Common Restrictive Covenants That Affect Sales

No Extension or Additional Building

One of the most commercially significant covenants is one that prevents the owner from erecting any additional structure, including extensions, outbuildings, or garages, without the consent of the original covenantee's successors. This type of covenant can materially reduce a property's value and development potential.

Residential Use Only

A covenant restricting the property to use as a single private dwelling prevents commercial use, subdivision into flats, or operation as a holiday let, all of which are significant restrictions in the current property market.

No Alterations to the Exterior

Some covenants, common on purpose-built estates, require the property to be maintained in keeping with the original estate design. Adding a satellite dish, changing the window style, or altering the roof line may technically breach such a covenant.

No Keeping of Certain Animals

Older covenants sometimes restrict the keeping of livestock, poultry, or even dogs. These provisions are frequently overlooked by owners and can come to light only when a buyer's solicitor reviews the title register.

No Parking of Commercial Vehicles

A covenant preventing the parking of commercial vehicles, caravans, or boats on the driveway or garden is common on residential estates.

Why Do Restrictive Covenants Cause Problems in Sales?

The problem typically arises when the property has been altered or used in a way that appears to breach a covenant recorded on the title, or when a buyer's intended use would breach it. Common scenarios:

• The seller has built an extension without obtaining consent from the covenantee (where consent is required by the covenant)
• The property has been used as a holiday let or business premises in breach of a residential-only covenant
• The buyer intends to build a garage or loft conversion that the covenant would prohibit

In each case, the buyer's solicitor will raise an enquiry about the covenant and will want to understand the enforcement risk before advising their client to proceed.

Enforcing a Restrictive Covenant

For a restrictive covenant to be enforceable, certain legal requirements must be met:

1. The covenant must have been intended to benefit the covenantee's retained land (not just be a personal promise)

2. The covenantee (or their successor) must still own the benefiting land

3. The covenant must have been registered against the title (for registered land)

In practice, many older covenants are difficult to enforce because the benefiting land has been sold off without the benefit of the covenant being passed on, or the covenantee's successors cannot be traced. An unenforceable covenant is still a defect in title, however, it must be disclosed, and a buyer's solicitor will want it resolved.

Options When a Covenant Causes a Problem

Indemnity Insurance

Where there has been a breach of a restrictive covenant, or there is a risk that a proposed use would breach one, indemnity insurance is the most common solution in residential transactions. The policy indemnifies the buyer and their mortgage lender against the financial consequences of a covenant being enforced.

Insurance is appropriate when:

• The covenant is old and the benefiting party is difficult to identify
• There has been no recent contact with or complaint from the covenantee
• The breach is minor or historic

Cost varies widely: a simple policy for an old, unlikely-to-be-enforced covenant may cost £150–£400. A policy for a recent or significant breach may cost considerably more and some insurers may decline to cover the risk at all.

**Important:** Do not contact the covenantee to seek consent or raise the issue with them once insurance has been recommended, this will alert them to the breach and may void any policy.

Discharge or Modification at the Upper Tribunal

If indemnity insurance is not available or acceptable, for example, because the covenant is recent or the covenantee is known and active, the owner can apply to the Upper Tribunal (Lands Chamber) under section 84 of the Law of Property Act 1925 to have the covenant discharged or modified.

This is a formal legal process that can take 12–24 months and requires the applicant to demonstrate one of the following grounds:

• The covenant is obsolete (the original purpose can no longer be served)
• The covenant impedes some reasonable use of the land without practical benefit to the covenantee
• The covenantee has agreed (expressly or impliedly) to the discharge
• Discharge would not injure the covenantee

The Upper Tribunal can also award compensation to the covenantee as part of any modification or discharge order.

Negotiate Consent with the Covenantee

Where the benefiting party can be identified and is amenable, negotiating a formal deed of release or variation can be the cleanest solution, particularly where a buyer intends a significant development that insurance cannot adequately cover.

A deed of release is a negotiated agreement, so the covenantee can demand a payment (a "consideration") in exchange. Payments vary from a nominal sum to a substantial proportion of the development uplift.

Advice for Sellers

Before you market your property, ask your solicitor to review the charges register for any restrictive covenants. If you have made alterations or used the property in a way that may breach a covenant, identify this early, ideally before a buyer is involved, so that insurance or another solution can be arranged without pressure.

Property Passport UK displays title data including details from the charges register, giving sellers and their advisors early visibility of any covenants recorded against the title.