Many people won’t have heard of restrictive covenants, but they’re a crucial element of contracts and owning property. They state what you can and can’t do under the terms of your contract and crop up most frequently in employment contracts and when buying a property or land.
So what do they look like and what should you do if you spot one?
What is a restrictive covenant?
Restrictive covenants are conditions built into contracts and land deeds that you must adhere to. Failing to stick to a restrictive covenant can result in action being taken by the covenantor (party who put the covenant in place).
What’s especially important when it comes to restrictive covenants is that their effects can last beyond the contractual period. For example, covenants on a property can pass on to subsequent owners. If this is the case, the covenant is said to ‘run with the land’, meaning it will endure regardless of ownership, unless it is removed.
This is why it’s important to seek legal advice if you see anything that could resemble a restrictive covenant.
Common restrictive covenants
Normally, the first time you’ll come across restrictive covenants is when you’re buying a property.
Covenants are commonly split out in a property’s title deed and clearly labelled in their own section.
What they actually say, however, will vary depending on what the covenantor wanted to achieve when the covenant was created. Here are two examples of common restrictive covenants:
Property Covenants
These covenants are found in a property’s title deed and are normally preventative measures to stop land and property owners from doing whatever they want with the land.
As the covenantor, these clauses are helpful if you expect the local planning authority might grant a change in use of the land. Under these circumstances, the restrictive covenant will normally supersede any proposed change in use.
Property covenants can include:
- Prohibitive conditions on what land can be used for, for example only residential purposes
- Restrictions on the type of buildings that can be built on the land
- Restrictions on the height of buildings on a piece of land
- Stopping any particular activities taking place on a piece of land, for example keeping livestock
- Controls on the number of structures allowed on a plot
- Easements or rights of way over a piece of land
Lease Covenants
These covenants are applicable if you own a leasehold property (for example a flat), or rent a residential or commercial property. They govern what you can and can’t do during the term of a lease.
For flats in particular, restrictive covenants can prevent nuisances from happening and lead to a more peaceful living environment.
These types of covenant include:
- Restrictions on the type of flooring allowed, for example no wooden flooring, which is popular in flats
- Requirements to seek approval for any alterations made to a property
- Restrictions on the use of a property, for example commercial leases normally state there can be no residential use under the lease
- Prohibitive conditions on subletting or assignments of a lease
Employment Covenants
People don’t normally think of restrictive clauses in employment contracts as restrictive covenants, but they are extremely common. Non-compete clauses and non-poaching clauses are two very common examples of employment restrictive covenants.
For example, if you are an account manager and switch jobs, your contract may contain a non-poaching clause to say you aren’t allow to bring any of your clients to your new employer. Even if it’s not expressly labelled as a restrictive covenant, this clause would act as one.
Employment covenants can cause issues as they can be difficult to enforce, especially if the covenant is deemed unreasonable.
Enforcing Restrictive Covenants
Restrictive covenants can generally only be enforced if the covenantor decides to do so. And even if they want to enforce it, the covenant has to be reasonable.
In all cases, you won’t be able to enforce the covenant unless there has been a breach.
Breach of Restrictive Covenant
If a breach of a certain covenant has taken place, it’s up to the covenantor to enforce this. For example, a couple buys a leasehold flat and decides to renovate it. They replace the carpet with wooden flooring, but their lease explicitly states they cannot do this. Subsequently, the neighbour downstairs who also owns their flat on a leasehold basis suffers from a loss of quiet enjoyment of their property.
There has clearly been a breach here of the covenant, and the covenant is reasonable, because its purpose is to prevent a nuisance.
In this situation, the neighbour might be suffering, but as they aren’t the freeholder, they can’t directly enforce the restrictive covenant.
Who can enforce a restrictive covenant?
Only the covenantor can enforce a restrictive covenant. In the example above, this means only the freeholder would be able to force the couple to remove their wooden flooring.
However, this doesn’t mean that the neighbour is completely powerless.
If they can prove that the couple’s lease is not being enforced, the neighbour could sue the freeholder for failure to enforce the terms of the lease. This means that the freeholder would be forced to take action to enforce the covenant.
Removing Restrictive Covenants
Whether or not you can remove a restrictive covenant will depend on where the covenant is placed. Covenants in employment contracts typically can’t be removed once the contract has been signed.
However, you can negotiate their exclusion before you sign the contract.
With property, it’s generally easier to either vary or entirely remove a restrictive covenant, but it’s not guaranteed.
How to challenge a restrictive covenant
As with most legal issues, the easiest (and often cheapest) way to remove a restrictive covenant is by mutual agreement. If the covenantor agrees to remove the covenant, you’ll need to draw up a ‘Deed of Release’. There is usually also an element of compensation that the covenantor will want.
If the covenantor refuses to remove the covenant, this doesn’t mean it can’t be removed, but it does mean you’ll need a good reason for doing so. You’ll need to apply to the Lands Chamber (the senior property court in the UK) and put forward your case.
These cases can be extremely costly and take years to resolve, so you should always consult a professional before going ahead.
There is also no guarantee that your application will be successful.
Alternatively, you can choose to breach the covenant directly. If the covenantor takes no action for 12 years after the breach is committed, they normally won’t be able to enforce the restrictive covenant. However, you should be cautious with this approach for obvious reasons.
How much does it cost to remove a restrictive covenant?
This will depend entirely on how far the case goes. As a minimum, there are several court fees involved in removing a restrictive covenant. These include:
| Courts fees to discharge or modify restrictive covenants | Average cost |
|---|---|
| Lodging an application to discharge or modify a restrictive covenant | £880 |
| Hearing an application (if required) | £1,100 |
| Determining an application (if no hearing required) | £275 |
| Applying for an extension of time to comply with a rule or direction given by a tribunal | £110 |
| Hearing to determine an objector’s entitlement to object to the application | £550 |
| Drawing up the tribunal’s final order | £220 |
| Total potential court fees payable before professional fees | £2,860 |
And these fees don’t include professional fees such as solicitor or land surveyor’s fees if applicable. Nor do they include any compensation due to the covenantor.
As a rough guide, you should expect to pay in excess of £5,000 on legal fees alone if your case goes to hearing.
Do restrictive covenants expire?
Generally restrictive covenants last until they are either removed or are no longer relevant. For example, some buildings come with restrictive covenants around their use which date back decades or centuries. These might say something like a building cannot be used to serve as a slaughterhouse, or must serve only as a place of worship.
While the restrictive covenant hasn’t technically expired, you could argue that it no longer serves its original purpose and therefore should be removed.
With employment contracts, restrictive covenants usually come with a time limit. For example, non-compete clauses will normally expire after a matter of months. You don’t need to apply to have this kind of covenant removed.
Conclusion
Restrictive covenants are extremely common and it’s worth knowing how they work. If you’re considering creating a covenant, or looking for a way out of an existing one, you should seek advice from a professional.
If you’re looking at buying a property that has an onerous restrictive covenant on it, it can be worth seeing if it can be removed before putting in an offer.
We can connect you with an experienced property solicitor to discuss your requirements.
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