When you are buying or renting property, it is fairly common for you to come across terms such as “deed of covenant.” “restrictive covenant” or “positive covenant”
Although it may sound daunting and complex, deeds of covenant are actually relevant to a great many property sales and transfers around the country. Quite simply, a deed of covenant is a legal agreement between a party with an interest in the land, such as a Landlord, Management Company or owner of adjoining property, and the purchaser.
Restrictive Covenants
A Restrictive Covenant is an obligation not to do something in relation to the land in question. Restrictive Covenants are usually discoverable whilst title is being investigated as part of the normal conveyancing process.
The Covenant will usually be contained in a prior deed or transfer of the land. An example of restrictive covenant would be ‘not to use the land and the dwelling thereon as anything other than a private residence for a single family” or “not to obstruct the right of way over the pathway shown coloured blue on the plan to this Transfer”.
Restrictive Covenant’s ‘run with the land’, which means that the benefit and burden of the covenants are binding on successors in title, and anyone who acquires the land will take subject to the subsisting covenants, provided that they are clear and correctly registered, usually without any further deeds or declarations having to be produced for the purposes of ensuring that the covenants will continue to bind the new owners.
It is possible to obtain a release from a restrictive covenant, provided the party or persons with the benefit of the covenant can be identified and that they are agreeable for the covenant to be released.
More often than not, the buyer will simply acquire the land/property subject to the covenants. As part of the conveyancing process, our report to you on title issues will generally cover the presence of any unusual or overly burdensome restrictions.
Positive Covenants
A positive covenant is a promise to actively perform or carry out a promise made to the party with the benefit of the covenant. An example of a positive covenant would be a promise to pay a routine service charge, or “to maintain in a good state of repair and condition the boundary wall marked with a ‘T’ on the plan to this transfer”
Positive covenants do not generally run with the Land. They are personal to the original parties to the original deed, transfer or conveyance in which the covenants are set out.
There may be occasions where the party who has the benefit of the covenant will want to ensure that it is binding on the successors in title of the party with the burden of it. Because the obligations do not ‘run with the land’, a separate deed will usually be entered into between the party with benefit of the covenant and the new owners, to ensure that the covenants can be enforced.
This document is normally created and completed simultaneously with the transfer of land to the new owners.
In the case of positive covenants, it is common for the title to be burdened by a restriction which prevents a sale, transfer or other disposal of the land unless the new owner enters into a Deed of Covenant. This ensures that the Deed of Covenant is created and that the obligations do not lapse when the original owner sells or transfers their land.
Deed of Covenant Meaning
In conveyancing, a deed of covenant is a legally binding document that sets out the terms, conditions, and obligations between two parties, for example the freeholder and the leaseholder of leasehold property. (Just to clarify, the freeholder of a property is the one who owns the property outright, whereas the leaseholder owns an interest in the property for the period of the lease, which is usually a fixed amount of time).
Those who make the promise are known as the “covenantor(s)” and those who enjoy the benefit of that promise are the “covenantee(s)”.
Why Is a Deed of Covenant Required?
Deeds of Covenant basically set out rules that you have to adhere to when living in a property. They are typically used to either create or modify the rights and obligations of parties in relation to land or buildings. For example, if you have a deed of covenant on freehold property, it could require you to maintain a shared wall, or a deed of covenant on leasehold property might obligate you to contribute to the upkeep of communal areas.
When it comes to buying or selling a property, it is important to know whether there is a requirement to enter into a Deed of Covenant and how it could affect the land, so that you know what your obligations/restrictions are. This is why it is important to check if there are any existing covenants registered on the title register at the Land Registry before making a purchase. You can get property and land information by requesting it online.
The wording on the deed of covenant or title documentation may be confusing to the untrained eye, but your conveyancing solicitor will identify it and inform you based on your specific transaction, as well as your other rights or obligations that come with the land.
What Is a Deed of Covenant on Freehold Property Vs a Deed of Covenant on Leasehold Property?
Most obligations relating to leasehold property will usually be contained within the lease itself. When leasehold property is sold or transferred, the new owner will become a successor in title of the previous leaseholder, and thereby ‘the Tenant’ for the purposes of the lease.
There is as a consequence minimal need for a Deed of Covenant in the case of leasehold title, because the obligations both positive and negative or contained in the lease itself, although it is not uncommon for a Landlord to require that the new owner of leasehold title enters into a Deed of Covenant in which they promise to perform the tenant’s obligations and observe the conditions of the lease.
How Long Does a Covenant Last?
If no time limit is mentioned, covenants could last indefinitely , unless the requirements in the covenant have been met and discharged, or the parties have agreed to modify or release the signed deed of covenant for instance.
Some covenants may have become obsolete due to the passage of time and can therefore be disregarded.
What Happens if You Breach a Covenant?
If you breach a covenant by not following the terms, the covenantee can take legal action for breach of contract.
The aggrieved party can file a claim in court, seek an injunction to stop further breaches, and/or seek damages for any financial loss suffered because of the failure to comply. They could also pursue a claim specific performance of the covenant in question, if applicable.
The court’s preferred solution is usually to ask for the breach to be remedied. For example, if you built an extension on your home that breached a restrictive covenant not to construct or alter the property, this would mean being ordered to tear it down.
The Limitation Act 1980, contains certain restrictions on the time period in which a claim for breach of covenant can be brought. For example, Section 19 of the Limitation Act 1980 prevents any action being brought to recover arrears of rent after more than six years from the date on which the rent was due.
There are however no general time limits on enforcement of a covenant. It is also important to note that some breaches are ‘continuing’, by way of illustration, the aforementioned extension breaches the restrictive covenant on each day on which it is present, rather than the just on the day that it was constructed.
It is possible to argue in some circumstances that the covenantee has waived the right to enforce a breach by their actions, for example, if a Landlord continues to collect rent, thereby treating the lease as continuing, despite being aware of a breach of covenant by the Tenant.
Must You Have a Signed Deed of Covenant for It to Be Valid?
To be a “deed” it must be a written agreement, signed by the parties, witnessed by an independent witness, and delivered to the other party. If those requirements are met, the deed of covenant is enforceable.
By signing the deed, courts take this as evidence that the signing parties have read, understood and agreed to the exact terms of the covenant.
How Can Laker Legal Solicitors Help?
At Laker Legal Solicitors, we have a dedicated team of residential property professionals on hand to assist with your conveyancing needs. As a member of the Law Society Conveyancing Quality Scheme, we are held to the highest conveyancing standards and take this responsibility seriously by offering our clients transparent, straightforward and quality legal advice.
We can assist you wherever you may be based and our Solicitors are always happy to have a free initial no obligation discussion with you to see how we can help.
Please contact us today by completing our enquiry form or email us on info@lakerlegal.co.uk
