Restrictive covenants

06 June 2002 by
Restrictive covenants

The problem

You have decided to build an extension to your hotel. You've got planning permission and a building contract. The foundations have just gone in when you receive a letter from your neighbours. They say that there is a restrictive covenant dating back to the 1930s. Apparently, the covenant states that you can't build any closer to the road than your existing building. Your neighbours claim that your planned extension breaches this restriction and they want you to stop.

The law

A restrictive covenant is a promise not to use land in a particular way. If certain tests are met, a restrictive covenant is said to "run with the land". This means that the restriction doesn't just bind the person who originally made the promise; it binds everybody who subsequently owns that burdened land. It also means that it is not just the person to whom the promise was originally made who can enforce the covenant, but also anyone who subsequently owns their benefited land.

This produces the unusual situation that a promise can be enforced against a person who didn't make it, by a person to whom it wasn't made.

If someone has the right to enforce a restrictive covenant they can ask the court to grant an injunction or award damages.

An injunction is an order requiring someone to do or not to do something, for example, to comply with a restriction or to remove a building built in breach. To fail to comply with an injunction is contempt of court and is likely to result in a prison sentence and/or a fine.

Usually, damages would be assessed at the level of the aggrieved party's loss. Awards for breach of restrictive covenant can, however, be higher.

Expert advice

What should you do now? As mentioned, restrictive covenants will "run with the land" only if certain tests are met. Take the title deeds to your solicitors and ask them to determine what the position is.

Don't assume that your neighbour is right. Restrictive covenants not to build are often made by reference to old plans, which are difficult to read. This is sometimes made worse by the fact that the landmarks shown on the plans have long since gone. Check carefully.

The Lands Tribunal has the right to modify or discharge restrictive covenants. If your extension was going to bring your frontage in line with everybody else's on the street (because all the properties have had extensions since the 1930s), it may be willing to order that the restriction has become obsolete.

Consider what to do about your building contract. If you order the work to stop - or the court grants an injunction - you will probably lose your extension and face a claim for damages from your contractor. However, courts will order injunctions only in limited cases, preferring to grant damages instead. You may decide to carry on with the development and accept that you will have to pay compensation.

The best advice would be to avoid getting into this situation in the first place. If you are planning an extension, get your title deeds out and see if there are any restrictive covenants. Try to design around them. Put an extension at the back, for example. Alternatively, you may be able to take out what is known as a Restrictive Covenant Indemnity Policy. This is insurance against the risk of someone trying to enforce the covenant. It will not protect you against the hassle factor of a claim but it may well protect your bottom line if damages are awarded against you.

Check list

  • Are the covenants enforceable?

  • Check any plans - make sure that the covenants are actually being breached.

  • The Lands Tribunal might vary or discharge the restrictions.

  • Is an injunction likely? Decide what to do with your contractor.

  • Don't get into the situation in the first place. Check your title deeds before you begin any work.

Contacts

Lewis Silkin
020 7074 8000
neil.toner@lewissilkin.com

Beware!

Restrictive covenants bite - there is no upper ceiling on the damages that can be awarded. In a recent case, Jurys Hotel Management (UK) had to fork out £375,000 because one of its buildings was in the wrong place by less than four metres.

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