Restrictive covenants affecting freehold land can hinder plans for future land use or development, even when the party now in ownership of the land affected by the covenant was not the original contracting party to the covenant, or the person intended to benefit from the covenant can no longer be identified. These are some of the most commonly used methods of addressing problems posed by restrictive covenants:
Where a restrictive covenant is old or the party benefitting from the covenant cannot be identified, insurance can be an effective long term solution. Typically, the insurance will last indefinitely with the payment of a one-off premium, even if the land is later sold or mortgaged. If the covenant is later enforced, the insurers will pay the insured’s costs of defending any action brought to enforce the covenant and often any damages that may be payable to the person with the benefit of the covenant. However, care should be taken to ensure no contact is made with the party potentially benefitting from the covenant as this can be a condition of the insurance. Insurers are often more willing to provide cover once planning permission for a development has been obtained.
A release from the covenant can be negotiated, but care needs to be taken to ensure that the owner(s) of the land with the benefit of the covenant have been correctly identified to ensure that the covenant is properly released. The landowner with the benefit of the covenant may require payment for agreeing to release the covenant and the release should be documented in a formal Deed of Release. As mentioned above, if there is a direct approach to try to negotiate the release of the restrictive covenant, this may have a negative impact on the ability to secure insurance.
A landowner impeded by a restrictive covenant can apply to the Upper Tribunal Lands Chamber for the modification or discharge of the covenant on a variety of grounds. The ground most commonly used is that the covenant in question restricts the reasonable use of the land (for example if planning permission has been obtained). Tribunal proceedings can be lengthy and costly, even if no objection is raised to the application. In certain circumstances, the Tribunal can order compensation to be paid to the party with the benefit of the covenant for any loss or disadvantage suffered as a result of the discharge or modification of the covenant.
For further information please contact Hayley Cottington on 01892 701300