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Drafting and enforcing covenants and restrictions on new build developments

By Ellie Johnson

Published In: Residential Development

When developing a new residential estate, the long-term harmony of the development often hinges on well-drafted and enforceable covenants. Whether a developer wishes to restrict the use of properties or impose positive obligations on the buyer, the wording and structure of the covenants is critical.

Such covenants are often protected by way of restriction to ensure that they are complied with by future owners of the properties for years to come. Here, we look at the key things to consider when drafting covenants and restrictions which stand the test of time.

block of flats

Understanding the types of covenants

Covenants fall into two broad categories:

  • Restrictive covenants - These prevent owners from doing something with their land, for example using it for commercial use or building extensions without prior written consent. These covenants ‘run with the land’, meaning that they automatically bind all future owners of a property.
  • Positive covenants - These are covenants which require the owner to do something, for example to maintain fences or pay towards the upkeep of private roads. These covenants do not ‘run with the land’ and as such require further protection such as the requirement for future owners to enter into a deed of covenant. The requirement to enter into a deed of covenant can be protected by the registration of a suitable restriction against the title to the property – see below.

Key things to consider when drafting covenants

Ambiguous or poorly drafted covenants risk being unenforceable. It is important to be precise and in particular specify:

  • What is restricted or required
  • Who is bound by the covenant
  • Who benefits from the covenant
  • The time period for the covenant to apply

Using restrictions to protect positive covenants

A restriction is an entry in the proprietorship register of a registered title that limits how the owner can deal with their property. The restriction does not in itself create a covenant, but it can be used to help enforce them by preventing dispositions (e.g. transfers, sales, leases or mortgages) of the property until specified conditions are met.

Restrictions are commonly added to new build property titles and to ensure they are effective consideration should be given to the following when drafting a restriction:

  • The covenants which the restriction is intended to protect must be clearly and easily identifiable
  • The restriction must clarify exactly what needs to be done to ensure compliance, i.e. an incoming buyer may need to enter into a Deed of Covenant
  • The party with the benefit of the restriction must be clearly identified
  • It must be clear who can provide a relevant consent or certificate to show compliance with the restriction
  • It is good practice to refer to the Land Registry Practice Guides to ensure that the restriction is in a standard form acceptable to the Land Registry

Why effective covenants and restrictions are important

By ensuring that effective covenants and restrictions are included in the documentation when setting up a new build development, the quality and value of a new build development can be preserved. This is because covenants can:

  • Control or prohibit changes to the appearance or structure of properties, for example restricting unsightly alterations
  • Help to ensure uniformity of the properties on a development
  • Ensure the consistent upkeep and restrictions on use of the development which helps to maintain an attractive, orderly development which in turn can help to maintain or enhance property values
  • Ensure infrastructure and services on the development are properly maintained
  • Minimise disputes between neighbours
  • Ensure future owners and residents remain bound by the same key obligations as all other owners

To summarise, well drafted covenants are essential in protecting the quality, appearance and use of the development, while restrictions act as a legal safety net to ensure that such obligations are complied with and passed on in the future.

If you require any further information or advice in respect of effectively setting up a new build development, please contact our Residential Property Development Team .

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Ellie has worked in the legal sector for over five years. She is an Associate Chartered Legal Executive in our Property Development department.

Associate Chartered Legal Executive

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