Understanding what a covenant is and how it affects your property forms an important part of the due diligence process for a conveyancing transaction. Covenants can also impact the way you wish to use or develop an existing property.
Generally, there are two types of covenants in New South Wales – restrictive and positive covenants. Each affect land in different ways.
This article discusses the implications of restrictive and positive covenants. The information is for general purposes only, and we recommend you obtain professional advice specific to your individual circumstances.
What is a restrictive covenant?
A restrictive covenant limits or prevents the use of land in a specific way to the benefit of other land.
Restrictive covenants ‘run with the land’ meaning that the benefit and burden of the covenant relates to the land itself and not to the owner of that land. Accordingly, if one of the original parties to the restrictive covenant sells their property, the restrictive covenant will remain in place and binds the subsequent owner.
What is a positive covenant?
A positive covenant imposes specific obligations requiring an owner of a parcel of land to carry out certain activities on or to their property. An example would be a requirement to landscape the gardens on a property in a certain way and within a certain timeframe.
Positive covenants also ‘run with the land’, meaning that whoever owns the land will be burdened by the covenant so long as the covenant benefits the land.
How do restrictive covenants affect property?
A restrictive covenant placed on one parcel of land must benefit the other land by protecting its value or enjoyment. A simple example of this is where a covenant in a particular subdivision specifies that dwellings can only be built using certain materials such as brick veneer, or that all dwellings must be a minimum size.
The above example is supposed to have a positive effect on the neighbourhood and help protect house values.
What can I do to remove or modify a restrictive covenant?
If you have a covenant that runs with your land and it is preventing you from using or developing your land in a particular way, you may be able to apply to remove or vary the covenant.
The ways in which you can attempt to do this include:
Request a release from the party who has the benefit of the restrictive covenant
This may not be feasible or practical as it may not always be straightforward identifying the party or parties with the benefit of the covenant.
Apply to the Registrar General under s81A Real Property Act 1900
This type of application will only be successful if the covenant is related to matters such as building materials, fencing or value of structures, the covenant has been in effect for at least 12 years and the Registrar General believes that the covenant will likely lose any practical value after 12 years of operation.
The Registrar General or applicant must serve a notice of the application on the required parties and give them one month to lodge a caveat prohibiting the granting of the application if they wish. The Registrar General cannot remove or modify the covenant until any caveats or court orders lodged against the grant of the application have been removed.
If the covenant is limited in operation or no longer has practical value or application, the Registrar General may independently extinguish a restrictive covenant under circumstances set out in s81J of the Real Property Act 1900
A registered proprietor may lodge a Request for the Registrar General to consider in their absolute discretion the cancellation of the restrictive covenant under the grounds specified in s81J. These generally include that:
- a time limit expressed for the operation of the covenant has expired
- the parcels of land respectively burdened and benefited by the covenant have been consolidated into a single parcel
- the covenant has no practical value or application
- there is no specific land that benefits from the covenant
- for covenants created prior to 1 July 1920, the land benefiting from the covenant cannot be identified
Section 89 of the Conveyancing Act 1919 – application with the Supreme Court of New South Wales
The Supreme Court may, upon application of an interested party, modify or extinguish a covenant on the basis that it is deemed obsolete in circumstances such as a change in the use of the land benefited by the covenant, or changes in the characteristics of the neighbourhood.
Conclusion
Although restrictive covenants are designed to benefit a parcel of land by protecting its value or enjoyment, they can create the opposite effect on the owner of the land burdened by the covenant.
Applying to remove or modify a restrictive covenant can be complex and we recommend you seek advice from an experienced property lawyer regarding any covenants on your land.
If you or someone you know wants more information or needs help or advice, please contact us on:
France Booth (02) 9958 1994 or email [email protected]
Wendye Vince (02) 9550 9767 or email [email protected]