Land Covenants

Posted 1 Apr '14

Land covenants are a mechanism used commonly by either land owners selling land and wanting to restrict its use, particularly if they are retaining neighbouring land, or to record agreed restrictions as between neighbours of adjoining property.

There are a number of reasons why land owners may wish to restrict the use of land. One example is a land owner selling part of their land and wishing to restrict the type and quality of buildings constructed on the land being sold. Other examples are height restrictions that may be protecting a view or limiting the height of a tree. While land covenants can be restrictive, they may also mean that the land gaining the benefit of the land covenant will be more valuable, particularly for future resale. In today's environment it would be very rare indeed for lots in a new subdivision not to be subject to a number of restrictions on the use.

Restriction on the use of land is achieved by registering land covenants against the title to the affected land. A covenant is a promise which creates a legal obligation by someone to do, or not to do something in respect of that land. This promise is tied to the ownership of the land. The document creating a land covenant details the restrictions, and also describes the affected land. The land covenant document is registered against the title to both the land benefiting from the land covenant (the dominant land), and also the land that bears the burden of the land covenant (the servient land). Once the land covenant is registered, any purchasers buying land can search a copy of that document and review the covenants affecting that property.

In addition please also note the following points:

  1. The land covenant is only applicable to adjoining land. If an owner wants to enforce restrictions against a land owner of non-adjoining land, then they can register a different type of document called a Memorandum of Encumbrance.
  2. Non-compliance. If a servient land owner is in default of any of the land covenants registered against the title, the owner of the dominant land can take legal action against the defaulting land owner. Most land covenant documents also contain financial penalties for any breach, and the defaulting land owner could find themselves financially liable. In most modern subdivisions, the land covenants are usually enforceable by each owner against all of the other land owners;
  3. When a property is sold, the new owner becomes liable to comply with any land covenant restrictions. It is therefore critical when purchasing a property that as part of the purchaser's due diligence enquiries, they establish that there is no current breach of any land covenants affecting the property;
  4. Removal of land covenants. Land covenants can be removed if all of the affected land owners agree. If this is the case, documents can be registered against the affected titles extinguishing or varying the land covenants. If either property is mortgaged, the mortgagee's consent would be required for variation or removal. If the affected land owners do not agree, an affected land owner can apply to the Court for an Order varying or extinguishing the land covenants;
  5. While it is now possible to create and register a much wider range of land covenants than previously, a land owner's ability to enforce land covenants is subject to complex legal rules. Some land covenants registered are unenforceable either because they were poorly drafted, or the law does not support them. Existing covenants should be scrutinised to determine whether they can be enforced. Any new land covenants should be carefully drafted by your legal advisor so that you are provided with the solution that you are seeking.

By Anne Needham from Rennie Cox Urban Legal

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