Restrictive covenants do exactly what you would expect – they restrict you from carrying out certain actions, limiting your property’s potential. But what if there was a way to break free from these? This blog explores the process of releasing restrictive covenants, including the impact on your property, and the options available for you.

What are Restrictive Covenants?

Restrictive covenants are legal obligations written into the deeds of a property by a seller, which limit what future owners can do with it. These can include restrictions on building extensions, keeping pets, or running a business from home. They can even dictate how the property is used – for example, preventing it from being used as anything other than an ordinary family home. It’s important to get a clear understanding of what the covenant restricts and who benefits from it, as breaches could have major consequences.

The Impact of Restrictive Covenants

Although these covenants may be enforced to help maintain the character of a neighbourhood, emphasising the element of uniformity, they could severely hinder the plans an owner may have for their property. It could be frustrating to be prohibited from altering or using your property as you wish, especially if its market value is also affected due to this.
Many restrictive covenants “run with the land”. This means that no matter how many times a property may change hands, it will always be restricted by these covenants until they are released.

Releasing Restrictive Covenants

Understanding who benefits from restrictive covenants is a crucial step before they can be released. Not only does the covenantee have this benefit, but there may also be others who hold the right to enforce these covenants. A restrictive covenant is typically established with the covenantee and extends to their successors in title, which includes the current owners and occupiers. However, if the covenantee has transferred part of their title that benefits from the covenant, the new owner of that portion may also possess the right to enforce the covenants.

If the covenants are not released in favour of all the beneficiaries, those beneficiaries retain the right to enforce them. This reinforces the importance of identifying all parties who benefit from the covenants.

The most common methods to release restrictive covenants are as follows:

1. A Deed of Release: This is a legal document, signed by all parties, that formally removes restrictive covenants from a property. Typically, all beneficiaries are party to this deed, as it releases them from their benefits over the property. However, it is quite unlikely that the beneficiaries will allow these covenants to be released without compensation. Therefore, negotiations regarding costs are usually necessary. If the terms of the deed cannot be agreed or the beneficiaries are simply unwilling to release the restrictive covenants, there is another option to consider.

2. Applying to the Upper Tribunal (Lands Chamber): The Upper Tribunal has the power to discharge or modify restrictive covenants, although at least one of the following criteria must be met in order for this to take effect:

• The restriction being obsolete due to changes in the character of the property, the neighbourhood, or other circumstances.
• The restriction obstructs some reasonable use of the land for public or private purposes.
• The beneficiaries of the restriction have agreed to the discharge.
• The proposed discharge or modification will not injure the benefiting persons.

The Tribunal may ask that compensation is paid to any person entitled to the benefit of the restriction. This may be for any loss or disadvantage suffered by that person due to the discharge of the covenant.

When applying to the Tribunal, a detailed case should be submitted, explaining why you believe the covenant should be discharged. This involves demonstrating that at least one of the above criteria is fulfilled.

The Lands Tribunal will make a decision based on the evidence presented which can take several months. When considering the case, any objections from interested parties will be taken into account.

3. Indemnity Insurance: If the covenants are not successfully released, you may be advised to seek alternatives such as indemnity insurance. It is important to note however, that this does not release the covenants; it only protects against the potential enforcement of them by beneficiaries. Obtaining indemnity insurance provides financial cover for breaches of restrictive covenants. This means that if the beneficiary does discover their right to enforce the covenants, and are aware that you have breached them, this insurance will cover the legal costs of defending the enforcement, negotiating the covenant’s release, and the payment of damages to the beneficiary. In some cases, the beneficiaries may not even be aware of their rights and will never take action to enforce these covenants. It is always best however to have this cover in place to minimise any potential risk. This is not an exhaustive list of options, but they are the most common when considering the release of restrictive covenants.

If the restrictive covenant is successfully released, you will be free to use your property as you wish, within the bounds of planning laws and other regulations. It is important to remember that this process can be complex and time-consuming, with no guarantee of success. However, it is vital to note that a lack of success does not necessarily mean you will be permanently restricted by the covenants, as alternatives such as indemnity insurance offers flexibility.

Every restrictive covenant is unique, so it’s always key to seek legal advice before proceeding.

Next steps

If you would like to instruct one of our experts at Fisher Jones Greenwood to assist you with a lease extension, or if you would like some further information before deciding whether or not to proceed with a lease extension, please contact our Commercial Property team: Sian Morgan [email protected] Leon Pascal [email protected] or Sarah Shea [email protected] by email or telephone on 01245 890110.

Disclaimer: This guide provides general information and should not be considered legal advice. Always consult a qualified professional for personalised guidance based on your specific circumstances. The contents are based on the law as at the date of publication.