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What is a property covenant?

John Tran
April 28, 2023
What is a property covenant

Are you thinking of buying a home? If so, there are several considerations to consider before making the investment. One of these is a covenant, which might have an impact on how you use and enjoy your land. Covenants are agreements between two or more parties that specify each party’s rights and duties surrounding a property. In this post, we will cover why understanding covenants is important and how they might affect you as a homeowner. 

What is a covenant?

Covenants are an important feature of property law, as they involve legal agreements between two parties concerning the use of land. The owner and another party – usually another landowner or local body – must adhere by the conditions laid out in the covenant agreement. These covenants often govern the type of development allowed on a piece of property, economic activities that are restricted, and any other limits on land usage. It is also a way to preserve the rights and obligations of all parties participating in the agreement, providing them with certainty and security when it comes to their individual interests. 

What kinds of covenants are there?

Positive Covenant 

A positive covenant is an agreement or obligations between a property owner and the local authority, that requires specified acts to be taken. These can range from putting fences surrounding houses, enforcing boundary lines, and creating regulations that must be followed when constructing a new home inside a given area.

Such covenants are commonly used in newly developed areas or suburbs, where there may be a lack of existing infrastructure since the goal of establishing positive covenants is to ensure that all homes within the area are held to a certain standard and conform to regulations set out by the local authority, in order to promote a sense of unity and quality across the neighbourhood.

Restrictive Covenants

A restrictive covenant is a legal agreement that limits the way an owner can use their land. It binds all current and future owners of the land, enforced by the courts and may be restricted or removed only with prior agreement between both parties. Some of the common examples of restrictive covenants include limiting development or building on a property, preventing certain types of business activities, and stopping the property from being subdivided.

These agreements are also irrevocable and cannot be modified without the consent of all parties. If an owner desires to have one removed, they must gain the approval of all other owners affected by the covenant and may need to take legal action. Restrictive covenants have a shorter lifespan and are easier to change or eliminate than positive covenants, it is crucial to highlight.

Are covenants important?

Covenants are essential in many legal contexts because they are used to create contractual responsibilities between the parties concerned, and they can be enforced by a court of law. Furthermore, covenants are often placed on residential properties when purchasing a new home which helps to keep the neighbourhood consistent and provide an assurance of quality for the neighbourhood.

For example, it restricts things like noise level, landscaping, paint colours, parking and the types of animals allowed in specific areas helps to maintain property values by ensuring the neighbourhood looks nice, has low noise levels and is generally pleasant to live in.

What happens when you violate a covenant?

The consequences of violating an agreement can range from modest to severe, depending on the individual who gets the 'benefit of the agreement'. Typically, they involve financial penalties as well as requirements that you repair any harm your breach caused. In certain cases, you may be liable for all legal costs associated with any action taken against you. If a legal dispute arises, the court may require you to pay any damages awarded or a specific sum of money and they may even bar you from using the land in question until the breach has been rectified.

That’s why it is important to take special care so as not to break any covenants that are entered into and if it does happen, you should seek legal advice quickly to ensure the consequences are not unduly harsh because breaking a covenant could have long-term financial implications and should be avoided where possible.

Can you remove a covenant?

When attempting to remove or vary a Covenant on your land, it is important to understand that the process can be costly and time-consuming. In addition to this, it is important to know that the result of such an application is never guaranteed. It might even take the form of a variation in the Covenant's terms rather than its total removal.

For example, an Applicant recently sought to vary a Covenant on their land pertaining to the height restriction. The Court allowed for a variation in the height allowance, but it was not enough for the owner to construct a two-storey dwelling as they had wished. Ultimately, while the Applicant technically 'won' the case, they weren't able to achieve the outcome they set out to obtain.

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