What is Covenant Consent? A Guide for Property Investors and Buy-to-Let Landlords
Owning a property doesn’t mean you can do exactly as you like with it. Often, legal covenants dictate what you can and cannot do with your property and when you might need consent to do them. Here’s a guide to covenant consent, when you might need covenant consent, and what can happen if you don’t obtain covenant consent.
Contents
- What Exactly is a Covenant?
- What is Covenant Consent?
- Which Properties Does Covenant Consent Affect?
- When You Might Need Covenant Consent
- Some Other Implications of Covenant Consent
- How to Find Out if You Need Covenant Consent
- How to Obtain Covenant Consent
- What Happens If You Don’t Get Covenant Consent?
- Covenant Consent on a Property You’re Selling
- Covenant Consent and Indemnity Insurance
What Exactly is a Covenant?
A covenant is a promise to do something – or not to do something – that is included within a legal agreement or contract. A contract of sale used to transfer the ownership of property will often have covenants written into it as part of the title deeds.
When you buy a property you legally agree to abide by any covenants as part of the transaction.
There are two types of covenants: restrictive covenants and positive covenants.
- A restrictive covenant means you cannot do something in relation to the property.
- A positive covenant requires you to do something in relation to the property.
A person or organisation that includes a covenant in a property sale and who receives the benefit of it is known as the covenantee or beneficiary of the covenant. A person or organisation who makes a promise in a covenant is known as the covenantor and they accept the burden of the covenant.
A general principle of covenants is that a covenant must benefit the covenantee. If not it may not be valid.
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What is Covenant Consent?
Covenant consent is needed when there is a requirement in the title deeds to do so before taking a certain action.
Covenant consent is usually a requirement to get consent to do something that is restricted by a restrictive covenant. Covenant consent is also needed if you do not wish to do something that is required by a positive covenant.
Covenant consent is required from the party who has the benefit of the covenant. This may be the party or parties who placed the covenant in the title deeds when the property or land has been sold previously. Restrictive covenants are said to run with the land in legal terms so they continue when land is sold on.
Which Properties Does Covenant Consent Affect?
Covenant consent can affect all types of properties of all ages.
Covenant consent can affect both freehold and leasehold properties. Covenant consent is more likely to affect leasehold properties such as flats, however.
When You Might Need Covenant Consent
There are many situations when you might need to obtain covenant consent in regards to a property you own or are considering buying. Some of the main reasons you might need covenant consent are:
- To make alterations to the property. For example, you might need covenant consent to remove internal walls in a flat.
- To build an extension on the property.
- To build on the land including to build on any garden.
If there is no restrictive covenant to prevent an extension or building there may be one that prohibits anything that restricts a neighbour’s access to light or air which an extension/building may cause.
- To do certain things with the property or use it for certain things. For example, you might need covenant consent to run a business from the property or to keep animals other than domestic pets.
- To do other things, such hang-out washing, erect fences or paint your property a different colour. There can sometimes be restrictive covenants on keeping a caravan or boat on the property or even parking a van there. There can sometimes be very generalised covenants such as covenants against causing a nuisance to neighbours, for example.
Covenant consent and planning permission: Covenant consent is not the same thing as planning consent or planning permission nor building regulations approval. You will still need planning consent or building regulations approval to do certain things with a property even if they do not need covenant consent or if covenant consent is given.
Some Other Implications of Covenant Consent
The need to obtain covenant consent can be more complex than anticipated. If you need covenant consent to build an extension, for example, this may not be a problem if you have no intention of building an extension. The need to get covenant consent could affect the saleability and value of the property in future, however.
How to Find Out if You Need Covenant Consent
You can find out if you need covenant consent by checking the title deeds for a property you own or a property you are planning on buying. The title deeds will state if any restrictive or positive covenants apply to the property. They should also indicate if covenant consent has previously been obtained in relation to the property.
As covenants are usually worded in complex legal language, it is advisable to ask a lawyer to explain them to you.
Solicitors and conveyancers will usually explain if any covenants apply to a property and what they involve before you exchange contracts to buy a property.
How to Obtain Covenant Consent
If you need covenant consent to do something with a property due to a restrictive covenant or need consent to avoid something required by a positive covenant, this should ideally be sought in advance. It is possible to apply for covenant consent afterwards although it may be more problematic. This is known as applying for retrospective covenant consent.
If covenant consent is required you will first need to find out who the covenantee is. That is, who has the benefit of the covenant. This may be the person or organisation who has included the covenant in the title deeds when the property has been sold or transferred at some point in the past.
The covenantee might be the original builder or developer, a previous owner, a freeholder in the case of a leasehold property, neighbours or some other party. The covenantee could be the local council, especially in the case of an ex-local authority property.
In some cases, it may not be possible to trace the original covenantee. They may have died, or the organisation may have closed down or been abolished. The covenant is still applicable as covenants run with the land, however.
In law, covenant consent cannot be unreasonably withheld where it is required. There is often some uncertainty about when covenant consent is reasonable or not.
Anyone who holds the benefit of a covenant is entitled to charge a reasonable fee for granting covenant consent.
As the matter of obtaining covenant consent can be complex it is best to take legal advice before doing anything with your property that might be affected by a restrictive covenant.
What Happens If You Don’t Get Covenant Consent?
This is known as a breach of covenant. If you do not obtain covenant consent when it is needed there are a number of possible outcomes:
- Nothing might happen – if the covenantee doesn’t find out about your breach of covenant or isn’t concerned that you have breached the covenant. There could be a problem in future if you sell the property and a potential purchaser finds out about the breach of covenant, however.
- You may be able to obtain covenant consent retrospectively by negotiation with the covenantee.
- The covenantee may be able to obtain an injunction to stop the breach or force you to rectify the breach of covenant. For example, if you have built an extension without covenant consent they may force you to demolish the extension. They may be able to enforce this by taking legal action.
- In the case of a leasehold property, the lease could be forfeited, in extreme cases.
- You may be able to take legal action and apply to get the covenant relaxed, removed or discharged as it is known. This may be done by referring the matter via the Upper Tribunal (Lands Chamber).
Sometimes covenants are badly drafted and it may be possible to make a case that the covenant is not enforceable. This may also be the case if the covenant is old or obsolete in some way.
It’s best to take legal advice on the appropriate course of action if you are in breach of covenant. Also, consider what the cost of each option is likely to be.
Covenant Consent on a Property You’re Selling
If you’re selling a property then it is a good idea to consider what effect any covenants might have on the sale. Restrictive covenants may cause problems with the sale of, and value of, a property as might any failure to obtain covenant consent or a breach of covenant. On the other hand, removing a restrictive covenant or remedying a breach may add to the saleability and value.
Alternatively, adding a covenant whether restrictive or positive, may help to protect your rights and value if you will continue to own a neighbouring property for example.
When selling a property it may be a good idea to review any relevant covenants and take legal advice on whether any action is needed.
Covenant Consent and Indemnity Insurance
Indemnity insurance is something that may be useful, with regards to covenant consent.
If you are purchasing a property and a situation arises where the seller may have breached a covenant and/or not applied for covenant consent it is possible to take indemnity insurance to protect your interests. This is known as either a restrictive covenant indemnity insurance policy, a breach of covenant indemnity insurance policy, title indemnity insurance or similar.
Indemnity insurance means that if the covenantee should subsequently take action to enforce the covenant you will be covered for any costs and legal costs that are incurred.
The costs and conditions of this insurance will depend on the individual case. To obtain indemnity insurance it should usually have been at least 12 months since the covenant was breached and the breach should not have been challenged.
Indemnity insurance can be obtained through a specialist insurer or broker.
This article is intended as a general explanation of covenant consent and is not intended to be legal advice.