What is a property covenant?
5.5 min read
After you’ve inspected a property the next step is to get your Conveyancer or Solicitor to review the Contract and the Vendors Disclosure Statement (aka the section 32). They review a number of things, including whether or not there are any Covenants on the property.
Just what is a covenant?
A Covenant was basically the first example of town planning and is used to limit the way property owners can utilise their land. The wider meaning of the word Covenant is ‘promise’ but in the case of conveyancing and property is used to describe restrictions placed over land use.
A Covenant is essentially a rule or obligation imposed on the property title and are rules you need to abide by as the title owner. The obligations can include big things like how many dwellings can be built on a block. Or the permitted height of a dwelling through to unusual things such as the property not being permitted to be used for the making of pottery or tiles.
Covenants can be deemed to be positive/non-restrictive or restrictive.
A positive Covenant refers to an action you need to take. Such as erecting a fence around the boundary of the property or ensuring that a home is built within certain guidelines within a certain period of time which is particularly common for the establishment of new suburbs. The purpose of a positive Covenant is (by and large) to ensure a certain level of quality and unity in newly established areas that do not have established infrastructure.
A restrictive Covenant limits the way an owner can use the land. This type of Covenant runs with the title and applies to all owners and whilst can possibly be removed, does not expire like a Positive Covenant might.
Examples of restrictive covenants include:
- Limiting the number of buildings on a block
- Not allowing business to be conducted at the house
- Requiring certain external features on a building e.g. the street facing 30% of the property in XYZ Estate be rendered or built from certain materials
- Limit the size of the building you can have on the land or alternatively require that the building be of a minimum size (excluding outbuildings)
Should I care about covenants?
Yes, you do need to know what (if any) Covenants are on the property and how it will affect your future plans. In some instances, the Covenant may not make a difference to the way you want to use the property. However, if you plan on subdividing a piece of land or constructing a multiple level building on the land and only discover after you’ve already bought the property that a Covenant will prevent you from doing this, then you’ll find yourself in a pickle!
Is it possible to remove a covenant?
It is possible to remove or vary a Covenant however it can be very difficult and expensive (a Supreme Court Application) and the result unknown! For example, an Applicant sought to remove or vary a Covenant on their land pertaining to a height restriction, technically the Applicant ‘won’ as the Court allowed for a variation to the height restriction however, the increased height allowance was not great enough for the owner to construct a two storey dwelling.
It is possible to apply for planning permission through your local council who have the ability to amend a Covenant the process for such an application is usually complex and requires consent by all owners who are affected by the same Covenant (which can be 100’s of owners). Not impossible but also not a given!
When it comes to reviewing contracts, it’s crucial to have a professional take a look at it. This ensures you fully understand what covenants and other overlays may affect it. You’ll want to make an informed decision on all aspects of the property before making an offer.