What are Restrictive Covenants?

Restrictive Covenants are private agreements between land owners. They are usually imposed when property is subdivided. The covenant will impose a restriction on one or more lots (the burdened land) for the benefit of one or more lots (the benefitted land). Whilst restrictive covenants are agreements between land owners – they are usually registered on title and council will not usually allow development that is inconsistent with the covenant.

Restrictive covenants can contain a diverse range of restrictions. Some of these are irrelevant in the modern era. Examples include prohibitions on quarrying, minimum construction costs (which are irrelevant as a result of inflation) – or even a prohibition on using a property as a brewery.

Some restrictions will limit the development of the burdened land. The most common example is a single dwellling covenant. This prevents the construction of more than one dwelling on the land. However, covenants that stipulate brick (for example) construction may also have implications for building costs.

Careful Analysis

BEFORE you buy the property you should consider carefully any restrictive covenants on the property. These are often difficult to read as they may be written in dense handwritten type on parchment that is 100 years or more old.

However, the precise wording and structure of the covenant is critical. Some covenants may not be enforceable. Others may have been interpreted to allow multiple dwellings. In some cases there may only be one or two lots that benefit from the covenant – and getting the owners’ agreement to remove the covenant may be viable.

Remove or Vary?

This leads to the next key consideration. It may be easier to vary a restrictive covenant than remove it entirely. For example, rather than remove a single dwelling covenant it may be enough for your needs to vary it to allow three (for example) dwellings.

Strategies to Vary or Remove

There are a number of strategies that can be employed to vary or remove a restrictive covenant:

  • Agreement – If you can secure the agreement of the other benefitting lots – you may be able to secure agreement to vary or remove the covenant. Clearly this is easier if there are few benefitting lots – but you do need all of them to agree.
  • Court Application – The Supreme Court can amend or remove a covenant. In simple terms, you need to convince the court that there is no net detriment to any beneficiary of the covenant. Beneficiaries need to be notified of the application. This is a relatively hard test to satisfy.
  • Planning Permit – The council has the power to amend or vary a covenant in response to an application under the Planning and Environment Act. Again, all beneficiaries need to be notified. The council can only exercise this power if satisfied that there is no material detriment to any beneficiary.
  • Amend the Planning Scheme – The council has the power to vary or remove a covenant under different provisions of the Planning and Environment Act – which allow for amendments to the Planning Scheme. All beneficiaries need to be notified. The key difference is that the council needs to be satisfied that there is a net community benefit and the application is consistent with sustainable development. Importantly, this can be the case even if there is detriment to individual beneficiaries of the covenant.

Concluding Thoughts

A restrictive covenant may not be fatal to developing a burdened piece of land.

You need to carefully consider the terms of the covenant and what strategy is to be employed to overcome a covenant that prevents your proposed development. It doesn’t hurt to look at whether other lots with the same covenant have been developed.

In some cases, covenants can be removed or varied relatively cheaply. In other cases it is an expensive and time consuming process with no guarantee of success.

If you are looking at a covenant and need some advice, Lewis O’Brien & Associates can assist. CLICK HERE to book a one on one session with Lewis O’Brien and explore your options.