Insight: feeling restricted
Having an offer accepted on the ‘perfect’ property is an exciting time and, at that point, most would-be purchasers have little idea as to what’s in the title deeds, let alone any covenants that might restrict how they might use their new property.
As you’ll be aware, it isn’t unusual for landowners to impose restrictive covenants on a title to the land they’re selling, and they can range from extreme and unusual restrictions, such as not hanging washing outside, to more common constraints on further extensions, developments, and use.
Such restrictions can appear on title deeds from the 1800s to present day and, with such a variety of both historical and recently imposed covenants requiring cover, we have to apply a range of approaches when underwriting your restrictive covenant enquiries.
Many of the enquiries we see are for properties that have already breached a covenant, such as an extension where further construction is prohibited or requires approval. For these cases, our underwriters’ main concern is that no contact has been made with potential beneficiaries of the covenants and the breach is at least six months old.
But we’re also happy to cover alterations and new build properties that may have only recently breached covenants. The risk for such properties is slightly higher, but our premium will always remain reasonable, as beneficiaries are likely to have objected at the planning stage or during the building works.
Covenants can be breached by existing properties where there is an intended change of the use, by new developments, and by plots or properties that are being redeveloped. These cases are more complicated to underwrite as we cannot always be sure if a covenant can be legally enforced, whether there is a beneficiary to the covenants and, if there is one, how they might react to the breach.
Our underwriters will first consider the enforceability and the age of the covenant (older covenants are generally less likely to be enforced). Identifying who imposed it helps us evaluate their likely reaction. For instance, Local or Statutory Authorities, large companies or institutions, or prominent local landowners are generally more likely to enforce covenants.
It’s also important to find out if any other parties, such as successors in title, might be able to enforce the covenants. This includes looking for any indication that land was retained when the covenants were imposed, and the current ownership and use of that land to determine potential beneficiaries.
And if the property is part of a building scheme, the covenants could be enforced by every plot owner on the original estate, so our underwriters will be sure to check for that!
Finally, if there were no objections that referred to covenants when planning permission was sought, this suggests that any beneficiaries might have decided not to enforce the covenants or simply be unaware of them.
We’re more than happy to consider cover on a pre-planning basis too; although this carries a higher risk, we’re always ready to look at the practical factors of a case in order to offer you a quote.
Freedom from restriction
With so many properties subject to an incredible variety of restrictive covenants, it’s no surprise that they represent perhaps the most common of legal indemnity risks. It’s also no surprise that we see plenty of claims on restrictive covenants policies, or that they’re not always easy to resolve quickly, as demonstrated by our claims case study.