Land Covenants – protecting or preventing development?

Land covenants are very commonplace in modern subdivisions and often impose significant restrictions on the way a property can be developed and used, now and into the future (sometimes indefinitely).

While usually intended to promote and protect the amenity of subdivisions and preserve property values in the years to come, covenants can stymie development, prevent neighbourhoods from moving with the times and create difficulties for owners trying to renovate and extend or sell their properties.

Common issues are:

• Requirements that the developer or other third party approve in writing any plans and specifications for construction of buildings on the land. Often these requirements are overlooked, and approval is not actually sought or there is nothing in writing to show that this requirement was complied with. This causes issues when the property is sold as a purchaser inherits (and could be required to fix) any covenant compliance issues when they buy a property. These requirements can also be written in such a way that it’s not clear whether approval has to be obtained for the initial construction of buildings on a property, or whether the obligation is ongoing and approval must be obtained for any new additional buildings (like a tiny home or extra garage) or changes to original buildings – which would cause further issues if the developer no longer exists.
• Prohibitions on subdivision or the number of dwellings that can be constructed. It is very common for covenants to specify that only a single dwelling can be constructed on a property, which can prevent an owner from redevelopments such as converting their property into a home and income and inhibits intensification of residential land.
• Inflexible material requirements, like obligations to use only certain types of cladding, which have become obsolete or problematic over time. These requirements can also prevent the use of new superior materials and building innovations.

It is possible to put a time limit on covenants and to update or remove them, but the process of doing so (if not provided for in the original registered covenants) can be painful.

Updates or removal can be done by:

• Obtaining the consent of all owners in the affected subdivision – but often this is simply not practical due to the number of impacted owners or the risk of one or more owners refusing to cooperate or requiring some sort of payment to do so.
• Making a Court application for an order under sections 316 and 317 of the Property Law Act 2007. Court proceedings can be costly and lengthy, with no guarantee of success. To be successful, an owner would have to convince the Court that:
  • There has been some relevant change (such as the use of the land or in the character of the neighbourhood) which means that the covenant should be modified or removed;
  • The continuation of the covenant as is would impede the reasonable use of the property; and
  • There is no-one who will be substantially detrimentally impacted by the modification or removal of the covenant.

If you are considering buying, selling, developing or redeveloping a property that you know or suspect is affected by covenants, it is prudent to check the property’s title and understand the impact the covenants may have on your plans and what your options. Our property team can assist with this, please get in touch.