“To buy or not to buy”, “To develop or not to develop”? A Restrictive Covenant on title is an important consideration for would-be purchasers and developers.
Solving the Restrictive Covenant Mystery
One of the key questions at the forefront of a Purchaser or Developer’s mind when buying a property or considering development of a property which has a restrictive covenant recorded against its Title is :
“To buy or not to buy” or “To develop or not to develop”?
Purchasers and Developers alike can be overwhelmed and mystified when they notice a restrictive covenant on the title. Quite often, it can lead to a complete halt in plans for development until the mystery of the restrictive covenant is solved!
What is a Restrictive Covenant?
A restrictive covenant is a written agreement or a contract between land owners that restricts the use and benefit of a parcel of land (“burdened land”) for the benefit of another parcel of land (“benefited land”). In most cases, when these agreements are entered into, they form part of the Title and remain on the Title. Furthermore, restrictive covenants not only binds the current land owner but also subsequent owners of that land.
What is the difference between a Restrictive Covenant, an Easement and a Caveat?
Covenants affecting the land can be either restrictive or positive in nature. A restrictive covenant is negative in nature as it prevents the land owner of the burdened land from undertaking particular activities or exercising certain rights. In contrast, a positive covenant requires the owner of the burdened land to take action for the benefit of other land. Some examples of restrictive covenants include:
- A single dwelling covenant which prohibits the construction of more than a one single dwelling on the burdened land. The effect of this covenant is that the landowner is restricted from subdividing the land.;
- A covenant imposing height restrictions on structures on the burdened land (such as fences) or;
- A covenant preventing the land owner from conducting a particular business or trade on that land; or
- A covenant restricting the use of certain building materials on construction of exterior walls or the frontage of the property (e.g.,brick veneer only).
In contrast, a positive covenant requires the owner of the burdened land to take action for the benefit of other land. For example, a requirement for land owner to landscape the gardens on the property or construct a fence along a boundary.
There may also be covenants or agreements between the land owner and a public authority in the course of developing the land pursuant to Section 173 of the Planning and Environment Act 1987 (Vic)(“Act”). These can also be positive or negative in nature but have no real effect on the purchaser or developer once compliance under that agreement has been met.
Can a Restrictive Covenant be altered or removed from the Title?
Before the Victorian Parliament passed the Planning and Environment (Restrictive Covenants) Bill in the year 2000, property owners who were affected by a restrictive covenant were able to obtain a planning permit without the need to modify or remove the restrictive covenant. This which often resulted in a breach of the covenant. Subsequently,the Act was amended to include Section 61 (4) which has since prevented the grant of planning permits if it would breach a restrictive covenant unless the restrictive covenant was varied or removed.
It is possible to remove or alter a covenant by the following methods:
- By submitting a Planning Permit Application to the relevant local Council to remove or vary a covenant;
- By making an Application to the Supreme Court under Section 84 of the Property Law Act seeking orders to either modify or remove the covenant; or
- By requesting an amendment to the Planning Scheme under Part 3 of the Act.
An Application made under any of the above methods however, comes with strict considerations and is tested on its own merits. One of the key factors for consideration usually is whether the removal of the restrictive covenant from the burdened land would adversely impact the beneficiary or the owner of the benefited land. While an Application to the Local Council is usually the first step and the preferred course to take when applying to vary or remove a covenant, a Council must refuse an Application under the Act if a beneficiary makes an objection. It can be difficult and a costly exercise when assessing the most suitable course of action.
How Sharrock Pitman Legal Can Assist
Our Property Law Team is led by Andre Ong (Accredited Specialist) in Property Law. Our Property Law Team is experienced to assist and advise you with the variation and/or removal of a restrictive covenant. If you wish to proceed with a Planning Permit Application for removal or variation of the restrictive covenant, we are able to prepare the relevant Application, supporting submissions and documents to the Council. Should the Council grant the Application, we can also assist in removing the covenant from the Title.
If you require assistance, please contact Shuhha Rao, Senior Associate in the Property Law Team directly on (03) 8561 3372. Alternatively, please contact our Property Law Team on 1300 205 506 or via email sp@sharrockpitman.com.au.
Further Information
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The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.
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For further information contact
Shubha Rao
Shubha Rao is a Senior Associate in the Property Law team at Sharrock Pitman Legal.
