What is a “covenant”? How does it affect my property?

You may have heard this term ‘covenant’ or ‘restrictive covenant’ when looking into property. But what exactly is it? And why is it important for property buyers and sellers?  

What is a restrictive covenant? 

A restrictive covenant, or more commonly known as just a covenant, is a private agreement or contract between neighbouring landowners. The council or government are not involved in this agreement, nor are they involved in enforcing the agreement. 

Covenants are considered restrictive as they can restrict what modifications and renovations can be made on a block of land or property. Examples include limiting the number of properties that can be built on a block of land, restricting the height of a property, or specifying what materials must be used during construction. 

The purpose of covenants is usually to utilise restrictions to create a desired ‘look and feel’ within the area. The land that restrictions apply to is referred to as the ‘burdened’ land, and another land which gains from this restriction is the ‘benefited’ land. These restrictions run with the land, or the title. This means that even when the landowner changes, the restrictions will remain. 

What it means for owners or sellers 

If you are selling your property and are unsure if there is a restrictive covenant over your land, you can find out in the Section 32 of the property contract. This Section 32 will need to be prepared when you sell your property. Your lawyer or conveyancer will be able to inform you not only of the existence of the restrictive covenant, but also its nature, when preparing this Section 32. 

A covenant will only appear on a title where the land is burdened, but not on the title of the benefiting land. If the benefited land has been subdivided several times, the original plan of subdivision will need to be reviewed to identify the benefiting owners. 

What it means for buyers 

If you are looking to purchase a house, it is important to find out whether a covenant restricts the land. Obtaining planning permits or subdividing a block of land may be affected by the covenant. It is possible for a covenant to expire or have a lapse date, but most will continue to apply until it is removed. However, the process of modifying or removing a covenant is time consuming and expensive.  

Finding out whether the land you own or are interested in owning has a covenant could be key in your future decision-making process. Wealthsource can help you explore the effect of a covenant on your land.  

Feel free to contact us if you have any questions at [email protected] or +61 3 9590 6180.