A sales engineer works for Company A, but is offered a job by Company B, which is a direct competitor of his present employer. Under these circumstances, this individual may find that somewhere in their contract of employment, there is a clause which states that they are prohibited from working with a direct competitor for a certain period. Having signed his or her contract of employment, they have entered into a formal agreement or covenant with their employer, which includes a restriction on their future employment. Some courts may not uphold this restrictive covenant as it can be seen as breeching the sales engineer’s human rights by restricting their ability to earn a living.

A Restrictive Covenant attached to a property or piece of land is a rule in your property deeds that dictates what you can or cannot do to a property or piece of land. It consists of an agreement in a title deed, which places a restriction on the use of the land or building in some way. This is usually to protect the interests of neighbours or the surrounding area and it is important to remember that Restrictive Covenants ‘run with the land’. This means that they apply to all future owners of the property and not just the original purchaser. When you purchase a property or piece of land, your solicitor or conveyancer should find any Restrictive Covenants attached to that property or land and explain the implications to you.

Restrictive Covenants in the property market are quite common. A plot of land may have a Restrictive Covenant placed on it, preventing it from being used for development purposes. This may have been done many years ago or may be a recent covenant added by a charity such as ‘Fields in Trust’, in conjunction with a landowner, which will protect an area of land for recreational use. A housing development may have Restrictive Covenants attached to the deeds which prohibits the fixture of satellite dishes or security cameras to the front of the house or the parking a caravan or boat in the front garden, keeping chickens or other livestock or allowing a garden to become overgrown and untidy. Some may have restrictions which do not allow a resident to change the appearance of the exterior of their house by painting the walls or doors a different colour, while others may prohibit the use of any part of the property for business use.

Many of the restrictions imposed by these covenants are for the protection of others or to hopefully contribute to the continued upkeep of a development to maintain its original appearance or standards. Others are less beneficial and can in some instances hinder the development or improvement of the area by, restricting the building of extensions or other construction work, which could curtail the future selling price of a property. In some cases, mortgage lenders may refuse to lend on properties where a covenant is deemed to adversely affect future saleability of that property, so it is wise to double check Restrictive Covenants with your conveyancer or solicitor when buying a property. A property may already be occupied and used in breach of a Restrictive Covenant or a change of use or development may be proposed that would be in breach of the restrictions.

While it is important to remember that Restrictive Covenants ‘run with the land’, it is possible to have them removed or indemnified against, because the covenant has no benefit or has become historically obsolete or unenforceable. Firstly, it is important to find out who placed the covenant or benefits from it being there. Your solicitor should then contact the beneficiary and ask to have the covenant removed, but be aware they may ask for a fee in compensation. Covenants can also be terminated by courts, if they can be demonstrated to be illegal, abandoned, or even subject to a change of circumstances. If a Restrictive Covenant is not enforceable then an application can be made to the Land Registry to remove the covenant from the deeds and if a property owner feels it is unreasonable, they may have a case for varying or amending the covenant or having it removed altogether.

If that is not possible, should there have been a breach of the covenant which has been unenforced for over twelve months and having established the likelihood of enforceability, a solicitor or conveyancer will usually look for options where insurance can be obtained to cover the liability of any further breach of contract. Restrictive Covenant Indemnity Insurance is cover for a breach of a Restrictive Covenant, known or unknown. Typically, this is taken out by a seller to protect the new buyer of their property against any party who has the ability to enforce these covenants.

The cost of Restrictive Covenant Indemnity Insurance will vary dependant on the number of covenants breached and the likelihood of any enforcement action. The policy will incur a one off payment and will last in perpetuity and like the Covenant itself, can be passed from one owner of a property to the next, including their mortgage provider.

Restrictive Covenant Indemnity Insurance costs in most cases, upwards of £100 and is available from most well-known insurance providers. As with most things which we are not familiar with, it is always best to seek advice from those who deal regularly with these issues, in this case, your conveyancer, solicitor or insurance broker, before making any commitment or decision.

If you are thinking of buying or selling your home, you may find some of these services useful: