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Restrictive Covenants

Leasehold Restrictive Covenants

Definition: What Is A Restrictive Covenant?

Leasehold covenants are rules that you agree to when you sign your lease. Most are designed to prevent anti-social behaviour or anything which could devalue the block or make its flats difficult to sell. They affect both leaseholders (tenants) and freeholders (landlords). Always read the covenants carefully before signing your lease.

Examples of Leasehold Covenants

Covenants can be either:

  • positive – such as a freeholder promising to carry out maintenance work to ensure the upkeep of the block
  • negative – restrictive covenants that stop things being done to/at the block.

Restrictive covenants are common and cover a wide range of areas. They can include bans on:

  • using your home as a holiday let
  • sub-letting your property to other tenants (this may also be a clause in your mortgage)
  • major alterations such as removing or moving walls (but it is permissible to install a new kitchen or bathroom)
  • parking too many vehicles on the communal forecourt; parking any commercial vehicles
  • parking your car on the forecourt instead of using your allotted garage as intended
  • running a business from your flat
  • nuisance – usually noise, such as doing DIY at certain times, practising any musical instruments, watching TV too loudly or hosting parties very late at night or in the early hours
  • keeping pets
  • certain types of flooring, hard wood, vinyl or laminate.

Covenants vary from lease to lease (and from town to town, depending on the old estates which own/owned the land). They tend to be stricter in more expensive properties.

How Long Do Leasehold Covenants Last?

Most covenants remain in place for the duration of the lease (99 years, for example) so they are permanent unless otherwise removed or changed.

It is possible to specify a set duration for a covenant but the vast majority are put in place for as long as the lease remains in existence.

Enforceability: What Happens If I Break A Covenant?

Is a covenant legally binding? Yes, it most certainly is. You must abide by all the covenants in your lease. You cannot treat them as mere guidelines that you can choose whether or not to obey.

It is also important to remember that covenants affect both leaseholders and freeholders – and that either side could face legal action if they break these rules.

Who enforces covenants? Tribunals, county courts and higher civil courts – following applications from aggrieved landlords or tenants. Failure to abide by civil rulings could have far-reaching consequences in the criminal courts.

Landlords can apply for a county court judgment against the leaseholder. Failure to abide by that judgment would put the errant leaseholder in contempt of court (which could ultimately result in them being fined or jailed by a criminal court).

Leaseholders who persistently breach covenants, behave badly and annoy other residents at the block could ultimately end up having to forfeit their lease (and therefore lose their home) if they continue their anti-social behaviour. In rare cases the freeholder can start forfeiture proceedings against a leaseholder by serving a Section 146 Notice under the Law of Property Act 1925.

In doing so, the landlord must:

  • specify the breach of covenant
  • require the leaseholder to remedy the breach (if that is possible)
  • require the leaseholder to pay compensation.

Serving a 146 Notice must be done correctly, according to defined procedures. There are potential pitfalls so it is important to get expert legal advice before embarking on this course of action.

Freeholders/landlords who breach covenants by failing to keep the block in good repair will also face legal action (and the prospect of bad publicity and angry leaseholders/tenants withholding service charge payments in protest).

Going to a tribunal or court can be an expensive process for both sides. We would advise it only as a last resort. Our leasehold solicitors can advise on quicker, easier and more cost-effective ways of resolving covenant disputes but these usually depend on the leaseholder/tenant correcting their breach(es). 

Lifting Restrictive Covenants

Times and circumstances change. Sometimes covenants become outdated or are no longer required. Perhaps the lease contains an error that needs to be corrected. 

In these instances, it is possible to apply to have covenants removed or modified.

There are two ways to do this:

  • by getting unanimous consent from the freeholders and all the leaseholders
  • by an application under Section 35 or 37 of the Landlord and Tenant Act 1987.

Applications go to the First-tier Tribunal – and either the landlord or the leaseholders can apply. If most of the parties agree, the tribunal has the discretionary power to amend the lease.

But to succeed, an application is subject to certain rules set out in Section 37:

  • the application must be in respect of two or more leases
  • the leases must be long leases (not assured short tenancies) of flats and the landlord must be the same person in both cases (but the properties can be in different blocks and the leases need not be identical)
  • all the leases involved must be varied the same way if the desired objective is to be achieved
  • if there are more than eight leases, 75 per cent of the parties must consent to the proposed variation – and not more than 10 per cent can object (they can abstain but not object)
  • if there are exactly nine leases, all (or all but one) of the parties must agree.

Lease variations can be contentious. So sometimes it can be hard to secure even a majority agreement

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