Now commonplace in residential developments
With all the property development over the last 20 years or so, land covenants have become commonplace in new build residential developments.
If you are buying a property in a newly or recently built residential subdivision, the odds are that the title will come with various covenants registered against it. These covenants are likely to place restrictions on the ways in which the owners can use and enjoy their properties.
What are land covenants?
Land covenants are usually put in place to ensure that the aesthetics and maintenance of the subdivision are built and kept up to a certain standard. In other instances, a landowner may subdivide part of their property and wish to restrict what can be done on the subdivided land to protect their use and enjoyment of their remaining land, for example, by restricting the location and size of any buildings to protect their view.
Whilst life in a subdivision is not for everyone, urban development in New Zealand is now usually done through a subdivision with land covenants.
Land covenants broadly fall into two categories:
- Positive covenants that impose an obligation on a property owner to do something; or
- Restrictive covenants that prevent an owner from doing something.
Positive covenants usually include an obligation to make a financial contribution or assist with maintenance of something in common with neighbouring landowners, such as the repair and maintenance of a fence or driveway.
Restrictive covenants are the most common covenants in residential subdivisions. The restrictions could include:
- The construction materials that can, or cannot, be used for building on the land (including a possible prohibition on the use of second-hand materials);
- The height/design of your house, garage or even a fence;
- Restrictions on whether you can leave caravans, boats and trailers parked in the driveway;
- Ensuring clotheslines, heat pump infrastructure, solar panels or satellite dishes are not visible from the street;
- Limitation on the number of dwellings and/or outbuildings you can have on the property;
- Whether certain types of animals are not allowed on your property; and/or
- A reverse sensitivity covenant, that prevents the owners of the land burdened by the covenant from complaining about noise, smell or substances produced by an activity (such as an airport, farm, etc) being conducted on the property having the benefit of the covenant.
What to look out for
This depends on your intended use of the property. If you are considering buying a section to build a home from scratch, you must ensure your builder and/or architect have a copy of the land covenants, and that the build complies with all restrictions.
If you are making any alterations to an existing property, or even installing a solar panel/heat pump, you should first read all land covenants and establish whether it is allowed and, if so, whether there are any restrictions.
When buying a property that is subject to land covenants, you should ensure that the current owner has adhered to the rules and restrictions of the covenant, obtained the necessary developer’s consents and not committed any breach to date by, for example, building a granny flat on the property where that is prohibited.
Once the subdivision is completed, developers will often wind up their development company. If the landowners have not obtained any necessary developer consent before the company is wound up, this can hinder or prevent a sale later. Prospective purchasers are likely to be advised by their lawyers to seek a copy of any developer’s consent and this can prove to be difficult where the development company no longer exists.
How long does a covenant last?
Many land covenants ‘run with the land’ which means they bind every new owner and run indefinitely.
A well-designed land covenant could have various provisions that expire – such as any requirement for obtaining consent from the developer to avoid the issue of a developer company being wound up. If this is the case, the expiry date will be stipulated in the land covenant.
Breaching a covenant?
The rules contained within the land covenant can be enforced by you and your neighbours (if they hold the benefit of the land covenant) against anyone who has breached the restrictions.
To enforce a breach, written notice should be given to the owner that specifies what the owner must do or pay to fix the breach. If the owner receiving this notice does not agree that there has been a breach, they should give notice in return stating this.
If there has been a breach, most land covenants provide for damages, often in the range of $100–$250 per day and per property owner who has been affected by the breach. These damages will normally accrue until the breach is remedied. Sometimes the covenant provides for payment of a lump sum when there is a breach.
Often it is an immediate neighbour who raises any potential breach of the land covenants as they are the most likely to be impacted.
We encourage compliance with land covenants to avoid any liability to pay damages or a breakdown in relationships between neighbours.
Can a land covenant be removed or varied?
Land covenants can be removed from the title or varied. The easiest and most common mechanism for a removal or variation is when all parties affected by the land covenants agree to the removal or variation, and sign the necessary documentation. Getting all affected parties to agree to a removal or variation can be a lengthy, expensive and difficult process. In some subdivisions, the sheer number of affected parties will make this option an unattractive proposition and the possibility of complete agreement unlikely.
If you cannot get all parties to agree, there are possible remedies available by an application to the courts. The courts are, however, often reluctant to vary or remove land covenants, even those which may seem to no longer be relevant.
With modern urban housing density in subdivisions, the prevalence of land covenants is likely to continue to increase. Land covenants usually impact land indefinitely. This makes it more important than ever to understand the land covenants registered against a property before you buy it.
If you are unsure whether any covenants apply, or their effect, please be in touch with us. You should not presume that the other owners, including previous owners, have complied with their obligations to date.
Disclaimer: All the information published in Fineprint is true and accurate to the best of the author’s knowledge. It should not be substituted for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are the views of the authors individually and do not necessarily reflect the view of this firm. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit being given to the source.
Content Copyright © NZ LAW Limited, 2023. Editor Adrienne Olsen, e. email@example.com m. 029 286 3650