Conveyancing is the process of transferring the legal title of property from one party to another, allowing the purchaser to be notified of any covenants (restrictions or rights) in advance of making their purchase. There are numerous requirements which must be met for a covenant to be enforceable against a purchaser. A recent case in the Victorian Supreme Court highlights the importance of making land affected by covenants readily identifiable, so that the covenant can be enforced.
What is a covenant?
Covenants are the obligations imposed during conveyancing, where the purchaser agrees to abide by the particular rules set out by the vendor relating to the property. There are two types of covenants:
- A positive covenant: requires the owner of a parcel of land to conduct a certain act on or to the property. An example would be a requirement to landscape the gardens on a property.
- A restrictive covenant: restricts the land from being used in a certain way. These types of covenants are far more common and can include things like no fences unless they are of a certain style or color, or no advertising signs to be placed on the property.
Covenants “run with the land”, meaning they apply to all of the successive owners, provided that the covenant benefits the land rather than any particular covenantee. Anyone can create and register a covenant to their property. They may be created by inclusion in a transfer or as set out in a deed agreement between the parties.
Covenants may be extinguished or modified if the owner of the land expressly releases the covenant or does so by implication where the changing nature of the land negates the covenant’s value. They may be extinguished where statute, such as the Conveyancing Act 1919 (NSW), requires the covenant to be released.
Enforcing a covenant
Covenants are enforceable against landowners under both the laws of contract and equity so long as the covenant “touches and concerns” the land, that is, the covenant requires an action that has some effect, direct or indirect, on what happens on the land. To be enforceable, the covenant must indicate that the land is “benefited” or “burdened”, meaning it must contain at least one clause that either includes a positive obligation on the owner or a restriction on the way the land is used.
Additionally, a covenant must touch and concern the land of the covenantee. A covenant which touches and concerns part of the land cannot be extended to benefit the entire land, meaning a covenant which restricts building on 18 acres does not restrict building across the entire 700 acre estate. A subdivision may benefit from a covenant if there was an intention to touch and concern the whole land. However, if the covenant does not benefit the subdivided part, the intention of the parties will be irrelevant and the covenant will be unenforceable.
The land must be readily identifiable to be enforceable: Re Ferraro  VSC 166
In this matter, the Court held that the plaintiff’s land was no longer affected by restrictive covenants as the land to which the covenants conferred a benefit was no longer readily identifiable.
In 2019, the plaintiff became the owner of a parcel of land with two restrictive covenants preventing her from carrying out certain development plans which included the partial demolition and alterations to the existing dwelling on the land. The covenants were registered in 1907 and 1911 and prohibited the construction of certain structures, required the use of certain materials when building a dwelling house and required any development to be approved by a few named individuals.
The Court, in its findings, upheld the principle that a restrictive covenant will only run with the land if it is given for the benefit of land, not simply for the benefit of a covenantee, and such covenant must touch and concern the land. The wording of the covenants was also examined by the Court and it was found that the ambiguity as to who the transferees were meant that the benefited land could not be ascertained.
Contact Etheringtons Solicitors
We can help you navigate the process to ensure that you are able to obtain good title on any prospective property and that there are no unknown restrictions on the property before you buy. If you need assistance with a conveyancing matter (either buying or selling) or would like more information please call us on (02) 9963 9800 or via our contact form.