A covenant running with the land is a legal obligation or right attached to a piece of land that binds not just the original parties to the agreement but all future owners of the land. Unlike a purely personal contract — which creates obligations only between the contracting parties — a covenant that runs with the land follows the property through successive changes of ownership. For property investors, this means that covenants agreed decades or even centuries ago may still be enforceable today.

Understanding the nature, source and practical impact of covenants affecting a target property is an important element of pre-acquisition due diligence. This guide explains the main types of covenant, how they arise, how they are enforced, and how their impact can be managed.

Positive vs Restrictive Covenants

Covenants are categorised as either positive or restrictive, and this distinction is legally significant because the two types have different rules about when they run with the land.

A restrictive covenant imposes a restriction on what the land may be used for or what may be done on it. It is a ‘negative’ obligation — a prohibition rather than a requirement to act. Under the rule in Tulk v Moxhay (1848), a restrictive covenant can run with the freehold land and bind successors in title provided certain conditions are met: the covenant must be restrictive in nature, it must ‘touch and concern’ the land, and the person seeking to enforce it must own land that benefits from it.

A positive covenant imposes a positive obligation — typically a requirement to maintain, repair or contribute to costs. At common law, positive covenants do not run with freehold land and bind only the original covenantor. Successive owners of the burdened land are therefore not directly bound by a positive covenant unless specific legal mechanisms (such as the use of a deed of covenant on each sale) are used to pass the obligation along the chain.

In leasehold land, the position is different — both positive and restrictive covenants in a lease typically bind successors in title, which is one reason why leasehold is used as the tenure for residential buildings where ongoing maintenance obligations need to be enforced.

Where Covenants Come From

Covenants on residential and investment property arise from a variety of sources:

  • Estate development — many suburban and residential estates were developed in the nineteenth and early twentieth centuries under a scheme of development in which each plot was sold with both the benefit and burden of a set of covenants. These covenants were designed to maintain a uniform character across the estate and often include restrictions on use, density and building style.
  • Individual sales — where a previous owner sold part of their land and imposed covenants to protect the retained land, for example preventing development that would overshadow the retained property or restricting use to avoid competition with a business on the retained land.
  • Leases — as noted above, both positive and restrictive covenants in leases bind successors in title.
  • Statutory sources — certain covenants and obligations arise from statute rather than agreement, including obligations arising from planning conditions and infrastructure agreements.

How Covenants Are Identified

Covenants affecting freehold land should be noted in the C register of the title register, either directly or by reference to a prior conveyance or document. Investors reviewing the title register should look for entries in the C register that refer to covenants in earlier deeds or transfer documents. Where covenants are referred to rather than set out in full, the underlying document should be obtained (usually from the Land Registry or from the seller’s solicitors) and reviewed in full.

It is not uncommon for covenants to be referred to in the title register in general terms — for example, ‘the property is subject to the covenants contained in the transfer dated…’ — without the specific terms being disclosed. Investors should ensure that the full terms of any such covenants are reviewed before exchange.

Assessing the Impact on Investment Strategy

The practical significance of a covenant depends entirely on whether the investor’s intended use of the property conflicts with its terms. A restriction on use to a single private dwelling matters enormously to an investor planning HMO conversion and not at all to an investor planning a standard single-let.

Where a covenant does conflict with the intended strategy, the investor has three main options:

  • Seek a release or modification from the beneficiary of the covenant — appropriate where the beneficiary is identifiable and the covenant is relatively recent.
  • Apply to the Upper Tribunal for modification or discharge under section 84 of the Law of Property Act 1925 — available where the covenant is obsolete or where its enforcement would impede a reasonable use of the land.
  • Obtain indemnity insurance — appropriate where enforcement risk is low (because the beneficiary is unknown, inactive or the breach has been in place for many years) and insurance is available at a commercially reasonable premium.

Bidq identifies covenant issues in every title review and explains their practical impact on your investment strategy before you commit. Explore Bidq’s pre-bid legal review.