Do you need a Restrictive Covenant Indemnity Insurance policy? - MCS

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16th November 2021

Do you need a Restrictive Covenant Indemnity Insurance policy?

A Covenant is typically understood as an agreement made between two parties in writing. In the context of property and land ownership, a Restrictive Covenant refers to an agreement that is written into a property deed. It defines certain actions the owner can or cannot do on the land or within the property. As a new owner of the property, you may wish to overrule the restrictive covenant. Removal of a restrictive covenant is not always a simple process however. Restrictive Covenant Indemnity Insurance provides the policy holder protection should the restrictive covenant be breached.

Within this article, develop your understanding of restrictive covenants, their purposes and limitations. Learn about restrictive covenant indemnity insurance and how it may help you safeguard your assets.

Everything you need to know about Restrictive Covenants

As previously mentioned, a restrictive covenant is a clause in the title deeds of a property. It restricts what use can be made of that property. Such as only allowing the owner or their close family to reside in it. Although restrictive covenants can sometimes benefit neighbours and provide protection, they can also become restrictive and anti-social for new owners.

Sometimes restrictive covenants can be positive – they can help protect your neighbours by setting out rules for things like noise levels, when you can use your home and any building works that need to take place. However, restrictive covenants placed by someone else on their land may benefit them in some way but often restrict what you can do with your own property in ways that are not so beneficial. For example they might stop you doing major building work or prevent you from having a tenant without permission.

Whilst these agreements may have been made with the previous owners of the property, new buyers may not agree with the restrictions, or the actions stated in the covenant may have become outdated. In this case, new buyers may want the restrictive covenant removed.

How to remove a restrictive covenant

There are a number of ways restrictive covenants can be removed. You could try to change the situation informally by speaking to your neighbours about whether they would be willing to withdraw or alter their restrictive covenant to suit both parties. However this may be unlikely to be successful, especially if the restrictive covenant was put in place many years ago.

If you are unable to come to an agreement with your neighbour, another way restrictive covenants are altered is through the Land Registry. They will listen to both sides and make a decision on what’s right for each property depending on the argument presented. Although this may provide satisfactory results, it also takes time and money. The process requires that you pay a fee and provide evidence for why you think the restrictive covenant should be removed. This can become costly and may not necessarily produce a positive outcome. The situation could escalate, leading to the inclusion of solicitors and an increased cost. Whilst this attempt is costly and time consuming, it does not always produce the desired result.

Restrictive Covenant Indemnity Insurance offers an alternative solution for new owners who wish to remove restrictive covenants from their property. This insurance policy can provide financial protection should the restrictive covenant be breached. This will safeguard your assets and help to protect you from any litigation.

Restrictive Covenant Indemnity Insurance

Restrictive covenant indemnity insurance provides cover for any financial loss that may occur as a result of claims against restrictive covenants. Or, restrictive covenants not being removed before exchanging contracts. This can be extremely beneficial for new buyers who have purchased properties with restrictive covenants on them. Often restrictive covenants are placed upon the title deeds of a property by the previous owners. This means they must legally remain in place until they are altered.

If you exchange contracts but do not alter the restrictive covenant, then this is classed as an ‘off-title’ dealing. Your conveyancer should advise you to take out restrictive covenant indemnity insurance to ensure your assets are protected. If it has been necessary to alter restrictive covenants after agreeing to purchase a particular property, restrictive covenant indemnity insurance can help to protect you in the event that any breaches occur.

In certain cases, breaches to the restrictive covenant are easily made. Some common examples demonstrate how they can become frustrating for new owners:

  • Restriction placed on the building of extensions, conservatories or outbuildings
  • Prevention from operating trading or business activities of any kind
  • Restrictions on alterations to the property, decorative or functional.

Final Thoughts

It’s clear how certain problems may arise as a result of specific covenants. Small businesses operating from home are incredibly common in 2021. Also, many homeowners enjoy the prospects of renovating and improving their home. If a homeowner breaches their obligation by taking these measures, they may face serious legal consequences if they have not considered how to defend themselves against enforcement. A Restrictive Covenant Indemnity insurance policy is the most effective way of reducing financial and legal consequences for restrictive covenants that new owners had not agreed to.

When looking for restrictions like these during conveyancing checks, it’s critical to work with an experienced and well-equipped conveyancing solicitor. Initiating restrictive covenant indemnity insurance is important for safeguarding your assets while also getting coverage for your money early. Our team experienced team at My Conveyancing Specialist can provide the services of skilled, professional licensed solicitors who will guarantee that no stone is left unturned throughout the conveyancing procedure.