A developer is halfway through a project when their solicitor flags a covenant buried in a 1958 conveyance. It limits the plot to a single dwelling. The new scheme has two. Work stops while everyone scrambles for answers.
This happens more often than most people in construction expect. Restrictive covenants sit quietly in title deeds for decades, then surface at exactly the wrong moment, during a sale, a planning application, or partway through a build.
The good news is that there is usually a faster fix than fighting the issue through the courts. Restrictive covenant indemnity insurance is the tool most developers, homeowners and lenders reach for first, and this article explains what triggers the need for it, what it actually pays out for, and what it tends to cost.
What Is a Restrictive Covenant and Why Does It Still Matter
A restrictive covenant is a condition written into a property’s title deeds that limits what can be done with the land. Common examples include rules against building more than one house, restrictions on extensions without approval, or limits on commercial use.
These conditions are often imposed when land is first sold off, sometimes generations ago, to protect the interests of the seller or neighbouring landowners. The original reasons behind them can be long forgotten, but the legal restriction often remains binding on whoever owns the land today.
This is why covenants from the 19th or 20th century still cause real problems for modern developers and homeowners. They rarely show up unless someone goes looking, usually a solicitor reviewing the title during a transaction or before construction begins.
What Restrictive Covenant Indemnity Insurance Actually Covers
Restrictive covenant indemnity insurance protects against the financial consequences if the person entitled to enforce a covenant decides to act. A typical policy covers:
- Legal defence costs if enforcement action is taken
- Compensation or damages awarded against the insured
- The cost of demolishing or reinstating unauthorised work
- Loss of market value caused by the enforcement
- Costs linked to planning delays caused by the dispute
This makes it a practical safety net for property sales, developments, and renovation projects where an old covenant creates uncertainty.
What It Does Not Cover
The policy will not protect against a breach you create deliberately after taking out cover. If you knowingly go ahead with work that contravenes a known, enforceable covenant, insurers will not step in.
It is also harder, sometimes impossible, to get cover where the person who benefits from the covenant is clearly identifiable and likely to object. Insurers tend to be cautious where a neighbour with an obvious interest is still around to enforce the restriction.
Three Scenarios That Trigger the Need for Cover
Buying or Selling a Property With an Unclear Covenant
If a solicitor finds a covenant during conveyancing and cannot confirm whether it is still enforceable, indemnity insurance is usually the quickest way to keep the sale moving. Without it, the buyer’s lender may refuse to proceed.
Planning a Development or Extension
A developer wanting to build two houses on a plot covenanted for one, or a homeowner planning a loft conversion where consent is required, both face the same dilemma. Tracking down the original beneficiary for approval can take months and may not succeed. Insurance lets the project carry on.
Discovering a Historic Breach During a Sale
Sometimes the issue only comes to light when a property goes up for sale. A previous owner added an extension without the required consent years earlier, and now it threatens to hold up completion. In this case, indemnity insurance offers a safeguard against future enforcement rather than forcing the work to be undone.
A look at our restrictive covenants insurance page sets out how this works for live transactions and developments of any size.
What Determines the Cost of Cover
Premiums vary considerably depending on the circumstances. Key factors include:
- The value of the property or development
- Whether the covenant beneficiary is known and easy to identify
- Whether planning permission has already been granted
- The age and exact wording of the covenant
- Whether a breach has already happened, as opposed to being a future risk
Simple residential cases can start from a relatively modest one-off premium, while larger development schemes with higher values and more complex covenant histories carry a higher cost. It is almost always a single payment rather than an annual one, and cover typically lasts for as long as the property is owned, often passing to the next buyer when it sells.
Insurance Versus Applying to the Upper Tribunal
There is an alternative route. Landowners can apply to the Upper Tribunal under section 84 of the Law of Property Act 1925 to have a restrictive covenant discharged or modified. It sounds appealing, removing the covenant rather than just insuring against it, but the practicalities make insurance the more common choice.
The setting-down fee for an application is £999, with a further £125 charged for certain applications made during the case, on top of legal costs. Unlike standard court litigation, winning does not guarantee you recover those costs from an objector, while a successful objector usually does get their costs paid by the applicant. That asymmetry makes the tribunal route financially risky even when the applicant is in the right.
Recent cases show the picture is nuanced. In Ball v Fulton [2025], the Tribunal discharged a covenant after deciding it was personal to the original vendor rather than binding on successors, a result some commentators see as a more developer friendly approach. But the earlier Supreme Court case Alexander Devine Children’s Trust v Housing Solutions Ltd showed the opposite outcome is just as possible: a developer who breached a covenant before applying for modification weakened its own argument, because it could not rely on a situation it had created to claim the covenant no longer served the public interest.
In short, tribunal outcomes depend heavily on specific facts and are far from guaranteed. For most developers and homeowners, paying a one-off premium for restrictive covenant indemnity insurance is faster, cheaper, and far more predictable than gambling on a tribunal hearing.
Our legal indemnity insurance page covers the wider family of policies this sits within, including planning and easement risks that often come up alongside covenant issues.
Getting It Right Before You Build or Sell
A few habits make this process much smoother:
- Get the title checked early, ideally before exchanging contracts or starting design work
- Speak to a specialist broker rather than trying to negotiate with a covenant holder directly, since approaching them can alert them to the issue and make a policy harder to obtain
- Keep any policy confidential from third parties who might be able to enforce the covenant, as disclosure can invalidate cover
- Build the cost of a policy into project budgeting from the outset rather than treating it as an afterthought
If you are managing a wider development, our property developers insurance page covers how covenant risk fits alongside the other cover a project typically needs. For a deeper look at what a covenant actually is and how it ends up on a title, our earlier piece on what a
restrictive covenant means is a useful starting point.
Getting the Timing Right Saves Money and Stress
The pattern across most covenant disputes is the same. The earlier the issue is spotted, and the earlier a policy is arranged, the cheaper and calmer the process tends to be. Waiting until a sale is about to fall through, or a lender is refusing to release funds, puts everyone under pressure and narrows the options.
Restrictive covenant indemnity insurance will not erase the underlying legal restriction. What it does is shift the financial risk away from you and onto the insurer, which for most buyers, sellers and developers is exactly the protection needed to keep a project or transaction on track.
If you think a covenant might affect your build, sale or purchase, get in touch with our team for tailored advice on the right cover for your situation.
Frequently Asked Questions
Do I need this insurance if I’m only selling, not developing?
Often, yes. Many sellers arrange a policy because a buyer’s solicitor or lender requests it before completion can go ahead.
Will my mortgage lender insist on cover?
Frequently. Lenders want reassurance that an existing covenant will not put their security, or your ability to repay, at risk.
Does the policy cover covenants I don’t know about yet?
Many policies cover unknown as well as known historic breaches, though the exact wording varies between insurers, so it pays to check carefully.
What if I’ve already started building?
Cover may still be available for an existing or historic issue, but not for a breach you knowingly continue after the policy is in place.
Can the policy transfer if I sell the property?
Yes. In most cases the policy passes to the new owner and their lender, which is one of the main reasons it is so widely used in property transactions.