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. Indemnity insurance for restrictive covenants is the tool most developers, homeowners and lenders reach for first. This guide explains when you need it, what it pays out for, how long it lasts 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 or alterations without approval, or limits on commercial use.
These conditions were often imposed when land was first sold off, sometimes generations ago, to protect the interests of the seller or neighbouring landowners. The original reasons 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 come to light unless someone goes looking, usually a solicitor reviewing the title during a transaction or before construction begins. For a fuller explanation, see our guide on what a restrictive covenant is and whether you should be insured.
What Restrictive Covenant Indemnity Insurance Covers
A restrictive covenant indemnity policy 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 altering or demolishing work that breaches the covenant
- Loss in market value caused by enforcement
- Abortive costs, such as wasted construction or professional fees, if a scheme has to stop
That 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 being told cover is unavailable, or one you carry on with after the person with the benefit of the covenant has objected.
It is also harder, and sometimes impossible, to get cover where the person who benefits from the covenant is clearly identifiable and likely to object. Insurers are cautious where a neighbour with an obvious interest is still around to enforce the restriction.
Indemnity Policy for Breach of Restrictive Covenant: Past vs Future Breaches
Restrictive covenant indemnity insurance can be written for two quite different situations, and insurers treat them differently.
- Historic breach – the covenant has already been broken, for example by an extension a previous owner built without consent. If years have passed without any complaint, cover is usually straightforward to obtain and relatively inexpensive.
- Future or proposed breach – you are planning work that will break a covenant, such as building two houses on a plot restricted to one. The insurer is taking on a live risk, so it will look much more closely at the circumstances and the premium tends to be higher.
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, covenant 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, faces the same dilemma. Tracking down the original beneficiary for approval can take months and may never 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. Here, an indemnity policy protects against future enforcement rather than forcing the work to be undone.
Our restrictive covenants insurance page sets out how this works for live transactions and developments of any size.
How Much Does Restrictive Covenant Indemnity Insurance Cost?
The cost of indemnity insurance varies considerably depending on the circumstances. The key factors include:
- The value of the property, or the completed value of the 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, or is a future risk
- How long any existing breach has gone unchallenged
Simple residential cases involving an old covenant and a historic breach can cost a relatively modest one-off premium, while larger development schemes with higher values and more complex covenant histories carry a higher cost. Because every case is assessed individually, the most reliable way to find out what your policy will cost is to get a tailored quote.
Is Indemnity Insurance a One-Off Payment?
Yes. Restrictive covenant indemnity insurance is almost always paid as a single, one-off premium rather than an annual one. There are no renewals to manage.
How Long Does Indemnity Insurance Last?
Most restrictive covenant indemnity policies last indefinitely, with no expiry date. Cover typically continues for as long as the property exists and passes automatically to future owners and their mortgage lenders when the property is sold. This is one of the main reasons the policies are so widely used in property transactions.
Insurance vs Applying to the Upper Tribunal
There is an alternative route. Landowners can apply to the Upper Tribunal (Lands Chamber) under section 84 of the Law of Property Act 1925 to have a restrictive covenant discharged or modified. Removing the covenant entirely sounds appealing, 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 will often have their costs paid by the applicant. That makes the tribunal route financially risky even when the applicant has a strong case.
The case law shows how unpredictable outcomes can be. In Alexander Devine Children’s Trust v Housing Solutions Ltd, the Supreme Court overturned a decision to modify a covenant because the developer had knowingly built in breach of it before applying. The developer could not rely on a situation it had created to argue the covenant should be removed.
Tribunal outcomes depend heavily on the specific facts and are never guaranteed. For most developers and homeowners, a one-off premium for restrictive covenant indemnity insurance is faster, cheaper and far more predictable.
Restrictive covenant cover sits within a wider family of legal indemnity insurance policies, including absence of easement, right of light and planning and building regulations cover, which often come up alongside covenant issues.
Getting It Right Before You Build or Sell
A few habits make the process much smoother:
- Get the title checked early, ideally before exchanging contracts or starting design work
- Speak to a specialist broker before approaching a covenant holder directly, since contacting them can alert them to the issue and make a policy impossible 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 your project budget from the outset
If you are managing a wider scheme, our property developers insurance page covers how covenant risk fits alongside the other cover a project typically needs.
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 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
How much does indemnity insurance cost for a restrictive covenant?
It depends on the property value, the age of the covenant, whether a breach has already happened and whether the beneficiary is likely to object. Simple historic breaches on residential property are usually inexpensive, while proposed breaches on larger developments cost more.
Is indemnity insurance a one-off payment?
Yes. You pay a single premium and there are no annual renewals.
How long does indemnity insurance last?
Most policies have no expiry date and remain in force for as long as the property exists, passing to future owners when it is sold.
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 at risk.
What if I’ve already started building?
Cover may still be available, but not if the person with the benefit of the covenant has already objected, or if you carry on with work after an objection.