Restrictive Covenants Insurance
At Construction insure, as construction insurance is our main focus we have seen and handled 100’s of restrictive covenants to insure a build can get under way. That’s why we are the go to broker when it comes to restrictive covenants insurance.
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A restrictive covenant is a contract that restricts the use of land and property. This contract can date back hundreds of years and, usually, has a historical application. If enforced now, a restrictive covenant could impede, or completely halt, the progress of your build. Some covenants, as an example, were put in place when houses were first developed on a plot of land. A developer would build five houses. One to live in and four to sell. To ensure that his land wasn’t overdeveloped, he would limit any additional building or additions to the houses, such as additional stories, by use of a restrictive covenant. With the passage of time, this contract wouldn’t become apparent until a new developer – perhaps fifty or a hundred years later – proposed to develop the existing properties. If the covenant is enforced, perhaps by neighbouring properties, the development would be unable to proceed. A Restrictive Covenant will usually be highlighted by a solicitor when the deeds for the new purchase are read through. They will advise their client of the details of the restriction and recommend the client purchases a restrictive covenant insurance policy.
What is Restrictive Covenant Insurance?
Restrictive Covenant Insurance would be obtained by the developer/building contractor or home owner, either pre-planning stage, post-planning, during the build, or even post-build, to ensure that a development Is protected. Then, if the restriction were to be discovered, the build can still proceed unencumbered by time or cost constraints. Without a policy, the development can be financially damaged by the cost of a settlement with neighbours. It could also mean that your build would be slowed down, or stopped, while negotiations take place. With a policy, your insurers would handle any case arising from the restrictive covenant. They would negotiate and pay any settlement costs, which might be five times the cost of the premium. Even if, in a worst-case scenario, the buildings had to be returned to their original condition, the insurance would cover those costs.
Commercial Restrictive Covenants
These types of covenants were also applied to commercial properties. For instance, the developer of a retail area could discover that there is a restriction on alcohol sales on the land. In which case, Restrictive Covenant insurance would allow them to sell the property to a business with an alcohol license. It would also continue to protect the buyer in the future. The same would apply for a change of use from residential to commercial if a restrictive covenant was in place preventing them from doing so.