Why do I need Restrictive Covenants Insurance?

September 28th 2021
restrictive covenants boxes

If you are about to start work on a property or piece of land or you are in the process of selling, one of the issues that could arise is finding out that there is a restrictive covenant. Detailed and held with land registry documents, you may not even know it exists. If you ignore it and forge ahead with any works, you could see yourself creating huge legal problems for yourself as well as being unable to sell on.

What is a Restrictive Covenant

A restrictive covenant is a contract that restricts how land and property is used. It can prohibit anything, from installing an extra window to forbidding and kind of building works. They are often historical and can date back hundreds of years. If enforced, it could seriously impact any work you are taking out and so it’s important to deal with it once you are aware of its existence.

Often they were put in place by the developer, for example a developer builds a small development of 10 properties, to limit further development they forbid any of the houses adding an extension by way of a restrictive covenant. This may only become apparent many years later when an owner wants to add a home office extension. If their neighbours were aware of the covenant and enforced it, it would stop them from being able to do it. Alternatively, and more commonly, the work goes ahead without the owner being aware that the restrictive covenant exists. A few years later they come to sell, and their solicitor informs them of it. At this stage they are advised to take out restrictive covenants insurance.

How does Restrictive Covenants Insurance Protect Me?

Restrictive covenants insurance is usually sought by a developer or homeowner, either before any work commences or (as mentioned above) when selling on. It is possible to contact the company or person that put the restrictive covenant in place and ask permission to do the work. But this can be a long and costly process without guarantee of being successful. So, in most cases Restrictive covenant insurance is taken out.

With this type of policy in place work can take place and should the restriction be enforced by anyone; you would be covered for any legal work as this would all be handled by your insurance company. Worst case, if the restrictive covenant had to be adhered to, the insurance would cover the cost of returning the property or land to its original condition (though this is rare).

In most cases a small premium is paid for the restrictive covenants insurance, work takes place, and the restrictive covenant is never enforced. But it gives the owner or developer peace of mind, they can continue on knowing that whatever happens they are protected financially by the policy they have taken out.