Whether you’re a vendor looking to improve the value of your property, or a purchaser hoping to one day develop a newly purchased site, removing or varying a covenant can be extremely beneficial.
What is a covenant?
A covenant limits what owners can do on their land, and is generally an agreement between the land owner and other land owners nearby.
Two of the most common restrictive covenants are:
- Building covenants imposed by developers to make sure the owners of lots complete building works within a certain timeframe and following specific building requirements (for example: limited building heights, certain colours and setbacks); and
- Covenants designed to protect the neighbourhood character or guide the long term development of an area (for example: a restriction that you can only build one house on your land).
To determine if a covenant is registered on your land, you should check your Certificate of Title or obtain a title search of your land. If there is a covenant registered, you should consider whether it would be commercially beneficial to remove or vary it. If for example, you are looking to sell a large block of land however, there is a covenant on title prohibiting an owner from building two or more houses, the land is unlikely to be attractive to potential multi-storey developers looking for a site. Alternatively, you may have purchased a site, hoping to subdivide the land and build another property at the rear. By removing the covenant, the value of your land could increase significantly. Note however, that your title does not tell you if you have the benefit of a covenant, only if there is a burden.
How to vary or remove a covenant?
In general, there are four ways to remove a covenant:
- With the consent of all lot owners who benefit from the covenant. This is by far the quickest and easiest method. However, it is usually only suitable where there are few benefitting lot owners. For example, old covenants that benefit “all untransferred lots in the subdivision”. In that situation, the first lot sold would need to get the consent of all other lot owners, whereas the last lot sold might, fortunately, not need the consent of anyone else.
- Applying for a planning permit to remove or modify the covenant. This method may be used for “deadwood” covenants, where there is no real prospect of any opposition to the covenant’s removal. For example, there are residential lots in the suburbs which prohibiting lot owners from housing more than 3 pigs!
- Amending the planning scheme. This method is likely to take the longest to succeed as you would usually need the support of your local authority and the relevant Minister both at the time of the amendment and at the time that it is actually adopted. The amendment would need to further the objectives of planning in Victoria, with any net community benefit outweighing any adverse affect on beneficiaries.
- Supreme Court application. Where there are a number of beneficiaries (which is the case with many covenants), this may be the most suitable option. It is important to remember however, that costs can be awarded in a court application, unlike if you were to proceed under a planning permit. This would mean that, as well as paying for your own legal costs, you may have pay for the costs of objectors as well. Although, the fear of costs might also dissuade objectors.
Depending on the circumstances, a number of tests may need to be satisfied for a Supreme Court application. One of the most commonly relied upon reasons to remove or vary a covenant is where, by reason of the changes in the character of the neighbourhood, the restriction should be deemed obsolete. Given many covenants in Victoria were first registered on titles close to a century ago, a neighbourhood’s character may have changed significantly. If you are applying to have a “single dwelling” covenant removed, consider whether there are several dual occupancies or blocks of apartments in your neighbourhood. You should also remember that covenants are read strictly. Surprisingly, the wording in a covenant is occasionally incorrect. A court is more likely to agree to the modification of a covenant to permit a proposed development rather than to remove the covenant entirely.