How restrictive covenants bind future owners
A restrictive covenant binds successors in title if: (1) negative in substance — restricts use rather than requiring action; (2) covenantee retains benefited land; (3) covenant touches and concerns the land; (4) noted on the Land Registry Charges Register for registered land. Positive covenants (maintaining a fence; contributing to road costs) do NOT run with freehold land and bind only the original covenantor.
- Negative in substance: restricts use (no HMO; no commercial use; no conversion) — does run with land and bind future owners
- Positive in substance: requires action (maintain fence; contribute to road) — does NOT run with freehold land; chains of indemnity covenants used in practice
- Registered land: covenant must be noted on the Charges Register of the burdened title to bind a purchaser for value
- Check the full Charges Register of the Land Registry title before exchanging contracts on any investment property
Common covenants affecting BTL landlords and indemnity insurance
No commercial or business use: renting out a property as residential accommodation generally does NOT breach a no-business-use covenant — the tenant uses it as a home; no HMO or conversion to multiple occupation: new-build estates frequently include explicit prohibitions on HMO use or conversion — actively enforced by estate management companies; no alterations without consent: affects house-to-flat conversions and annexe additions.
- No HMO or conversion covenants: common in post-2000 new-build estate transfers; enforceable by estate management company by injunction
- No commercial use covenants: standard BTL letting generally does not breach; serviced accommodation or operator-led HMO may be closer to commercial use
- Indemnity insurance: one-off premium (£200-£1,000+) covering enforcement risk for historic or borderline covenants — only available where covenantee has not been recently alerted to the breach
- LPA 1925 s.84 — Upper Tribunal (Lands Chamber): can discharge or modify a restrictive covenant on grounds of obsolescence (ground a); impediment to reasonable use (ground aa); agreement of benefited parties (ground b); or no injury (ground c)