When you’re looking at buying a property, the real estate agent will usually provide a copy of the record of title (sometimes called the title, certificate of title or CT).
The record of title is an important document that shows who officially owns the property and outlines any rights or restrictions – such as covenants, caveats and easements – that apply to the land.
In this article, Debbie Nelson explains what covenants are and what you should consider when buying a property with a covenant.
What exactly is a land covenant?
Land covenants are rules that apply to a particular property and affect how you can use it.
Covenants can apply permanently or for a set period of time (i.e. have an expiry date). If a covenant is permanent, all current and future owners of the property will be bound by the covenant and must comply with the rules.
There are two types of covenants:
- Positive covenants – rules that require a property owner to do something (e.g. build a property out of a particular material, or build and maintain a fence)
- Restrictive covenants – rules that prevent an owner from doing something (e.g. you can’t build a double-storey house)
Covenants are usually registered by the developer or the original land owner on completion of a subdivision to ensure the look of the entire development stays consistent. Sometimes covenants are registered by neighbouring owners to record an agreement they’ve reached or sometimes the council may require covenants to be registered as a condition of resource consent.
What kinds of rules do land covenants typically create?
Covenants can involve all sorts of things, but here are some common examples:
- Requirement for the developer to approve any plans and specifications for any buildings and structures
- Restrictions on the size or shape of a new home (e.g. minimum floor area)
- Whether any additions (like a minor dwelling, tiny home, garage or shed) can be added to the property
- Construction materials or paint colours which can or can’t be used
- Direction on fencing
- Limitation on further subdivision
- Pet restrictions
- Residential use only (i.e. no commercial use)
- Whether outside aerials or clotheslines can be installed
- Time limits on construction (e.g. 18 months to complete construction after building consent is granted)
- Maintenance of infrastructure or bush/vegetation areas
It’s very important to be aware of any covenants that apply to a property you’re thinking of buying, as some covenants will mean the property isn’t suitable for you. Even if the covenant won’t affect you personally, it’s a good idea to think about whether it would limit the pool of potential buyers if you decide to sell the property later down the track.
For example, some covenants say you can’t have a dog and/or cat on the property – and this type of covenant would put many buyers off.
Who enforces land covenants? And what happens if you breach one?
Covenants usually have default provisions included, which state who can give notice of a breach. For example, a developer may have the right to enter the property to assess and ensure compliance and if there is non-compliance found, issue a notice to remedy the breach.
If the covenant is registered within a mutual land covenant scheme, any owner of the land (within the subdivision) can enforce the covenant on their fellow neighbour if they’re not compliant.
The covenant will outline the penalties that apply for any breaches.
How we can help
When you’re buying a property, it’s important to send the record of title to your lawyer so they can review it and advise you on any registered covenants. This needs to happen during the unconditional stage of the agreement or before you bid at auction so that you can make an informed decision.
You need to be certain that the property can be used how you want to use it and that you can build the home you want to (if you’re buying bare land). You also need to be aware of any covenants that apply to ensure you don’t breach them if you decide to buy the property.
If you’d like us to assist you with your next property purchase, get in touch with our team on enquiries@armstrongmurray.co.nz or 09 489 9102.
This article is brief and general in nature. You should not treat it as legal advice and should seek professional advice before taking any action in relation to the matters dealt with in this post. Armstrong Murray accepts no liability for losses suffered by any person or organisation who may rely directly or indirectly on this post.
