Land covenants have become a popular way for developers to control the standard and integrity of their subdivision, in order to maintain the value of the properties within. These covenants are usually recorded in either a transfer or easement which is registered at the same time as the titles issue.
The covenants can dictate almost any requirements in relation to the property. These rules bind all parties over all properties recorded under the covenant. While all the owners of the properties will be bound by the covenants and can usually enforce them against each other, a developer or “grantor” has the right but not the obligation to enforce them. Councils have no responsibility to ensure the compliance of the land covenants by land owners.
Common covenants might require an owner to receive the developer’s consent for their building design. This might also include approving the colour schemes and landscaping plans. Other covenants may affect a property owners day-to-day use of the property, such as requiring sections to be kept tidy, or restricting loud noise and certain breeds of dogs.
A common covenant that caused a lot of stress with clients post-earthquake was the requirement that a dwelling could not be occupied until the code compliance certificate was issued. Purchasers need to be fully aware if this is the case and they may not be able to settle and move in immediately.
Covenants run with the land, not the land owner, and stay registered on the title for eternity or until removed. Some covenants are limited as to duration so that they only apply for a limited time (say 10 years) after registration. This is especially helpful when a developer cannot be located or the development company is no longer trading.
Fencing covenants are slightly different to land covenants. Under the Fencing Act 1978, occupiers of adjoining lands not divided by an adequate fence can be made to contribute in equal proportions to work on a fence. If a fencing covenant is registered on the title to a property after 1 April 1979, it will automatically expire 12 years after the date it was registered.
Fencing covenants usually come about in one of two scenarios. Firstly, where a developer wants to avoid fully fencing the lots in a subdivision. Secondly, where a developer does not want to be liable for each individual fence between a lot sold to another party and a lot still held by the developer. Once a lot is no longer owned by the party who lodged the fencing covenant, the provisions of the Fencing Act apply. In other words, once the neighbouring lot has been sold a purchaser can have their new neighbour contribute to the cost of building the boundary fence. This would normally mean each owner contributes one half share for the lengths of fence running along their shared boundary.
To remove or vary a land covenant is very difficult and expensive. All land owners and their mortgagees have to provide their consent so it is always helpful to inform clients about their obligations as soon as possible. Likewise, when selling a property that is bound by covenants, the owner should try and find old copies of their developer’s approval if they have it. A purchaser’s lawyer will likely ask for this. Titles are frequently requisitioned for non-compliance with covenants, so taking these steps at the beginning of a transaction can save a lot of headaches down the line.
For assistance with covenants of all shapes and sizes, come and speak to our friendly residential property team today.