When purchasing a property, the Agreement for Sale and Purchase will usually specify that you can make enquiries with the vendor’s solicitor in relation to any of the interests that may be noted on the title. A land covenant is an example of a type of interest that you, through your lawyer, may want to make enquiries about.
So what is a land covenant exactly and why might you want your lawyer to review a land covenant?
To put it simply, a land covenant is a type of “promise” that directly relates to the land you want to purchase, which can either be for your benefit or your burden. For example, developers who want to control the use of land in a subdivision sometimes impose covenants on purchasers as to how the land can be used and what can be built on it, with a view to binding subsequent owners of the land. Your lawyer will peruse the land covenant connected to the property you want to purchase and see a number of restrictive covenants which they will want to bring to your attention. Land covenants can include restrictions such as:
- How many buildings (including garages) can be placed on the land, as well as what size they need to be and what materials need to be used to build them?
- What type of clothesline you can have?
- What type of letterbox is acceptable?
- What type and how many animals you are allowed?
- The type and positioning of fencing on the land.
- Whether or not you are able to keep caravans, boats (or the like) on the land. Furthermore, if you are, then whether or not they should be screened from the road (and what material you can use for the screen).
The list above is not exhaustive and every land covenant is different. You can see from the above items that sometimes land covenants can impact potential purchasers negatively depending on their specific requirements. Some people may not want to have an interest noted on the title to a property which will impact their decisions regarding the property going forward. However others may not be too concerned whether or not they have a rotary clothesline or not (for example). Every client has differing wants and/or needs.
How land covenants can affect the value of the land
As mentioned above, different land covenants have different benefits or burdens. That is why it is important for you to have your lawyer read through interests noted on the title to the property you want to purchase, as you might not know what you are actually agreeing to – and this may impact how you can deal with your land into the future.
This includes how successful you are likely to be in finding a purchaser for a property which has a land covenant interest noted on the title when you eventually want to sell the property down the track. If the land covenant is too restrictive you may find you are also restricted as to the number of potential purchasers interested in purchasing the property into the future.
Land covenants can range from the innocuous to the extremely detrimental. You need to know what they are, how they will affect you and whether they are likely to have an adverse effect on the future saleability of the property BEFORE you buy.