Landowners commonly want to place restrictions on the use of land when they decide to sell it, particularly if they are retaining some neighbouring land. This article explains how this can be done by arranging a land covenant and what it entails.


Why restrict the use of land?
There are various reasons why you might wish to restrict the use of land after you sell it. If, for example, you are retaining some neighbouring land you might wish to prevent the new owner subdividing that land, to restrict the number and quality of buildings erected on the land being sold, or you might want your views to be preserved. Having these restrictions might also mean that the land you are retaining will be more valuable if and when you come to sell it in the future. Nowadays, it would be very rare for lots in a new subdivision not to be subject to numerous restrictions on their use.

How can you do this?
You can restrict the use of land by registering land covenants against the titles to the affected land. A covenant is a promise by someone to do, or not to do, something. A land covenant is a promise which is tied to the ownership of land. The document creating the land covenants sets out the restrictions and describes the affected land. The land covenant is registered against both the land benefitting from the land covenant (called the dominant land) and the land being subject to the land covenant (called the servient land). Anyone buying land subject to a land covenant can search the title and see that the land is subject to the land covenant.
Before the Property Law Act 2007 was passed, only land covenants containing negative obligations could be enforced against future owners of the subject land. An example of a negative covenant was when the owner could not erect a dwelling unless it had a minimum floor area of 200m2. As a result of this, covenants were couched in negative terms, although they effectively imposed a positive obligation on the landowner.
Positive land covenants created since 1987 can now be enforced against future owners of the subject land. For example, a covenant stating that the owner must erect a dwelling having a floor area of at least 200m2 can now be enforced against future owners, not only the landowner at the time it was created. A land covenant must be in favour of nearby land to be enforceable. If you want to ensure that you can enforce restrictions against a landowner when you don't own nearby land, you can register a different type of document called a Memorandum of Encumbrance.

Not complying?
Having a land covenant means that the owner of the land benefitting from a land covenant can take legal action against the owner of the land subject to the land covenant to require that owner to comply. For example, if the land covenant stated that the land must be landscaped in a certain way, the owner of the subject land could be legally compelled to do the landscaping work. The document creating a land covenant also usually allows the owner of the land benefitting from the restrictions to claim a substantial fixed amount from the other owner (for example, it could be as much as $50,000) if the covenant is not complied with.
Once the land subject to a land covenant is sold, the new owner becomes liable to comply with the restrictions, and the seller is no longer liable, except for non-compliance while he or she was the owner. By the same token, the owner of the land benefitting from the land covenant can usually only enforce non-compliance with the land covenant while he or she is the owner of the land benefitting from it. In the case of a modern subdivision, the land covenants are usually enforceable by each owner of a lot against all the other owners of lots.

Can they be removed from titles?
If all of the affected owners agree, then documents can be registered against the affected titles extinguishing or varying the land covenants. If the land benefitting from the land covenants is subject to a mortgage, then the mortgagee would have to consent to the variation or removal. If all the affected owners don't agree, an affected owner can apply to the court for an order varying or extinguishing the land covenants. The court could grant such an order if, for example, circumstances have changed since they were registered, or their removal would not prejudice the owner benefitting from them.

It's not that simple.
Although it's now possible to create and register a wider range of land covenants than in the past, a landowner's ability to enforce land covenants is subject to some complex legal rules. Whether or not land covenants can be enforced may depend on when they were created. Some of the land covenants registered in the past are unenforceable, either because they are poorly drafted or the law will not support them. Existing land covenants may require careful scrutiny to determine whether they can be enforced. If you're considering registering a land covenant, you should ensure it is carefully drafted so it provides you with the solution you are seeking.