Property purchase: Watch out for restrictive covenants

Nov 24 2012, 09:18 IST
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SummaryThey could also find themselves at risk of becoming the owner of a land, which may be subjected to a variety of charges, rights, obligations or restrictions.

Buyers looking at purchasing a new property, which is “free from encumbrances”, may be puzzled to find certain restrictions in the contractual documents, which necessitate a careful approach. They could also find themselves at risk of becoming the owner of a land, which may be subjected to a variety of charges, rights, obligations or restrictions. This makes it absolutely essential to understand restrictive covenants in property deals before making the decision.

Nature of Legal Covenants

It is important to understand the nature of legal covenants to get an insight into restrictive covenants. A “legal covenant” generally refers to a contractual understanding, agreement or written promise between two parties, which constitutes a pledge to perform a particular act or refrain from doing something which has been outlined in specific terms.

Some of the features of legal covenants are:

Contractual agreements are enforceable in a court of law.

“Positive covenants” refer to those legally binding promises, which lead to the performance of predefined actions.

n When the covenant prohibits the performance of a specific act or set of actions, then it is known as a “restrictive covenant”.

The individual who undertakes or promises to perform a certain act is referred to as the “covenanter”.

The other party in the legal covenant, to who the promise is made, is called the “covenantee”.

Restrictive Covenants

The restrictive covenants, which are typically mentioned in the title deed are in the nature of legal obligations imposed on the purchaser of the property by the seller and buyers are expected to adhere to them.

Restrictions which ‘Run with the land’: As a buyer prepares for the transfer of real estate or land, he should watch out for certain covenants, which are an integral part of the estate and are non-separable in the event of successive purchase or transfers. This typically means that as a successive owner of the property, the purchaser shall be subjected to the burdens or benefits enforceable by the restrictive covenants. In simple terms, these restrictions “run with the land” and are inherited by all successive owners.

Common Restrictive Covenants: Most residential sale agreements include certain common restrictive covenants that one needs to be aware of, as a buyer.

An owner of an apartment in a residential complex will be barred from storing any combustible, offensive, hazardous or obnoxious articles or substances, which may be injurious to the health and well being of the other inmates and occupants of the building.

Residents will not be permitted to

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