New Zealand: Land covenants – be wary…

Last Updated: 10 October 2016
Article by Ann-Maria Buckley

What is a covenant and what does it mean for land owners?

Most modern subdivisions now include land covenants which are registered against the titles. These are effectively rules that the land owner must abide by when owning the land. Many covenants relate to how and what you can build, with a view to keeping up the value of the subdivision. However, there are also ongoing obligations that can impact on your future use of the land so buyers need to fully understand the nature and potential effect of the covenants.

Mutual covenants

The covenants are mutual which means that each owner in the subdivision must both abide by the covenants and ensure that their neighbour abides by them too. Many land covenants contain a clause providing for liquidated damages (i.e. an amount of money) to be payable for every day you are in breach of the covenants.

In addition, neighbours are willing to take action when it comes to policing land covenants. A recent example of this was seen at the Travis County Estate in Burwood, where residents blocked the delivery of a relocatable house to the subdivision because it breached the land covenants.

Common Covenants

Some of the more common covenants you will see are a prohibition on:

  • Further subdividing the land;
  • Use of certain materials e.g. second hand roofing;
  • Certain activities in a rural setting such as pig farming;
  • Certain breeds of pets e.g. Staffordshire terriers, pit bull terriers or Rottweilers.

There are also positive covenants relating to the initial design and construction of the dwelling such as setback requirements and fencing rules which may have an impact on the cost of your dream home.

Most subdivisions contain a covenant that states that the developer must approve the plans for the dwelling prior to building commencing. This is probably the covenant that causes the most difficulties as evidence of this sign-off will be required when the property is sold in the future. If this record is not kept and the developer disappears then this can cause major problems at sale time.

We have also come across instances where the covenants provide that construction must commence within a set timeframe of the issue of title and we are trying to sell a section outside of that time frame.

A further covenant might be a prohibition on objecting to further development of surrounding lands.

How long do covenants last?

Most covenants will remain on the land forever however it is becoming more common now to see a date (say 10 years) after which certain covenants will no longer apply. A covenant can normally only be removed with the consent of the land owner(s) having the benefit of the covenant.

From a Developers point of view

Badly drafted or open ended covenants can cause enormous headaches for property developers also. It is not just a case of rolling over land covenants between developments as each set of covenants needs to be carefully considered and updated in line with good conveyancing practice and the specific circumstances of your development.

We at Cavell Leitch have considerable experience in both acting for developers creating land covenants as part of their subdivision, as well as acting for the ultimate purchasers of sections subject to land covenants. We would be very pleased to assist you with any queries you may have in this area.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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