Using land covenants for your benefit

Peter Rust

Special Counsel

Special Counsel

Phone: +64 7 927 0547
Email: prust@clmlaw.co.nz

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Bachelor of Laws, University of Auckland

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How do developers of upmarket subdivisions ensure that new houses fit in with the “look” and standard of the subdivision? 

What stops someone from building a good old-fashioned one room corrugated iron beach Bach at a plush upmarket subdivision? 

The answer is land covenants.

Land owners can register agreements onto land titles. A good example of this is a mortgage. Under a mortgage, you agree that the bank can sell your property if you owe the bank money. This “agreement” is registered onto the title to your property; and this registration ensures that the property cannot be sold without the mortgage being settled (which means you must first repay your loan).

Land covenants operate the same way. Land covenants are basically rules relating to the use of land. For example, if you are subdividing, you might want to keep some control over what happens on the property you have just sliced from your own land. These rules and controls can be registered onto the land title in the form of land covenants.

Commonly, land covenants have been used in the past where a land owner has subdivided land, and that original owner wants to make sure that the new neighbouring property owner will not do anything to the detriment of the original land; such as (for example) putting up a new fence which will block out an amazing view.

Land covenants are now used for much more than simply protecting views.  Property developers commonly draw up extensive lists of land covenants for subdivisions, which might include:

  • duties to build a house of a certain standard or size
  • Fencing quality
  • requirements to keep a tidy yard and buildings well maintained
  • any other conditions the developer thinks might be needed to keep the neighbourhood presentable. 

These covenants are registered onto the titles for the new properties in the subdivision. The property developer and the people buying properties in the subdivision can then have some confidence that housing in the street will meet a certain standard.

You do not have to be a property developer to make use of land covenants. If you were subdividing your own back yard, you might want to put land covenants in place to make sure the new neighbour does not put up a high rise car-park (or even an old-fashioned one room corrugated iron Bach).

Although a useful tool there are some points to remember about land covenants:

  • Once registered onto titles, later removal or a variation to a land covenant can be an expensive and difficult exercise.
  • Property owners need to give careful thought to the sort of restrictions placed on a title. 
  • Well thought-out and carefully drafted covenants can enhance a subdivision, but (just as easily) badly drawn covenants can detract from the value and appeal of properties within a neighbourhood. 
  • Enforcement of covenants may be left to any owner of a property for which the covenant was made.  Enforcing any legal requirement can often incur legal costs. 
  • It is not the Council’s responsibility to ensure compliance with land covenants, it’s the responsibility of the property owner.

The continued growth of property development in the Bay of Plenty has increased the relevance and impact of land covenants to both those wishing to sell, and those wishing to buy property. It’s important to look closely at all implications that land covenants can have on any property that you may be looking to buy, sell, or develop.

If you have any questions please don’t hesitate to get in touch with us on 07 578 2099.