Land Covenants and what you need to know about them
It is not uncommon to find land covenants registered on Records of Title in New Zealand, particularly in new subdivisions. If you are interested in buying a property that is subject to land covenants here are some key points to consider:
What is a land covenant? What is a covenant in gross?
There are two main forms of land covenants in New Zealand.
A land covenant is a promise or agreement made between the Covenantor (owner of the “Burdened Land” which is subject to the land covenant) and Covenantee (owner of the “Benefited Land” which receives a benefit from the land covenant) to do or refrain from doing something, in respect of the land.
An example of this is where land covenants are registered against residential sections in a subdivision which impose restrictions around the type of dwelling which can be built for the benefit of the other properties in the subdivision.
In contrast, a covenant in gross is a promise or agreement made between the Covenantor (owner of the “Burdened Land”) and the Covenantee, who in this case does not need to be the owner of another property, to do or refrain from doing something, in respect of the land. Covenants in gross have only been permitted since the new Land Transfer Act came into force in 2017.
An example of this is where a local authority attaches a burden to land by way of a covenant in gross, and is not an affected land owner.
If there is a covenant registered on a Record of Title how long is this binding?
Unless there is intention to the contrary contained in the covenant, a covenant is binding on every person who becomes the owner of the “Burdened Land”.
This means a land covenant will remain indefinitely on a Record of Title, unless removed.
Can covenants be changed or removed?
Yes, covenants can be changed by agreement of the owner of the “Burdened Land” and the owner of the “Benefited Land” or in the case of a covenant in gross, the person with the benefit of the covenant, and the consent of any chargeholder for example a bank registered as mortgagee.
In practise this means all parties with an interest in the land covenant need to agree and mortgagee (or any other chargeholder) consent needs to be obtained.
Failing agreement between the parties, it is possible to apply to the court to have a covenant changed or removed, however, this can be a difficult and expensive process.
How can covenants be enforced?
In the first instance, written notice is given to the Covenantor specifying work to be done and the requirement to either do the work or pay the cost of having it done.
The Covenantor then has 15 working days to respond to the notice. If the Covenantor does not serve a “cross-notice” within this timeframe, they are treated as if they have agreed to the notice and the reasonable costs of remedying a breach can be passed on to them.
If the parties are unable to resolve a dispute they can make an application to the court for resolution.
There are many things to consider when purchasing a property which is subject to land covenants and we regularly assist clients in this area. Please get in touch with us if you have any queries.