When any development is planned most developers and landlords check the title at an early stage of site investigations. This will identify whether or not there are any restrictive covenants, which would impact on the viability of a proposed development, however the discovery of a restrictive covenant may not always be the end of the road.
The discovery of a restrictive covenant in the deed or lease relating to a parcel of land scheduled for development invariably sets alarm bells ringing. Investors and developers know that, in principle, the burden of a restrictive covenant runs with the land. Provided it is annexed to the land it was intended to benefit, successors in title will be bound by it. If this is discovered, is the proposed scheme destined to fall at the first legal hurdle?
The answer is, ‘not necessarily’. The existence of a restrictive covenant does not automatically thwart a development. There are occasions when it is prudent to put such constraints to the test. In particular, title insurance is unlikely to be available where there is awareness of the existence of a restrictive covenant (and the beneficiaries), in the local area.