The Institute of Surveyors - VictoriaRegional Conference – Wangaratta

Restrictive Covenants

Neil HaydonSolicitor & Senior Planner

April 2015

What are restrictive covenants?

• A covenant is an agreement, usually formal, between two or more persons to do or not do something specified.

• A restrictive covenant is defined in Butterworth's Australian Legal Dictionary as a covenant affecting land restricting the uses to which land may be put.

• Enforceable against original parties – Contract Law.

• They are interests in land which restrict the use of land by the owner of the burdened land in favour of rights of the benefited land.

What is the purpose of restrictive covenants?

• Developed in mid nineteenth century

• Original form of private planning control

• Used to maintain amenity of a particular property against the loss of amenity because of activities on adjoining property.

How do I know if land is burdened by a restrictive covenant?

• Check title

• Normally get a “register search statement” newer titles or found on older titles.

• Title will give information about where to locate covenant – usually in Transfer of Land document (as agreement between the parties upon sale of the land to be burdened).

• Can be on a plan of subdivision.

Which land is burdened by restrictive covenants?

• Benefit and burden must run with the land to be enforceable.

• Burden is easy, title shows covenant encumbering title also – check document creating restrictive covenant.

• Burden of covenants cannot generally run at law however, equity law provides that burden will run with owners of burdened land if:

• Covenant is negative in nature (hence restrictive)• Covenant touches and concerns the land• Purchaser of burdened land has notice prior to

purchase (hence shown on title)

Which land is benefited by restrictive covenants?• Benefit more difficult – check document creating restrictive

covenant.• At common law, benefit of the covenant runs with the land so

successor in title to benefited land can sue on the contract.• Benefit in law will run if:

• Dominant land is part of a building scheme (eg. All land in subdivision equally benefited and burdened – simplified)

• The beneficiary has become the owner of land to which the benefit of the covenant has been annexed expressly or by implication.

• The benefit has been assigned

• Re Dennerstein (1963) VR 688 = the words of a covenant must be sufficient, expressly or impliedly to identify the land to be benefited.

Problems with determining beneficiaries

• Benefit runs with the land – need to determine what is the land – eg. Could be whole of an original subdivision (all land including roads and reserves) or could be lots only.

• Distinction between benefiting land and benefiting owner.

• Subdivision of itself does not negate benefit from applying to certain land.

Which land is benefited by restrictive covenants?

• Kotefski v Boroondara CC [2006] VCAT 1835 dealt with whether there is any land benefiting.

• John Thomas Creaser doth hereby for himself his heirs executors administrators and transferees covenant with the said mayor councillors and Burgesses of the Town of Camberwell (hereinafter called the said Council) and their transferees that he or they shall not nor will erect more than one dwelling house or tenement on the said piece of land colored red hereby transferred without the previous consent or waiver in writing of the said Council and that any dwelling house or tenement erected on the said land shall be built of brick or stone and at a cost of not less than seven hundred and fifty pounds and such house or tenement shall have its front entrance to Broadway and shall not have its back premises or any part thereof abutting on Broadway and it is intended that this covenant shall be set out as an encumbrance at the foot of the Certificate of title to be issued in respect of the said land and shall run with the land.

• No clear land benefited.

Which land is benefited by restrictive covenants? ….continued

• In Kotesfski• At the time this portion of land was transferred it formed

part of a larger piece of land owned by Council.• Portions of the larger parcel were later sold but Council

kept some of the land.• Council and subsequent owners claimed they are

beneficiaries.• Kotefski who wanted covenant removed argued

covenant personal in nature between Council and the owner of the land originally transferred. Argued that because covenant does not expressly identify the land intended to be benefited and no building scheme exists.

Which land is benefited by restrictive covenants? ….continued

• Tribunal said at 14 that:• To decide whether the benefit of a covenant is

annexed to some land the common intention of the original parties to the covenant must be ascertained. This can only be done by considering the words of the covenant and giving them their ordinary meaning and natural meaning. If it can be concluded that there is an intention other surrounding circumstances known to the parties at the time may be properly be taken into account.

Removing or varying a restrictive covenant

• By agreement in writing of all beneficiaries

• By planning scheme amendment

• By application to Supreme Court under section 84 of the Property Law Act 1958

• By planning permit issued by Council

By agreement

• By agreement in writing of all beneficiaries• If all of the owners of the land which benefit from

the covenant (dominant land) agree, the covenant can be removed from the relevant titles.

• Deed which is signed by all owners of benefited land and the owner of the burdened land.

• Agreement recorded with land registry (s 88(1) Transfer of Land Act 1958).

By planning scheme amendment

• By planning scheme amendment• Amend Clause 52.02 of the Planning Scheme to

provide for covenants to be varied or removed. Not often used.

• Useful for covenants that may cover a wide area.

• Consider Melbourne 2030.

• Would need to go to the Land Registry pursuant to the Subdivision Act 1988 (plan would be required).

Supreme Court application• By application to Supreme Court under section 84 of the

Property Law Act 1958.• That by reason of changes in the character of the

property or neighbourhood or other circumstances of the case the Court deems material, the restriction ought to be deemed obsolete or that its continued existence would impede the reasonable user of the land without securing practical benefits to other persons.

• That the persons entitled to the benefit from the restriction agree to it being discharged.

• That the proposed discharge will not substantially injure the persons entitled to the benefit.

Supreme Court application …..cont

• Applications made by originating motion and affidavits• No defendant• Heard first before a master• Essentially master will determine advertising and directions

for application• If advertised, and no beneficiary turns up at next court

date, then master usually makes a decision to remove or vary covenant

• If contested, case adjourned for hearing before a court• Court’s power discretionary• If granted, order to register pursuant to section 88 (1)

Transfer of Land Act 1958.

Supreme Court application …..cont

• Court’s power discretionary and the way in which courts have interpreted various grounds often means that it can be difficult to remove a covenant.

• Three recent cases:• Stanhill Pty Ltd v Jackson [2005] VSC 169 (before Morris J)• Bevilacqua & Anor v Merakovsky & Ors [2005] VSC 235

(Ashley J)• Re Milbex Pty Ltd [2006] VSC 298 (before Byrne J

favouring Stanhill)

Planning permit• Planning and Environment Act 1987 changes in 2000.• Council cannot grant permit that would result in a breach

of a registered restrictive covenant.• Council can grant permit for removal or variation of

restrictive covenant.• Councils not responsible for enforcing private breaches

unless it is a beneficiary – essentially property law matter not planning.

• Section 61(4) Planning and Environment Act 1987 provides:• If the grant of a permit would authorise anything which would

result in the breach of a registered restrictive covenant, the responsible authority must refuse to grant the permit unless a permit has been issued, or a decision made to grant a permit, to allow the removal or variation of the covenant.

1st Consideration - Breach

• Council’s questions• Is there a restrictive covenant affecting land to be used or

developed?• What does it restrict?• If Council granted the planning permit, would it breach

the covenant?

• Problems?• Interpretation of the covenant.

Interpretation

• Single dwelling• Does it restrict two or more houses on land?• Will subdivision breach such a covenant?

• No subdivision

• Only use for dwelling

• Quarrying – pools/spas/water features

• Type of building materials

• Any building at all

Single Dwelling

• Examples: “One vs A”• Will not erect or permit to be erected on the land

hereby transferred or any part thereof any building other than one private dwelling house with the usual and necessary outbuildings and that such house shall not be less value than the sum of five hundred pounds with a roof of slate or tiles and that he will not use the said land or any part thereof for any purpose but those of a private residence.

Single Dwelling

• Examples:• Will not erect or permit or allow to be or remain erected

on the land hereby transferred any dwelling house garage or outbuilding other than a dwelling house garage or outbuilding having external walls or brick stone concrete glass or timber or any combination thereof provided that:

• No building shall have any external wall solely of timber• Any dwelling house having steel roofing other than steel

deck roofing of or similar to Lysaght colorbond type.

Single Dwelling

• In Gubby v Mornington Peninsula Shire Council and Others [2002] VCAT 1344, the Tribunal declared that a restrictive covenant referring to “a dwelling”, is not to be read as a covenant restricting the construction of a second dwelling on the land.

• Followed Urban Planning and Development v Boroondara City Council [2001] VCAT 244

Single Dwelling……cont

• Examples• That no main building shall contain more than one

occupancy except that two units may be incorporated into one main building where the units are both under the one main roof (not including a carport roof).

• Hanna v Greater Bendigo CC [2005] VCAT 1469

• Member held that while the reference in the covenant to “no main building shall contain more than one occupancy” it was concluded that a reference to a “main building” is a reference to a dwelling. No restriction on number of main buildings allowed.

Subdivision vs Single Dwellings

• It is an accepted principle that subdivision of itself does not cause a breach of a covenant relating to construction, frontage, single dwelling and cost or construction of materials.

• Dukovski v Banyule CC [2003] VCAT 190• Hampsons Enterprises v Casey CC (P3125/2002)• Weiler v Casey CC [2004] VCAT 470

• However, Tribunal cases have rejected such appeals where developments are also considered part of the application or where a breach had already occurred on one lot.

Subdivision vs Single Dwellings….cont

• Helen Gibson’s Case Wade v Yarra Ranges SC [2005] VCAT 111

• Deputy President Gibson declined to make a declaration that a two lot subdivision for residential purposes breached a single dwelling covenant.

• Directed that the permit issue but imposed a condition that before a statement of compliance could issue the covenant must be removed or varied to allow a single dwelling to be constructed on each lot.

• Relied on Clause 65.02 of the planning scheme that allowed her to consider the existing use and possible future development of the land and nearby land as relevant considerations.

Subdivision specifically

• Examples• A lot shall not be subdivided by strata subdivision,

cluster subdivision or otherwise.

• Must not subdivide the land.

Quarrying

• Has been problematic because of digging required for in ground pools

• Example• That the transferees and their successors of the Land

covenant with the transferor not to:• “carry on quarrying operations on the said land hereby

transferred or any part thereof nor dig carry away or remove any marl earth clay gravel or sand therefrom except in the way of excavating for the construction of any swimming pool nor permit any building, other than one dwelling home or a swimming pool on such lot and that no such dwelling house shall be erected at the cost of less than five hundred pounds”(bold added as example)

• Not really a problem now – purposive approach rather than literal approach taken.

Other

• Other examples:• “…shall not at any time hereafter use the said land or

allow or permit it to be used in any manner for the purposes of erecting any building or other erection or for storage of any kind thereon”.

• “…will not use the said Lot 86 nor permit the said Lot 86 to be used for the purposes other than those of a golf course and open space recreational pursuits”.

2nd Consideration – Grant permit

• If permit not to remove or vary restrictive covenant, Council needs to have:

• Reviewed restrictive covenant• Come to conclusion about whether or not granting

of permit will breach covenant (eg: if application to subdivide and build two houses with a single dwelling covenant Council should refuse application)

Planning permit application

• Section 47(1)(e) if application is to remove or vary a registered restrictive covenant needs to be accompanied by:

• Information clearly identifying each allotment or lot benefited by the registered restrictive covenant; and

• Any other information that is required by the regulations (nothing in particular).

Planning permit application …..cont

• If not by agreement, amendment, or court order – applicant can make an application for a planning permit to remove or vary a restrictive covenant.

• Clause 52.02 of the Scheme provides that a permit is required before a person proceeds under section 23 Subdivision Act 1988 to create vary or remove a restriction.

• Restriction defined in Subdivision Act 1988 to mean “a restrictive covenant or a restriction which can be registered, or recorded in the Register under the Transfer of Land Act 1958.

• No definition of “restriction” in Transfer of Land Act 1958.• Requires either a plan of subdivision or a text plan and

registered on title pursuant to Subdivision Act 1988.

Planning permit application ……cont

• Registered restrictive covenant defined to mean a “restriction within the meaning of the Subdivision Act”

• What is not a restriction• An agreement made under section 173 of the Planning

and Environment Act which is registered on title and therefore becomes a “covenant” on the land is not a “restriction” within the meaning of the Subdivision Act 1988 and therefore does not come under the definition of registered restrictive covenant. Therefore, the provisions of the Act applying to registered restrictive covenants are not relevant. Ur v Wellington SC [2001] VCAT 2453 and Van Der Heyden v Mansfield SC [2003] VCAT 102.

• Easement of carriageway not a restrictive covenant Focused Vision Pty Ltd v Nillumbik CC (2002) 15 VPR 154.

Planning permit application ……cont

• Section 47(2) provides that notice provisions of section 52 and referral section 55 do not apply to an application for a permit to remove a restriction over land if the land has been used or developed for more than 2 years before the date of the application in a manner which would have been lawful under the Planning and Environment Act but for the existence of the restriction.

Planning permit application ……cont

• Section 47(2) application depends on wording of covenant.

• Hill v Campaspe SC [2004] VCAT 1399 essentially stands for the proposition that if the restrictive covenant has a number of restrictions, section 47(2) would only apply to the restriction breached not every restriction. Eg. in this case, non-compliance for the construction materials for the shed did not extend to not give notice for removal of the part of the covenant which allowed for only one dwelling.

Planning permit application ……cont

• Strict tests in Planning and Environment Act

• Section 60(2) – covenants on or after 25 June 1991 – date on document creating covenant not registration at Land Registry date.

• Section 60 (5) – covenants before 25 June 1991

Planning permit application ……cont

• Section 60(2) – owner of any land benefited by the restriction will be unlikely to suffer;

• Financial loss• Loss of amenity• Loss arising from change to the character of the

neighbourhood• Any other material detriment

• Section 60(5) – the owner of any land benefited by the restriction

• Will be unlikely to suffer any detriment of any kind (including perceived detriment); and

• If beneficiary objected, the objection is vexatious and not in good faith.

• Number of cases on this and each must be treated on its facts.

Planning permit application ……cont• Some comments:

• Balance of probabilities that any beneficiary will be unlikely to suffer any detriment of any kind.

• Compliance with planning controls does not of itself establish that a beneficiary will be unlikely to suffer any detriment of any kind

• Mere assertion of the existence of detriment not sufficient to demonstrate its existence.

• Loss of amenity will constitute a detriment.• Not necessary for an affected person to assert detriment because the

Tribunal must be affirmatively satisfied of a negative (ie no detriment of any kind) and Tribunal entitled to form its own view of the evidence.

• Vexatious means groundless or having no merit without regard to the objector’s attitude, intentions or honesty.

• Owners of land who have not objected to the variation/removal after having been given notice generally treated as not suffering any detriment although Tribunal still needs to be satisfied.

QUESTIONS ??

CONTACT

Neil Haydon – Solicitor and Senior PlannerBallarat OfficePhone: 5327 2000 Email: haydonn@bevwill.com.au

Beveridge Williams & Co. Pty LtdDevelopment and Environment Consultants