When considering purchasing a buy-to-let property, you’ll naturally focus on its rental potential. You might look at the property’s condition, location, likely tenant demand, and whether the numbers could work for you. However, you also need to understand whether any legal restrictions affect what you can actually do with it.
Restrictive covenants can limit how you use or alter a property. Some may have little impact on your plans, while others could affect the reason you’re buying in the first place. Finding a restrictive covenant doesn’t automatically mean you should walk away from a purchase, but it’s essential to understand what it means and whether it creates a problem for your intended use.
What is a Restrictive Covenant on a Property?
A restrictive covenant is a legally binding restriction affecting how land or property can be used. It generally prevents or limits a particular activity, rather than requiring the owner to do something. Covenants are often created when land is sold, or a development is built. They can remain relevant long after they were originally imposed and can continue to affect the property when ownership changes in the future.
Details of restrictive covenants affecting registered property usually appear in the title register and may restrict building work, prevent particular uses, or limit what you can do with part of the land. For a buy-to-let investor, the key question is what that restriction means for how you intend to use the property.
Could a Restrictive Covenant Prevent You From Renting a Property?
Potentially, but it depends on the wording of the covenant. A title may contain restrictions on how a property can be occupied or used, and if you’re purchasing specifically to let, your solicitor will need to confirm whether any conflict with your plans.
Not every covenant referring to residential use necessarily prevents you from letting. A restriction requiring a property to be used as a private dwelling, for example, shouldn’t automatically be interpreted as a prohibition on renting it out. The precise wording and circumstances of the covenant need to be considered.
This is why it’s useful to tell your buy-to-let conveyancing solicitors from the outset that you’re buying the property as an investment. They can then consider any restrictions in the context of how you actually intend to use it.
What Other Restrictive Covenants Could Affect a Buy-to-Let?
Even if nothing prevents you from letting the property, other covenants could affect your investment plans. Restrictions on alterations or extensions are key if you plan to renovate, reconfigure, or extend the property before finding tenants. Other covenants might limit further development, the use of outbuildings or particular activities at the property.
These restrictions matter most when the investment depends on making changes. A property may seem to have good potential for improvement, but you need to consider any title limitations. If you have specific plans for the property, tell your solicitor about them early in the conveyancing process so they can consider whether the title raises any concerns.
What if You are Buying a Leasehold Property to Let?
If your buy-to-let property is leasehold, there is another important set of restrictions to consider. The lease will contain covenants governing how the property can be used and many leases contain a covenant restricting assignment or underletting without the landlord’s consent.
This means you need to check the lease carefully if you intend to rent the property out. Depending on its terms, underletting may require consent or be restricted altogether. The lease might also include conditions affecting how the property is occupied or altered. These can be particularly relevant if you intend to make changes before letting it.
Importantly, you shouldn’t assume that a property can be let simply because it has previously been occupied by tenants or is being marketed as a buy-to-let opportunity. You still need to check the lease terms as part of the purchase.
What Happens if a Restrictive Covenant Has Already Been Breached?
Sometimes an issue identified during the conveyancing process relates to something that has already happened. For example, an extension or alteration might have been carried out despite a covenant restricting that type of work. Alternatively, the property may have been used in a way that appears inconsistent with a restriction on the title.
An existing breach doesn’t necessarily mean that you can’t buy the property, but it does need to be investigated. Your solicitor will consider the wording of the covenant, the nature of the apparent breach and the options available. Indemnity insurance is sometimes considered in property transactions, but it’s not appropriate or available in every situation. Importantly, insurance doesn’t remove the covenant. If you discover an existing breach, it’s better to understand the implications before deciding whether to proceed with the purchase.
Can a Restrictive Covenant Be Removed or Changed?
In some circumstances, a restrictive covenant can be removed or changed, but you shouldn’t assume this will be possible simply because the covenant is old or inconvenient.
You may be able to reach an agreement with those entitled to the benefit of the covenant to formally release or vary it. There is also a statutory route for certain restrictive covenants. Under section 84 of the Law of Property Act 1925, an owner of affected freehold or leasehold land can apply to the Upper Tribunal (Lands Chamber) to discharge or modify a covenant where the relevant legal grounds are satisfied.
This is a specialist process, and there is no guarantee an application will succeed. If a restriction affects something fundamental to your plans, your conveyancing solicitor can advise on the options available and whether they are realistic in the circumstances.
Does Planning Permission Override a Restrictive Covenant?
No, planning permission and restrictive covenants are separate matters. You could obtain planning permission for an extension, for example, but still be prevented from carrying it out because of a restrictive covenant. The Upper Tribunal’s guidance specifically confirms that a covenant can prevent development even where planning permission has been granted.
The reverse also applies. Removing or varying a restrictive covenant doesn’t remove the need to obtain any planning permission or other regulatory approval required for the work. This distinction is particularly important when the property investment relies on extending, converting, or otherwise developing it before letting.
Should You Buy a Property With a Restrictive Covenant?
A restrictive covenant doesn’t automatically make a property unsuitable for buy-to-let. The important question is whether it affects what you actually intend to do. A restriction that has little relevance to your plans might not create a practical problem, while one that prevents an alteration or creates uncertainty around your intended use could change the investment.
Identifying this during the conveyancing process gives you the opportunity to understand the implications before deciding whether the property still works for you.
Speak to Buy-to-Let Solicitors Before You Purchase
When you’re buying a property as an investment, the legal checks need to take into account how you intend to use it. Restrictive covenants, lease terms and existing breaches can all affect what’s possible after completion. At Ubique Legal, our buy-to-let property solicitors can review the title and other legal documents, identify restrictions relevant to your plans and explain what they mean for your purchase.
If you’re looking for buy-to-let solicitors in Birmingham, we can also support you with the conveyancing process and help you understand your legal position before you commit to your investment. Contact us today to learn more about buy-to-let purchases.
