Does a Covenant Truly Last Forever?

02 SEP 2020

 

When purchasing a property there are particular risks that can arise; for instance, will there be a covenant that only allows you to build a one storey home? Will there be a covenant that does not permit you to use the property for commercial purposes? Do these covenant run with the land forever?

In the recent decision of Hawthorn Road Pty Ltd v Krystyna Duszniak & Ors, the Victorian Supreme Court for the very first time had to determine whether a covenant had an expiration date.

What is a Covenant?

There are two forms of covenants:

(1)   Positive Covenant; and

(2)   Restrictive Covenant.

A positive covenant simply means that the owner of the land must conduct a certain activity to the property. For example, having to landscape the property.

A restriction covenant simply does not allow the land to be used in a certain way. For example, only being permitted to build a one-storey house or not allowing trucks to be parked on the Property.

Anyone can create a covenant on their own land. Likewise, public authorities may require covenants on the land as long as it is in writing and registered. But how are covenants removed?

Hawthorn Road Pty Ltd v Krystyna Duszniak & Ors

The plaintiff owned two parcels of adjoining land, being 196 and 198 Hawthorn Road, Caulfield North, hoping to build seven apartments on 196 Hawthorn Road, and 16 apartments on 198 Hawthorn Road. However there was one problem… There was a covenant on the title to the land on 198 Hawthorn Road, which only allowed for a single dwelling to be built. 

The plaintiff argued that a covenant was only “limited to the life of the transferor” so the covenant on title should be removed. Therefore, two questions arose from this case:

(1)   Will a Covenant only last the lifespan of the person who created the Covenant?

(2)   Will the land still be subject to any restriction in relation to the single dwelling? 

In short, the answer is no. When a restrictive covenant is being evaluated, a court must determine the intention behind the creation of the covenant at the time of the transfer, which cannot be extrinsic evidence at the time of the creation as it will not be admissible. The covenant was not seen as a “personal” covenant which means that the terms will only benefit the person rather than the land itself. If it was a personal covenant, it would not be passed onto subsequent purchasers.

Despite the Covenant being created within 1925, the death of Mrs Langdon did not mean that her intention for the covenant was to simply “die out”. The covenants was to run with the land and remain on the land unless the covenant was modifies, varied, released or have a court order to remove them.

Let us help you

Should you find yourself in a situation purchasing a property with covenants or finding yourself bound to unjust covenants, please contact Ben Wong on bwong@marsdens.net.au to ensure your rights are being protected and upheld.

The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.

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