Hound of Holborn on Restrictive Covenants: Selling the Land, Keeping a Hand on the Wheel
Restrictive covenants are one of the quiet instruments of property power. They do not shout. They do not wave from the estate agent’s brochure. They sit in the title, sometimes for decades, waiting for someone to propose something ambitious.
Then they clear their throat.
The Financial Times recently reported that several supermarkets want the Competition and Markets Authority to bring Aldi and Lidl within the supermarket land control regime. The complaint, broadly, is that the discounters should not be able to use property covenants and land arrangements to keep competitors away from future grocery sites.
That is “interesting” competition news. But the property point is older, sharper and more useful. How much control can you retain over land after you have sold it?
The answer, in English land law, is often: rather more than the buyer might like.
A freehold sale is usually thought of as final. Money changes hands. Title is transferred. The buyer becomes the owner. The seller departs.
Except, sometimes, the seller does not quite depart. Sometimes the seller leaves behind a covenant.
What is a restrictive covenant?
A restrictive covenant is a private legal obligation restricting the use of land. It may prevent building, subdivision, trade use, residential conversion, competing commercial use, alterations, or some other activity which the original seller wished to control.
Properly drafted, properly protected and genuinely benefiting identifiable land, a restrictive covenant can bind future owners long after the original seller has left the stage.
That is the unsettling genius of it.
You may own the land. You may hold the registered title. You may have planning permission. You may have paid the SDLT, instructed the architect, and promised the contractor that works will begin in June.
Then a covenant appears on the title and quietly says: no.
Leicester Square and the covenant that would not die
The classic case is Tulk v Moxhay from 1848. It concerned Leicester Square. The land had been sold subject to a covenant requiring it to be kept as open garden land. A later owner, Mr Moxhay, wanted to build on it. He argued that he had not personally made the promise.
Equity was unmoved. Lord Cottenham held that a purchaser who took with notice of the covenant could be restrained from acting inconsistently with it. The principle became the foundation of modern restrictive covenant law: a negative covenant can, in the right circumstances, bind successors in title in equity.
That is why Tulk v Moxhay remains one of the great property cases. Not because it is quaint. Because it explains a brutal commercial truth.
Planning permission is permission from the state. A restrictive covenant is a private property right.
Planning permission is public law permission. A restrictive covenant is a title control. They are not the same approval in different costumes.
Ownership is not always the same thing as freedom. Nor is planning permission the same thing as consent under a restrictive covenant. This is the distinction clients often miss.
The local planning authority may decide that a development is acceptable in planning terms. That does not mean the covenant has vanished. It does not mean the beneficiary of the covenant has consented. It does not mean the title is suddenly clean.
Sometimes the point is sharper still. A local authority may itself have the benefit of a restrictive covenant. In some cases, it may be able to enforce that covenant even where it does not own an obvious neighbouring plot. Clients often assume that if “the council” has granted planning permission, the council has said yes to everything. That is unsafe.
A council acting as planning authority is not necessarily the same as a council acting as covenant beneficiary. Same building, different hat. One may grant planning permission. The other may still withhold covenant consent.
This is why a buyer can have planning permission and still be unable to build.
It is also why proper title due diligence is not a clerical exercise. It is not box-ticking. It is risk detection.
A covenant preventing “more than one dwelling” may destroy a subdivision scheme. A covenant against “trade or business” may affect short-term letting, commercial use or mixed-use plans. A covenant requiring consent for alterations may give a neighbouring owner, estate owner or local authority leverage. A covenant against building may turn a development site into an expensive field with delusions of grandeur.
The problem is not always that the covenant exists. The problem is often that nobody gave it serious thought until too late.
Negative bites. Positive often does not.
There is another important distinction.
Restrictive covenants are negative in substance. They tell the landowner not to do something. Do not build. Do not use as flats. Do not trade. Do not alter without consent.
Positive covenants require action. Maintain a wall. Repair a road. Contribute money. Carry out works.
In freehold land, the burden of a positive covenant does not generally run automatically with the land. That is why lawyers often need additional machinery: leasehold structures, rentcharges, estate rentcharges, chains of indemnity, management companies, title restrictions, or other devices. The law will not always make a future freehold owner spend money merely because a predecessor once promised to do so.
The law is not always intuitive. It is perfectly capable of allowing an old promise not to build to bind successors, while treating a sensible obligation to contribute to shared maintenance as legally awkward unless carefully structured.
English property law is many things. Sentimental is not one of them.
Why sellers use restrictive covenants
Restrictive covenants are not merely relics from Victorian conveyances. They remain highly practical.
A landowner selling part of an estate may want to protect retained land. A developer may want to preserve the character or value of a wider scheme. A commercial seller may want to prevent a competing use nearby. A family selling land may wish to ensure that a particular building, view or setting is not destroyed.
Recently, I was asked about a historic barn. The owner was prepared to sell it, but did not want it converted into flats. That is a classic covenant conversation.
The question is not simply: “Can she sell the barn?” Of course she can.
The better question is: “After she sells it, what does she still need to control?” There are several possible answers.
A restrictive covenant could prohibit conversion into separate residential units. It could restrict subdivision. It could prevent external alterations without consent. It could preserve a particular use or character.
But one must be careful.
A covenant drafted too widely may reduce value or deter buyers. A covenant drafted too weakly may be decorative rather than useful. A covenant imposed without identifying the benefiting land may later be difficult to enforce. A covenant that looks commercially clever at completion may become forensic confetti in litigation.
The drafting matters. So does the strategy.
Overage: control is not always prohibition
Sometimes the seller does not actually need to stop development. Sometimes the seller wants to be paid if development happens. That is where overage comes in.
A restrictive covenant says: “You must not do this.”
An overage provision says: “If you do this, I receive part of the uplift.”
The difference is important. A seller of land with future development potential may not wish to sterilise the land entirely. They may simply want to share in the benefit if planning permission is obtained, if the land is sold on at a profit, or if a more valuable use is implemented.
Overage can be extremely useful, but it must be drafted with precision.
The key questions include:
- What is the trigger?
- How long does the obligation last?
- Is it triggered by planning permission, implementation, disposal, or actual receipt of money?
- How is the uplift calculated?
- What costs may be deducted?
- Is the obligation secured by restriction, charge, covenant, bond or other mechanism?
- Does it bind successors?
- What stops avoidance?
A vague overage clause is not a commercial solution. It is a future dispute wearing a completion-day smile.
Why buyers and developers should worry
From the buyer’s perspective, restrictive covenants are not background noise. They are title risk.
The first question is whether the covenant actually burdens the land.
The second is who has the benefit.
The third is whether that benefit has passed properly.
The fourth is whether the proposed use actually breaches the covenant.
The fifth is what can be done about it.
That analysis is often more subtle than clients expect.
Some covenants are enforceable. Some are not. Some are ambiguous. Some have lost practical force. Some benefit land which can still be clearly identified. Others are ghosts: visible enough to frighten a lender, but too faint to identify as a genuine opponent.
That uncertainty itself can be expensive.
Lenders dislike unresolved title risk. Developers dislike delay. Buyers dislike discovering that the dream extension, conversion or commercial use is less certain than the brochure suggested.
And neighbours, when armed with a covenant, may become unexpectedly interested in the law of equity.
How restrictive covenants are protected on title
In registered land, restrictive covenants affecting the land will commonly appear in the charges register. More broadly, HM Land Registry distinguishes between notices, which protect the priority of certain third-party interests, and restrictions, which regulate the registration of dispositions.
That distinction matters.
A notice may alert the world to an interest affecting the land. A restriction may prevent registration of a disposition unless certain conditions are satisfied. In overage and development arrangements, restrictions are often used as part of the machinery to ensure that a buyer or successor cannot simply sell on without dealing with the agreed obligations.
The title register is therefore not just a record of ownership.
It is often a record of control.
Can restrictive covenants be removed?
Sometimes, yes.
The cleanest method is a deed of release from the person entitled to the benefit. That requires identifying the beneficiary and agreeing terms. Sometimes that is straightforward. Sometimes it becomes a negotiation. Sometimes it becomes a ransom.
Another option may be indemnity insurance.
But insurance is not a cure. It does not remove the covenant. It may provide financial protection if enforcement action is taken, subject to the terms of the policy. It also requires care: approaching the beneficiary may prejudice the availability of cover.
There is also a statutory route. Section 84 of the Law of Property Act 1925 gives the Upper Tribunal power, in certain circumstances, to discharge or modify restrictive covenants affecting land. The statutory grounds include cases where the restriction has become obsolete; where it impedes reasonable use of the land without securing sufficient practical benefit, or is contrary to the public interest; where the beneficiaries have agreed expressly or impliedly; or where discharge or modification would not injure those entitled to the benefit.
The Upper Tribunal guidance confirms that an owner of freehold or leasehold land subject to a restrictive covenant may apply under section 84, but also notes that the Tribunal has no power under that route to discharge or modify positive covenants or easements such as rights of way.
That route is valuable. It is not casual.
Applications need evidence. They may require planning material, valuation evidence, neighbour analysis, title investigation and a sober assessment of compensation risk. A client who treats section 84 as a routine administrative fix is likely to receive an education, and possibly an invoice of some weight.
The supermarket point
The supermarket story is not the subject of this article.
We are not pretending to give competition advice from a property desk. But the property mechanism is familiar: covenants, exclusivity, title control and the ability of a former owner or interested party to influence land after disposal.
The Groceries Market Investigation (Controlled Land) Order 2010 limits certain large grocery retailers’ ability to use restrictive covenants and exclusivity arrangements in the grocery sector. The Order includes provisions dealing with the release of certain restrictive covenants and restrictions on enforcing or entering into certain exclusivity arrangements, including limits on new exclusivity arrangements restricting grocery retailing beyond five years.
That is a specialist competition framework. But the underlying property technique is familiar far beyond supermarkets.
Landowners use covenants to preserve value. Developers use them to manage estates. Sellers use them to control what happens after disposal. Buyers encounter them when title is investigated. Lenders worry about them when security may be affected. Neighbours rely on them when planning law gives them no answer.
The FT story is therefore a useful reminder of a much older proposition. Land can be controlled without being owned.
The practical lesson
For sellers, the question is: what do you need to protect after completion? If the answer is “nothing”, then do not burden the title unnecessarily.
If the answer is “future value”, consider overage.
If the answer is “future use”, consider a restrictive covenant.
If the answer is both, draft both carefully and make sure they work together.
For buyers, the question is: what has someone else already protected against you?
That question should be asked early. Not after exchange. Not after planning. Not when the contractor is waiting outside the barn with a clipboard and a very expensive expression.
Restrictive covenants are not always fatal.
But they are rarely improved by being discovered late.
How Bishop & Sewell can help
At Bishop & Sewell, we advise landowners, buyers and developers on restrictive covenants, overage agreements and title restrictions.
We can assist with drafting covenants when land is sold, reviewing whether an existing covenant affects proposed development, negotiating deeds of release, considering indemnity insurance, advising on overage structures, and assessing whether an application to discharge or modify a restrictive covenant under section 84 of the Law of Property Act 1925 may be appropriate.
In English property law, selling land does not always mean surrendering power. Sometimes it merely changes the mechanism through which power is exercised.
Contact our Residential Property team
For more information about Bishop & Sewell’s residential property services please contact Charlie Davidson Senior Associate in the firm’s Residential Property team: cdavidson@bishopandsewell.co.uk or follow Charlie on LinkedIn.
The above is accurate as at 12 May 2026.
The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.
