What is a Restrictive Covenant?
Restrictive covenant indemnity insurance is cover for a breach of a restrictive covenant, known or unknown. Typically, this is taken out by the vendor to protect the new buyer of the property against any party who has the ability to enforce these covenants.
Restrictive Covenants apply to many properties and are usually created to limit the development or use of land to protect the amenity of land still owned by the seller. Many date back for a very long time although some can have been imposed fairly recently.
Properties or land can be subject to restrictive covenants relating to matters such as the number and type of premises that can be built, the use of the premises, the nature of the use of the property etc. A property may already be occupied and used in breach of those restrictions or a change of use or development may be proposed that would be in breach of the restrictions.
Sometimes a property is subject to Restrictive Covenants in a lease. In many cases, breach of these can be covered. The covers available can be seen on the Title Protection page.
Equally, on occasion, it may be that covenants may have been imposed in documents that are not now available or which were not recorded by Land Registry. The covers available can be seen on the page for unknown rights and covenants.
In what circumstances is cover required?
Restrictive covenant insurance can be valuable in a number of circumstances:
- Where the existing and proposed continued use of a Property breaches known, or may breach unknown, restrictive covenants affecting the Property.
- Where the proposed development of the Property breaches known or may breach unknown covenants.
What does a Restrictive Covent Indemnity cover?
Risks covered include damages/compensation awarded to any claimant, loss sustained by the Insured in respect of loss of market value, cost of remedial/demolition works, agreed additional costs and legal costs and expenses.
New breach of a Restrictive Covenant
If a change or development will breach a Restrictive Covenant for the first time then further information will be required including:
- Details of the proposed change or development and the covenant(s) that will be breached
- Confirmation of whether cover is required before or after planning permission has been applied for and, if after, copies of the permission and any objection letters
- Details of any relevant communication with parties that may have the benefit of the covenant
What will a Restrictive Covenant Indemnity cost?
The actual cost depends very much on the nature of the breach. The cost for a substantial development constituting a new breach of Restrictive Covenants will clearly be far greater than that for a continuing breach and no proposed changes to the use of a Property. There are a wide variety of providers of Restrictive Covenant Indemnities from the established companies such as Aviva, RSA and Countrywide through to a number of expert insurers who may not be household names. LawSure Insurance, as an independent broker, has access to all the relevant insurers but will only deal with those who we consider to be financially secure (‘A-rated’ insurers).
The cost of cover is a key consideration, but we also take into account the terms and conditions of the policy in order to decide on the best cover, which may not always be the cheapest.