Buying a residential lot in New Zealand to build your dream home is an exciting prospect, but navigating the landscape of covenants and restrictions is crucial for a smooth and fulfilling experience. These rules, which run with the land and bind successive owners, dictate what you can and cannot do with your slice of paradise. Understanding them upfront can save you from costly surprises and ensure your vision aligns with the permitted development.
What Exactly are Covenants and Restrictions?
Covenants and restrictions are legally binding agreements that control how land can be used and developed. They are typically created when a large piece of land is subdivided into smaller sections, forming part of the title of the land. These agreements aim to maintain the character of a neighbourhood, protect property values, or ensure a consistent standard of development. While covenants and restrictions are used interchangeably in New Zealand, legally, they are distinct. Covenants are usually agreements between landowners to do (positive covenant) or refrain from doing (restrictive covenants) something on their land. Restrictions are usually imposed by a local authority under the Resource Management Act 1991. For practical purposes however, both have similar impacts on your property ambitions.
Finding and Understanding Covenants and Restrictions
The first step in understanding the covenants and restrictions applicable to a property is to obtain a copy of the Record of Title (formerly called the Certificate of Title). You can obtain this document through Land Information New Zealand (LINZ) either online for a fee or through a lawyer or conveyancer. The Record of Title will list any registered covenants and restrictions affecting the property. Crucially, the Record of Title might refer to a separate document, such as a ‘Memorandum of Encumbrance’ or a ‘Land Covenant Instrument’. This document contains the full text of the covenants and restrictions. Make sure you obtain and carefully read this document! These documents can be complex, filled with legal jargon, but understanding what is permitted and prohibited is key.
Pay particular attention to clauses that address building height restrictions, permitted building materials (e.g., cladding type, roof colour), minimum floor area requirements, landscaping obligations (e.g., what type or how many trees to plant), fencing regulations (e.g., types of acceptable materials, height restrictions), restrictions on secondary dwellings (e.g., granny flats), and rules about keeping animals (e.g., the number and types of pets allowed). For example, a covenant might specify that all houses must have a minimum floor area of 150 square meters, be clad in brick or weatherboard, and have a roof colour within a specific palette. Another example may pertain to preventing unsightly items such as clotheslines or rubbish bins visible from the street.
Case Study: The Roof Colour Controversy
Consider a real-world scenario: a buyer purchases a section in a newly developed subdivision, excited to build their dream home with a modern, dark grey roof. However, upon close inspection of the covenant documents, they discover that only ‘light to medium grey’ roofing is permitted. This restriction, implemented to maintain a consistent aesthetic throughout the subdivision, clashes directly with their vision. This forces a difficult choice: either abandon their preferred roof colour or attempt to gain consent to vary the covenant. This consent may not be granted.
Hidden Implications and Unintended Consequences
Covenants may have hidden implications that are not immediately obvious. For example, a seemingly innocuous clause restricting the keeping of ‘commercial vehicles’ on the property could be interpreted to include work vans, even if they are not heavily branded. This can be a significant issue for tradespeople working from home. Another example is a covenant prohibiting ‘nuisances’. What constitutes a nuisance can be subjective and open to interpretation, potentially leading to disputes with neighbours over noise levels, smells, or activities. In Auckland, the Auckland Unitary Plan controls the permitted activities. However, if the lot is subject to a restrictive covenant, the covenant may be more restrictive than the Auckland Unitary Plan.
Negotiating and Varying Covenants
While covenants and restrictions are binding, they are not always set in stone. There are mechanisms in place to vary or remove them, although the process can be complex and time-consuming. The most common method is to obtain the written consent of all parties who benefit from the covenant. This can be challenging, especially if there are many landowners involved or if some are unwilling to agree. It’s essential to identify who the ‘burdened’ and ‘benefitted’ parties are from the Record of Title. Land that is burdened is the land impacted by the covenant, whereas land that is benefitted is the land that receives the benefit of the covenant. The benefitted party have a decision over whether to agree or disagree, and have rights to enforce the covenants. Engaging with neighbours early in the process to discuss your plans and address any concerns can increase your chances of gaining their consent. It is better to be open with new neighbours rather than to assume they will not care or notice.
If obtaining unanimous consent is not possible, you can apply to the High Court under the Property Law Act 2007 for an order modifying or extinguishing the covenant. The Court will consider various factors, including the purpose of the covenant, the extent to which it continues to achieve that purpose, and the prejudice that would be caused to the objectors if the application were granted. This involves lodging an application with the court seeking the change and informing your neighbours so they can object to the application if they wish. Court proceedings are generally expensive and require a lawyer.
Prior to purchasing a lot, make your offer conditional on consent to vary a restrictive covenant, if needed. If this consent cannot be obtained, you are not required to complete the purchase. This reduces the risk of being financially burdened with land that is not suitable for you.
The Role of Local Councils
While covenants and restrictions are primarily enforced by private landowners, local councils also play a role in regulating land use and development. Their rules are set out in district plans under the Resource Management Act 1991. These plans specify zoning regulations, building height restrictions, setback requirements, and other development standards. In some cases, council regulations may overlap with or even contradict covenants. For instance, a council zoning rule might permit the construction of a two-story house, while a covenant might limit building height to a single story. In such situations, the more restrictive rule will generally prevail. It’s essential to consult both the covenant documents and the relevant district plan to understand all the regulations governing the property. The council will not generally enforce a breach of restrictive covenant. However, you will need to apply for resource consent. This process requires you to notify your neighbours who have the chance to object.
Restrictive Covenants and Resource Consent
Even with the consent of your neighbours, you will also need to obtain resource consent that complies with the council plans. The resource consent will consider environmental effects surrounding the development you wish to progress. This includes considering infrastructure of the surrounding area. For example, if the section is located near a water source, restrictions will be in place to prevent pollution.
Due Diligence: Essential Steps Before Buying
Before committing to purchasing a residential lot, conduct thorough due diligence to uncover any potential covenant-related issues. Start by obtaining copies of the Record of Title and all associated covenant documents. Carefully review these documents, paying close attention to clauses that might impact your building plans. Consult with a surveyor to understand how the covenants apply to the specific topography and features of the land. For instance, a height restriction might be measured from a certain point on the property, which could affect the buildable area. A surveyor can provide accurate measurements and interpretations of the covenants in relation to the land. Talk to an architect or building designer about the covenants and seek clarity in whether your aspirations will be in compliance with the existing rules.
Furthermore, consider engaging a lawyer or conveyancer specializing in property law to review the covenant documents and advise you on their implications. They can help you understand the legal terminology, identify any potential risks or ambiguities, and negotiate any necessary variations or waivers. Don’t hesitate to contact the local council to inquire about any relevant zoning regulations or planned infrastructure projects that could affect the property. Speak to the neighbours about their opinions on covenants and restrictions to gain a ground-level understanding of the area.
The Costs Associated with Covenants
While there are no direct costs associated with covenants themselves, complying with or varying them can incur expenses. For example, if a covenant requires you to use specific building materials, those materials may be more expensive than alternatives. Similarly, if you need to obtain consent to vary a covenant, you may incur legal fees, surveyor costs, and application fees. Court proceedings could also be a costly option to consider. Budget accordingly for these potential expenses to avoid financial surprises down the line. Always seek accurate professional advice to enable you to make the wisest decision.
Long term implications
Covenants and restrictions are permanent features on the record of title, meaning that they affect subsequent owners. These have long term implications for the area. This is something you should consider when buying the section. If you decide to sell the property, you have a better understanding of its potential value.
Leveraging Covenants to Your Advantage
While covenants can seem restrictive, they can also be beneficial. Well-drafted covenants can protect property values, maintain neighbourhood aesthetics, and create a desirable living environment. For example, covenants that prevent unsightly developments or ensure a consistent standard of landscaping can enhance the overall appeal of a subdivision. When evaluating a residential lot, consider whether the covenants align with your own values and preferences. If you appreciate a well-maintained neighbourhood with high aesthetic standards, covenants can provide assurance that those standards will be upheld. If you value a unique or distinctive architectural style, seek out properties with fewer restrictions or with covenants that allow for greater design flexibility.
Negotiating the Purchase Agreement
The purchase agreement is a critical document that outlines the terms and conditions of the sale. It’s essential to include clauses that protect your interests in relation to covenants. For example, you can insert a clause that makes the purchase conditional on obtaining satisfactory legal advice regarding the covenants or on obtaining consent to vary a specific covenant. This gives you the opportunity to back out of the deal if you discover any unexpected or unacceptable restrictions. Work closely with your lawyer to ensure that the purchase agreement adequately addresses your concerns and protects your rights. Always seek independent legal advice before signing a purchase agreement.
Recent Trends and Developments
In recent years, there has been growing debate about the effectiveness and fairness of covenants and restrictions. Some argue that they can stifle innovation, limit housing affordability, and perpetuate exclusionary zoning practices. Others maintain that they are essential for protecting property values, preserving neighbourhood character, and promoting sustainable development. As urban densities increase and housing affordability becomes a more pressing issue, there may be increasing pressure to reform or relax some covenants. It is always possible to vary a covenant with the consent of those people who are affected by it. Alternatively, an application to the High Court could be considered for varying a covenant.
Changes could also be made on the government level, depending on who is in power. Depending on the political party in power, there may be different ideas which could directly or indirectly impact decisions around property and building. For example, a previous government introduced intensification rules. Changes in the law could impact the enforcement or validity of certain types of covenants. Keep abreast of these developments to understand how they might affect your property rights and development options.
Staying Informed and Seeking Expert Advice
Navigating the complexities of covenants and restrictions requires a proactive and informed approach. Stay up-to-date on the latest legal developments, case law, and council policies related to land use and development. Attend community meetings, consult with industry experts, and leverage online resources to expand your knowledge base. Engage experienced professionals, such as lawyers, surveyors, architects, and building designers, to provide tailored advice and support. By staying informed and seeking expert guidance, you can make sound decisions and avoid costly mistakes.
Alternative Dispute Resolution
Disputes about covenants can be difficult because emotions can run high when issues affect private property. These disputes can be costly when considering legal fees. Alternative Dispute Resolution (ADR) offers a less expensive alternative to litigation by using skilled mediators to resolve these disagreements. Mediation allows parties to address their concerns, understand one another’s positions, and develop mutually acceptable settlements, which can preserve relationships and offer creative solutions that a court might overlook. The process is confidential and voluntary, giving each side control while promoting fairness and cooperation. Using ADR, especially mediation, streamlines the resolution, reduces expenses, and encourages harmonious community connections.
The Impact of Enforcement
Enforcement of covenants typically falls to the beneficiaries of these agreements, typically the landowners in the subdivision. If a property owner violates a covenant, a neighbouring landowner might take legal action to enforce compliance. The penalties for breaching a covenant can vary but might include court orders compelling the property owner to cease the violating activity, remove a non-compliant structure, pay damages, or bear legal costs of the opposing party. It is critical to respect and comply with covenants to avoid costly and time-consuming legal battles. Being proactive in following the necessary rules will enable you to avoid legal disputes.
Future-Proofing Your Investment
Before committing to a purchase, think about how likely the covenants will affect future use of the land. Check if the covenants are in line with changing lifestyles and environmental concerns. For instance, there is an increasing focus on sustainable building solutions, and certain traditional covenants could hinder the adoption of solar panels, rainwater collection systems, or energy-efficient building materials. Make sure you are aware of these restrictions and how they could evolve over time. Being future-oriented helps protect your investment so the property continues to fulfill your needs and comply with future regulations.
Emerging Legal Challenges
Recent litigation highlights the evolving landscape of covenant law and enforcement in New Zealand, raising important questions about the role of restrictive covenants. These developments suggest that courts are increasingly willing to scrutinize the reasonableness and enforceability of covenants, particularly where they unduly restrict land use or conflict with broader societal goals. As the law continues to evolve, those with a stake in restrictive covenants must remain proactive, staying abreast of emerging legal challenges and adapting their strategies accordingly.
Examples of Recent Case Laws
Body Corporate 202201 v Proprietors of Unit Title Development 202201 NZHC 876 clarifies the enforceability and scope of covenants within unit title developments, confirming covenants that directly benefit the unit title development as a whole are enforceable.
Auckland Council v Harrison NZEnvC 47 highlights the importance of considering local characteristics when setting maximum height limits on construction. Where restrictive covenants specify heights, and the council attempts to go higher based on local characteristics, any restrictive covenants takes precedence.
As these cases illustrate, the judicial interpretation of covenants must be considered, especially in rapidly evolving urban areas where community practices and values greatly impact the execution of the property law.
Disclaimer: Please note that the above examples do not represent legal advice and individual facts will affect the outcomes of legal proceedings. You must seek independent legal advice from a trusted advisor.
FAQ Section
What happens if I breach a covenant?
If you breach a covenant, the beneficiaries of the covenant (typically neighbouring landowners) can take legal action against you. This could result in a court order requiring you to cease the infringing activity, remove any non-compliant structures, or pay damages.
How long do covenants last?
Covenants typically run with the land indefinitely, meaning they bind successive owners. However, they can be varied or removed under certain circumstances, such as with the consent of all beneficiaries or by a court order.
Can I get a covenant removed if it’s outdated or no longer relevant?
Yes, you can apply to the High Court under the Property Law Act 2007 for an order modifying or extinguishing the covenant. The Court will consider various factors, including the purpose of the covenant, the extent to which it continues to achieve that purpose, and the prejudice that would be caused to the objectors if the application were granted.
Who is responsible for enforcing covenants?
The beneficiaries of the covenant (typically neighbouring landowners) are responsible for enforcing it. Local councils generally do not enforce private covenants.
Are there any restrictions to keep in mind while developing the section?
Some common restrictions to keep in mind include building height restrictions, restrictions of building materials (e.g., cladding type, roof colour), minimum floor area requirements, landscaping obligations (e.g., what type or how many trees to plant), fencing regulations (e.g., types of acceptable materials, height restrictions), restrictions on secondary dwellings (e.g., granny flats), and rules about keeping animals (e.g., the number and types of pets allowed).
Are there any rules about ‘nuisances’?
Yes. A covenant prohibiting ‘nuisances’ can be subjective and open to interpretation, potentially leading to disputes with neighbours over noise levels, smells, or activities.
References
Land Information New Zealand (LINZ). (n.d.). Record of Title.
Property Law Act 2007. (n.d.). New Zealand Legislation.
Auckland Unitary Plan. (n.d.). Auckland Council.
Resource Management Act 1991.
Don’t let covenants and restrictions dim your dream of building your perfect home. Arm yourself with knowledge, seek expert advice, and approach the process with diligence and foresight. By understanding and navigating these regulations effectively, you can unlock the full potential of your chosen section and create a residence that reflects your vision while respecting the character of the community. Start your journey today by obtaining the Record of Title, engaging with local experts, and crafting a plan that aligns with both your aspirations and the governing regulations. Your dream home awaits!
