If you’re going to buy a property it is crucial that you know what interests affect the title and the rights of the owner. Various interests registered against a title may set out rules and restrictions about how the property can be used or enjoyed. One type of interest that commonly appears on New Zealand titles is called a covenant.
What is a covenant?
A covenant is a set of rules and restrictions that affect how a property can be used. If you are buying a section or house that is part of a new development, the chances are that there will be covenants registered against the title. Developers often place covenants on properties in a subdivision to maintain a certain standard of quality with new houses within the development.
Covenants can contain restrictions on any number of things, including the type of materials that can be used, the size of the house and where it can be placed, and even its colour and architecture. Usually in a subdivision the use of recycled or second-hand materials will be banned and relocated houses not allowed.
Covenants may also include rules about the types of activities allowed on a property as an ongoing matter, or whether any pets or animals are allowed. While some of these things may seem unnecessary or intrusive, they form an important part of the property title and the owner is legally bound to observe them.
These rules can be enforced by neighbours that share that same covenant. If a property owner fails to follow the rules, they could face a claim or court action by another landowner. In this way, a covenant is like the rules of a club: everyone in the club signs up to a code of conduct and, if someone breaches the rules, the other members can seek disciplinary action.
What could a covenant mean for you?
If you are looking to buy a house or section, you need to understand the effect any covenants may have on the property. Make sure that you get a copy of all covenants that apply. Make sure you’ve been fully informed as to their potential effect and impact. If you have any concerns, your lawyer will be able to help you determine how it might affect the use and enjoyment you get from your potential dream home.