Understanding restrictive covenants

Building a house involves countless decisions about fixtures, finishes and fabrications, but owners need to ensure a new home follows the rules set out in its covenant.

What is a restrictive covenant?

Covenants – referred to as ‘estate covenants’ in housing estates – place restrictions on how a home owner can use or alter their property.

They can relate to big picture things like the number of homes on a block or the style of house or finer details, such as the type of fence or letterbox allowed.

They are legally binding and can be enforced by local councils.

Estate covenants are designed to create uniformity when it comes to the look of a neighbourhood. Picture: Getty

Real Estate Institute of Victoria president Joseph Walton says covenants are usually put in place to create a desired “look and feel” in a housing estate or neighbourhood.

“Covenants are legally binding and enforceable and can apply to any property, not just those in new housing estates,” Walton says.

Details about what is and isn’t allowed under a property covenant is recorded on the Certificate of Title and included in the vendor’s Section 32 statement.

Covenants cover a vast range of property characteristics, from front fences, building set-backs, building heights and even materials.

“They can also restrict the number of dwellings and use of a property, in an effort to protect the local environment,” Walton says.

Generally speaking, covenants don’t cover agreements between sellers and buyers that are personal to them.

“Covenants affect the title of a property, with the obligations of a restrictive covenant passed onto transfers of title,” he says.

“Covenants last a very long time, even after the need for having them in the first place has long passed. They can be enforced by local councils and property owners whose properties benefit from having the covenant,” Walton says.

Covenants still apply on re-sale, so it’s imperative potential buyers inspect the Section 32 to find out if one applies to the property they are considering buying.