Home buyers often focus on the property itself — the layout, the price and the postcode — but overlook the legal restrictions tied to the land. One important example is a restrictive covenant on title. These covenants are designed to protect property values and maintain high community standards, but new owners may not be familiar them. In this article, we’ll explain what restrictive covenants on property are, why they matter and how to check if one affects your property.
Understanding Restrictive Covenants in Property Law
A restrictive covenant is a legally binding condition placed on a property’s title that restricts how the land can be used or developed. In contrast to general standards enforced by councils, restrictive covenants are exclusive agreements — usually entered into by a landowner sub-dividing a property or a developer — with the aim of maintaining neighbourhood character, protecting property values or attaining uniformity in a subdivision.
These covenants may set limits on building size, property use (e.g. no businesses), types of buildings or even house exterior colours. Importantly, restrictive covenants on property "run with the land", so they bind all future owners unless removed by law. Because they are legally binding and remain on title for successive purchasers, a new purchaser should review the title carefully and find out what covenants may apply before completing a property sale.
Common Types of Restrictive Covenants on Property
Building Design Restrictions
- These restrict homes to follow some building theme or materials, typically for consistency in a development.
- They might limit roofs, exterior cladding or windows.
- This keeps the whole neighbourhood looking consistent but may reduce the options for a purchaser to individualise their property.
Single Dwelling Only
- A covenant can also provide that only a single house can be built on the property.
- This could mean that no duplexes, granny flats or any other housing units with multiple units can be built.
- This is common in master-planned communities aiming to control density and preserve property values.
No Business Activity
- This restrictive covenant excludes operating a business from the property like home workplaces, retail trade or workshops.
- It's intended to preserve the domestic nature of an area and limit traffic, noise and signage associated with business.
Setback Requirements
- They define how close buildings are to the front, rear or side lot lines of the property.
- Setbacks keep space open between buildings, allow for natural lighting and develop a consistent streetscape.
Minimum Building Size
- Some covenants call for a minimum interior floor area or bedrooms/bathrooms.
- This prevents the construction of smaller, potentially lower-cost homes that might impact the overall market perception of the estate.
Fencing Style and Materials
- A restrictive covenant can stipulate that all fences are of a particular height, colour or material — such as timber slat or Colorbond in specified colours.
- This allows for uniformity in boundaries of property and to maintain a tidy, designed appearance.
Prohibited Structures
- Restrictions can exclude building or storage on the land of sheds, shipping containers, trailers or caravans.
- Covenants are also used to prevent visual clutter and maintain the appearance of a development.
No Further Subdivision
- This restriction on the title excludes further division of the land into smaller lots.
- It is designed to protect low-density living and stop overdevelopment that could exert pressure on infrastructure or alter the nature of the area.
Landscape or Garden Controls
- These covenants may require owners to include certain landscaping elements, such as lawns, garden beds or specific tree species.
- Others may prohibit the removal of native vegetation or require maintenance to a certain standard.
Facade and Colour Restrictions
- A few properties have laws that govern the colour and finishes on the outside of properties to keep them looking the same.
- For example, owners may be required to choose from a palette of approved colours for walls, roofs and garage doors.
How Restrictive Covenants Affect Property Owners
Limitations on Renovations or Extensions: Restrictive covenants may prevent you from renovating or extending your home in certain ways, restricting design choices or building placement.
Risk of Legal Action: Breaching a covenant can expose you to legal disputes or enforcement actions from neighbouring property owners or developers.
Does Title Insurance Cover Restrictive Covenants?
Title Insurance can be a good safeguard in the event of restrictive covenants. Even when proper title searches and expert advice have been followed, errors or slips can happen, and that is where Title Insurance comes into play.
What may be covered:
If the restrictive covenant did not come to light or was not discovered during pre-purchase diligence, and it impacts your use of the property as intended; Title Insurance may cover you for the impact. This may be in terms of payment for reduction in value, fees to alter or demolish buildings or even attorney fees. Additionally, if a previous owner violated a covenant — such as building without required approvals — your Title Insurance may protect you from the financial fallout, especially if you're now legally responsible for fixing or removing the structure.
What’s typically excluded:
Title Insurance will not protect you from a restrictive covenant on a title if it was already known or clearly disclosed in your contract, Section 32, or title documents before settlement. If the issue was identified to you but you ignored or misunderstood it, the restrictive covenant is not eligible for coverage. Also, if you’re purchasing land in Queensland, Title Insurance policies generally exclude coverage related to restrictive covenants altogether due to state-specific regulations.
While Title Insurance doesn't do away with due diligence, it can serve as a valuable safety net for unexpected issues with restrictive covenants, specifically those situations you wouldn't be able to control otherwise.
Why Restrictive Covenant Cover Matters
Restrictive covenants can quietly follow a property from one owner to the next, and many buyers don’t realise they’re taking on these legal obligations. Whether due to oversight by the seller, conveyancer or council, these errors can leave you in breach — often unwittingly.
If a covenant limits your plans or provokes a court fight, the monetary cost can also become considerable. Title Insurance can provide protection and comfort in the event an undisclosed or unknown limitation affects your rights as the property owner.
How First Title Can Help
First Title provides policies that outline exactly what types of restrictive covenant breaches are covered. You can also learn more with our Title Insurance Guide. With access to experts experienced in complex title matters and land development, First Title offers practical support when unexpected issues arise. And with a single one-off premium, you gain lasting protection and peace of mind, so you can move forward with confidence knowing you’re covered for the things your conveyancer may have missed.
Protect Your Property with Confidence
Don’t let hidden, restrictive covenant title issues cost you later. Peace of mind starts here, so request title insurance coverage or get a quick Title Insurance quote from First Title today and enjoy long-term protection for your property purchase.
