Restrictive Covenants- “Good Neighbours Respect Good Covenants”

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A restrictive covenant is a legally binding agreement between a Vendor and Purchaser of land
where the Purchaser agrees with the Vendor that he will not do certain acts in respect of the
land, for example, a covenant not to carry on a particular trade or business on the land or a
covenant not to subdivide the land. Restrictive covenants which are usually found on a
registered Title operate for the benefit of the Vendor as well as persons who live in close
proximity to the land and are enforceable against successors in Title. Lands which are subject to
restrictive covenants may significantly impede Developers as well as Purchasers who will be
securing financing from a mortgage institution. Below are some important points to consider
when purchasing lands that are subject to restrictive covenants.

When purchasing real estate, it is crucial for potential purchasers to inspect the face of the Title
in order to determine (i) whether there are any restrictive covenants endorsed on the Title and
(ii) whether there are any breaches of same. Where the Purchaser will be securing financing
from a mortgage institution, they will require the Purchaser to engage the services of a
Commissioned Land Surveyor for the preparation of a Surveyor's Identification Report (ID
Report). The purpose of the ID Report is to indicate the boundaries of the land being purchased
and whether the land is in compliance with any restrictive covenants endorsed on the Title. If
found to be in breach, the mortgage institution will demand that the breach be rectified
immediately or they will accept an undertaking from the Vendor's Attorney-at-Law to make an
application to the court in order to rectify same. Failure to do so will result in the mortgage
institution withholding the mortgage proceeds.
Unless otherwise provided for in the agreement for sale of land, it is usually the obligation of
the Vendor to transfer good Title to the Purchaser. The Vendor is therefore equipped with the
responsibility and must agree with the Purchaser to modify or discharge the restrictive
covenant in the event of a breach. If the Vendor has not agreed with the Purchaser expressly
that he will take full responsibility for modifying or discharging the restrictive covenant then
this may be the Purchaser's responsibility. Likewise where a Developer is desirous of
subdividing the land but is hindered from doing so as a result of a restrictive covenant endorsed
on the Title, it will be his responsibility to discharge same.

Under the Restrictive Covenants (Discharge and Modification) Act a restrictive covenant can be
modified or discharged by way of an order from the Court if the Applicant can rely on any of the
following grounds:- (i) that due to changes in the character of the neighbourhood the covenant
has become obsolete (ii) that the continued existence of the covenant would impede the
reasonable use of the property (iii) that the proposed discharge or modification would not
substantially affect the persons entitled to the benefit of the covenant i.e. persons who live in
close proximity to the land and (iv) that all persons of full age and capacity who are entitled to
the benefit of the covenant have agreed expressly or by implication, by their acts or omission,
to the discharge or modification of same. The statutory guidelines suggest that each of these
grounds may be used disjunctively. However the courts have placed such a high standard on
the Applicant requiring him to satisfy more than one of the abovementioned grounds.

The Applicant will be required to serve copies of the Application on the relevant local
authorities such as the Town and Country Planning Authority, the Kingston & St. Andrew
Corporation (KSAC) and the National Environment Planning Agency (NEPA). The Court will also
require the Applicant to serve notices of the Application to all persons entitled to the benefit of
the covenant as well as to advertise the Application in the local newspaper. Persons will then be
entitled to object to the modification or discharge within fourteen (14) days of receiving the
said notice. Upon the expiration of the fourteen (14) days the Court will proceed to determine
the Application and if satisfied that the Applicant has proved one or more of the grounds, an
order will be granted for the modification or discharge of the restrictive covenant. It is also
advisable that the Applicant have his Attorney-at-Law settle with NEPA the precise and
acceptable wording for the modified covenant.

Where the Purchaser will not be securing financing from a mortgage institution, it is still
important to obtain a Surveyor's Identification Report to ensure that the property is in
compliance with the restrictive covenants. Failure to do so will result in the Purchaser acquiring
a defective Title which he may have to pay the price of correcting in the event he decides to sell
the property. It is therefore recommended to engage the services of an Attorney-at-Law when
purchasing real estate as he/she will be equipped with the relevant expertise and will ensure
that you receive good Title for your money.