What are lease covenants?

Restrictive lease covenants are a crucial element in the management and use of leased properties. These covenants are essentially clauses within a lease agreement. They impose certain restrictions on the lessee’s (tenant’s) use of the leased property.

Restrictive lease covenants are conditions set by the lessor in the lease agreement that limit how the lessee can use the leased premises. These covenants are designed to protect the property’s value, ensure its proper use, and prevent activities that could harm the property or its environment.

Unlike positive covenants, which require the lessee to perform specific actions (like maintaining the property or paying rent and service charges), restrictive covenants only require the lessee to refrain from certain behaviours or uses.

Purpose of restrictive lease covenants

The primary purpose of these lease covenants is to ensure that the use of the leased property remains consistent with the lessor’s intentions and the property’s character.

This can include preserving the residential nature of a property, maintaining the aesthetic standards of a commercial development, or ensuring that a property is used in a manner that complies with laws and regulations. Restrictive covenants help in maintaining the property’s value and the quality of life for its occupants or neighbours.

Common types of restrictive covenants

Use restrictions:

Use restrictions enforces covenants that limit the type of activities that can be conducted on the leased premises. For example, a lease might prohibit the use of a residential property for commercial purposes or restrict the types of businesses that can operate in a commercial space.

Alterations and improvements:

Many leases include covenants that restrict the lessee’s ability to make alterations, improvements, or additions to the property without the lessor’s consent. This is to ensure that any changes to the property are in line with the lessor’s standards and do not adversely affect the property’s value or integrity.

Subletting and assignment:

These covenants can restrict or completely prohibit the lessee’s ability to sublet the property or assign the lease to another party. The intention is to maintain control over who occupies the property and ensure that any new occupant is suitable and financially stable.

Enforcement of lease covenants

Enforcement of restrictive leasehold covenants is primarily the responsibility of the lessor. If a lessee is in breach of a covenant, the lessor has several options to remedy the breach, including:

• Injunctions: The lessor can seek a court order to stop the lessee from continuing the prohibited activity.
• Damages: If the breach has caused financial loss to the lessor, they may claim damages as compensation.
• Forfeiture: In severe cases, the lessor may have the right to terminate the lease and regain possession of the property, although this is subject to legal safeguards to protect lessees.

Lease covenant dispute cases between landlords and tenants are usually held in the County Court. It is always advisable to seek legal advice for disputes involving lease covenants.

Challenges and considerations

While restrictive covenants are vital for protecting the lessor’s property and interests, they must also be balanced with the lessee’s rights and needs.

Covenants that are too restrictive can limit the lessee’s ability to use the property effectively, potentially leading to disputes and legal challenges. Therefore, it is essential for these covenants to be clearly defined, reasonable, and compliant with the law.

Furthermore, the dynamic nature of business and societal needs means that what is considered reasonable at the beginning of a lease may change over time. As such, leases often contain provisions for reviewing and potentially modifying restrictive covenants to adapt to new circumstances.

Lease covenants FAQs

Can restrictive lease covenants be negotiated before signing a lease?

Yes, restrictive lease covenants can often be negotiated before signing the lease. Potential tenants should discuss any concerns or requirements they have with the landlord to find mutually agreeable terms. It’s essential to have these discussions early in the negotiation process.

Are there any restrictions on what can be included in a restrictive covenant?

Yes, while landlords have considerable leeway in setting restrictive covenants, these restrictions must be legal, reasonable, and non-discriminatory. They cannot violate local laws or regulations, nor can they discriminate based on race, religion, gender, or other protected characteristics.

How can a tenant challenge a restrictive covenant they believe is unreasonable or unenforceable?

Tenants can challenge a restrictive covenant by seeking legal advice. If a covenant is deemed unreasonable, overly burdensome, or unenforceable under current laws, a court or legal agreement might modify or remove the covenant from the lease.

Can restrictive lease covenants change over time?

Restrictive lease covenants are generally fixed for the duration of the lease. However, landlords and tenants can mutually agree to amend these covenants during the lease period if both parties consent to the changes. Additionally, some leases may include provisions for periodic review and adjustment of covenants.

How can ARC Costs assist?

ARC Costs have a network of solicitors who can provide advice and assistance on lease covenants.

In addition to introducing you to a solicitor, we can also assist in the recovery and negotiation of legal costs in land dispute cases, whether you are the paying or receiving party.

ARC Costs are highly experienced in advising and assisting with costs issues and disputes in different areas of law. As Costs Draftsman and Costs Lawyers, we can assist in your Commercial Litigation Costs issues.

If a costs award has been made, allowing you to recover costs from your opponent, we can assist with preparing a Bill of Costs on your behalf to ensure maximum recoverability. We can also assist in Costs Negotiations and represent you at detailed assessment proceedings which can determine the amount of costs you may be able to recover.

If you have been ordered to pay costs to your opponent, we can assist in disputing costs which may be sought and which you may deem to be excessive and unreasonable. We can do this by way of preparation of  Points of Dispute and also through negotiations to ensure you will only pay for costs which are reasonably incurred and not exaggerated.

Should you wish to discuss your costs query with us, please contact us on 01204 397302 or via email at info@arccosts.co.uk. Alternatively, you can complete our online query form and we will contact you to discuss your query further. We can provide expert legal advice on costs in our free, no obligation initial consultation.

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