Land Covenants - How can irrelevant covenants be removed from the land?

It is common in New Zealand for properties to be subject to restrictive land covenants. Land Covenants (Covenants) are sets of privately made rules which govern how the owners can use their land. The most common Covenants dictate what the owner can’t build on land, what they can’t use the land for, and what materials they can’t use to construct buildings on the land. It’s common for lifestyle and small farm blocks to have Covenants which prevent the owners complaining about the effects of farming activities being undertaken on adjoining land (such as noise, smell and spray drift).

Covenants are registered on the titles to all properties affected by them – both on the land having the benefit of, or being burdened by, the Covenants. They usually last indefinitely but can expire after a period of time. The owners of the affected land can all agree to remove the Covenants from their titles. However, if they can’t agree, or where it’s impractical to obtain their agreement, an affected landowner may apply to the Court under the Property Law Act to have the Covenant removed from the affected titles. The Court may consider various factors when deciding whether to grant the application.

The recent decision of the High Court in West Hoe Family Trustees Limited v Forsyth and Forsyth and Others [2022] NZHC 2708 granting an application to remove a Covenant confirmed the factors the Court must consider. In this case, the applicants owned a small lifestyle block in Dairy Flat which was subject to a restrictive covenant registered in 1986. The Covenant limited the use of the land and permitted only one dwelling to be built on the land.

The applicant asked the Court to consider the significant changes that had occurred in the area since 1986 and argued there had been significant changes to the properties, the characteristics of the area, and Council planning by-laws. The Court noted the area used to be sparsely populated and had been predominantly used for farming. The Court also noted the benefitted properties did not have buildings erected on the land at the time, and there had been extensive subdivision which, by 2021, resulted in the original three benefitting properties becoming eight benefitting properties. In 2021 the benefitting properties all had multiple buildings on them.

In addition, the Court noted that since 1986 activities in the neighbourhood had changed from rural to commercial, industrial, and agricultural. Many more buildings and homes were in the area and the neighborhood had become denser and more urbanised. The Court concluded that the properties which benefitted from the Covenant had changed substantially since 1986, and therefore the retention of the Covenant reduced its benefit to the benefitting owners.

The Court also found that being restricted to building one dwelling on the burdened land no longer benefited the owners because of the surrounding residential intensification and increased type of use of neighbouring properties. The Court also agreed that the Covenant impeded the use of the burdened property to a different extent from that which could have reasonably been foreseen in 1986 - at that time the benefitted properties were rural and undeveloped. Finally, the Court concluded that the removal would cause no substantial injury to the owners of the benefitted land, as the rationale for the Covenant (to assist in preserving rural ambience and peace) was no longer relevant.

This case, among others recently considered by the Courts, shows that those contemplating the registration of Covenants, or buying land subject to Covenants, should consider their long-term relevance in the light of societal changes, future development and increased urbanisation.