Deed of Covenant: A Comprehensive Guide

A Deed of Covenant is a crucial legal document for leasehold property owners, dictating the responsibilities and obligations between the freeholder and the leaseholder. This comprehensive guide covers everything you need to know about Deed of Covenant, from its purpose and types to legal implications and how to obtain one.

What is a Deed of Covenant?

A Deed of Covenant is a legal agreement between two parties, usually concerning leasehold properties. It sets out the obligations and responsibilities that the leaseholder agrees to undertake as specified by the freeholder or landlord. The primary purpose of a Deed of Covenant is to protect the freeholder and management company by legally binding the leaseholder to adhere to the specified covenants.

To obtain information about a Deed of Covenant, you need to order the Title Register for your property. The Title Register is an official document from HM Land Registry that contains details of a property's ownership and any rights or restrictions affecting the property. If there is a Deed of Covenant relevant to your property, it will be mentioned in the Title Register.

Positive and Negative Covenants

Covenants in a Deed of Covenant are broadly divided into two categories: positive and negative.

Positive Covenants

Positive covenants require the leaseholder to carry out specific obligations, often aimed at creating a pleasant living environment for all residents within the development. These obligations may include:

• Agreeing to certain funds being spent on maintenance
• Agreeing to larger works (often subject to committee discussion)
• Paying service charges promptly
• Keeping communal areas in good condition
• Maintaining the external parts of the property (essential repairs and painting, for example)

Negative Covenants

Negative covenants, on the other hand, prohibit the leaseholder from performing certain actions across the property. Common negative covenants include:

• Subletting
• Owning pets
• Running a commercial business
• Making excessive noise after specific hours
• Holiday or service accommodation lets

There may also be restrictions on accessing certain parts of the development where the leasehold property is located, known as easement restrictions.

Signing a Deed of Covenant

When a leasehold property is sold, the Deed of Covenant must be signed by the new buyer, transferring both positive and negative covenants from the seller. The Deed of Covenant acts as a contract issued by the freeholder, obliging the new leaseholder to abide by the specified covenants.

Breaching any terms contained within the Deed of Covenant could result in a claim for damages and, potentially, a court injunction. As every leasehold property within the freehold may have its nuances, it's essential to consult a qualified conveyancer or conveyancing solicitor with suitable expertise to examine the legal documentation before signing.

Direct Deed of Covenant

If a leaseholder decides to sublet their property (with the freeholder's permission), the Deed of Covenant may require a separate Deed of Covenant between the subtenant and the landlord. This is known as a Direct Deed of Covenant, as it does not impose any obligations on other leaseholders.

Deed of Covenant Fee

Freeholders may charge a fee for issuing a Deed of Covenant, typically added to the other house sale costs. The fee may form part of the administrative charge that some freeholders make when forwarding the leasehold management pack to the conveyancer. There's no set fee for this, but it usually does not exceed £300.

Conveyancers may also charge additional fees, often correlating with the complexity of the Deed of Covenant. For instance, if the lease documentation is older, more detailed legal work may be necessary (at a proportionate cost).

Deed of Covenant Template

During the conveyancing process, the seller's solicitor usually forwards a draft Deed to the buyer's solicitor for review. After addressing any inquiries and resolving any issues, the buyer's solicitor creates the final Deed.

In the Deed, the freeholder is typically referred to as the Covenantor, and the leaseholder as the Covenantee. A sample template can be found on reputable websites, but it is not advisable to copy and paste the contents without seeking qualified legal advice.

Do I Need to Sign a Deed of Covenant?

Most leases state that signing a Deed of Covenant is compulsory upon any transfer, assignment, or underletting of a leasehold property. A wet signature, signed onto a physical copy of the document, is typically required. An independent witness (over the age of 18) may also be necessary to observe and countersign the document.

Failing to sign the Deed of Covenant may result in a breach of contract. In such cases, the freeholder may refuse to accept any service charges or ground rents, potentially affecting their ability to enforce future covenants in the lease. This could lead to an accumulation of payments, additional financial penalties, and interest charges. When selling the property, the freeholder can lawfully claim for this amount before allowing the sale to proceed.

As always, it's recommended to consult a suitable conveyancer or conveyancing solicitor before signing a Deed of Covenant.

Obtaining a Deed of Covenant from Land Registry

To access official copies of Land Registry documents online, including information about a Deed of Covenant, visit the Land Registry Online website. By ordering the Title Register for your property, you can find details of a property's ownership, rights, and restrictions, including any relevant Deed of Covenant.

Conclusion

Understanding the importance of a Deed of Covenant is crucial for leasehold property owners. This legal document outlines the obligations and responsibilities between the freeholder and leaseholder, protecting both parties' interests. Ensure you consult a qualified conveyancer or conveyancing solicitor when dealing with a Deed of Covenant to avoid any legal complications or breaches of contract.