Legal advice: restrictive covenants
I am thinking of buying a pharmacy, but there is a restrictive covenant on the title preventing pharmacy use. Is this a problem?
The answer is that it depends.
A restrictive covenant is usually a covenant on the title to a property that would have been imposed to prevent defined activities or uses.
To see whether the restrictive covenant may still be effective your lawyers will need to assess:
- How the restrictive covenant was worded and whether it benefits any particular land
- Whether that land can be easily identified and who benefits from it
- How long there has been an ongoing breach of the restrictive covenant.
All of these factors will link into whether the restrictive covenant can still be legally enforced, and if it can, what the likely outcome would be if anyone took action regarding any breach.
If there has been a longstanding breach of covenant the courts will usually not award an injunction to stop the use, but will look instead at damages as a remedy (the extent of damages will depend on the length and nature of the breach).
In some instances indemnity insurance may be available to cover the risk of any potential legal action â€“ ask the seller to provide details of any indemnity insurance that might be in place.
Seeking a specific release from a covenant from the party with the benefit of it will usually prevent insurance being available, so the matter should be checked thoroughly.
The above is a general overview and we recommend that independent legal advice is sought for your specific concerns.
Claire Timmings is a solicitor and senior associate in the pharmacy property transactions team at Charles Russell Speechlys LLP, Claire.Timmings@crsblaw.com
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