Edmonds Judd

subdivision

Land Covenants

Now commonplace in residential developments

With all the property development over the last 20 years or so, land covenants have become commonplace in new build residential developments.

If you are buying a property in a newly or recently built residential subdivision, the odds are that the title will come with various covenants registered against it. These covenants are likely to place restrictions on the ways in which the owners can use and enjoy their properties.

What are land covenants?

Land covenants are usually put in place to ensure that the aesthetics and maintenance of the subdivision are built and kept up to a certain standard. In other instances, a landowner may subdivide part of their property and wish to restrict what can be done on the subdivided land to protect their use and enjoyment of their remaining land, for example, by restricting the location and size of any buildings to protect their view.

Whilst life in a subdivision is not for everyone, urban development in New Zealand is now usually done through a subdivision with land covenants.

Land covenants broadly fall into two categories:

1. Positive covenants that impose an obligation on a property owner to do something, or
2. Restrictive covenants that prevent an owner from doing something.

Positive covenants usually include an obligation to make a financial contribution or assist with maintenance of something in common with neighbouring landowners, such as the repair and maintenance of a fence or driveway.

Restrictive covenants are the most common covenants in residential subdivisions. The restrictions could include:

  • The construction materials that can, or cannot, be used for building on the land (including a possible prohibition on the use of second-hand materials)
  • The height/design of your house, garage or even a fence
  • Restrictions on whether you can leave caravans, boats and trailers parked in the driveway
  • Ensuring clotheslines, heat pump infrastructure, solar panels or satellite dishes are not visible from the street
  • Limitation on the number of dwellings and/or outbuildings you can have on the property
  • Whether certain types of animals are not allowed on your property, and/or
  • A reverse sensitivity covenant, that prevents the owners of the land burdened by the covenant from complaining about noise, smell or substances produced by an activity (such as an airport, farm, etc) being conducted on the property having the benefit of the covenant.

What to look out for

This depends on your intended use of the property. If you are considering buying a section to build a home from scratch, you must ensure your builder and/or architect have a copy of the land covenants, and that the build complies with all restrictions.

If you are making any alterations to an existing property, or even installing a solar panel/heat pump, you should first read all land covenants and establish whether it is allowed and, if so, whether there are any restrictions.

When buying a property that is subject to land covenants, you should ensure that the current owner has adhered to the rules and restrictions of the covenant, obtained the necessary developer’s consents and not committed any breach to date by, for example, building a granny flat on the property where that is prohibited.

Once the subdivision is completed, developers will often wind up their development company. If the landowners have not obtained any necessary developer consent before the company is wound up, this can hinder or prevent a sale later. Prospective purchasers are likely to be advised by their lawyers to seek a copy of any developer’s consent and this can prove to be difficult where the development company no longer exists.

How long does a covenant last?

Many land covenants ‘run with the land’ which means they bind every new owner and run indefinitely.

A well-designed land covenant could have various provisions that expire – such as any requirement for obtaining consent from the developer to avoid the issue of a developer company being wound up. If this is the case, the expiry date will be stipulated in the land covenant.

Breaching a covenant?

The rules contained within the land covenant can be enforced by you and your neighbours (if they hold the benefit of the land covenant) against anyone who has breached the restrictions.

To enforce a breach, written notice should be given to the owner that specifies what the owner must do or pay to fix the breach. If the owner receiving this notice does not agree that there has been a breach, they should give notice in return stating this.

If there has been a breach, most land covenants provide for damages, often in the range of $100–$250 per day and per property owner who has been affected by the breach. These damages will normally accrue until the breach is remedied. Sometimes the covenant provides for payment of a lump sum when there is a breach.

Often it is an immediate neighbour who raises any potential breach of the land covenants as they are the most likely to be impacted.

We encourage compliance with land covenants to avoid any liability to pay damages or a breakdown in relationships between neighbours.

Can a land covenant be removed or varied?

Land covenants can be removed from the title or varied. The easiest and most common mechanism for a removal or variation is when all parties affected by the land covenants agree to the removal or variation, and sign the necessary documentation. Getting all affected parties to agree to a removal or variation can be a lengthy, expensive and difficult process. In some subdivisions, the sheer number of affected parties will make this option an unattractive proposition and the possibility of complete agreement unlikely.

If you cannot get all parties to agree, there are possible remedies available by an application to the courts. The courts are, however, often reluctant to vary or remove land covenants, even those which may seem no longer to be relevant.

Conclusion

With modern urban housing density in subdivisions, the prevalence of land covenants is likely to continue to increase. Land covenants usually impact land indefinitely. This makes it more important than ever to understand the land covenants registered against a property before you buy it.

If you are unsure whether any covenants apply, or their effect, please be in touch with us. You should not presume that the other owners, including previous owners, have complied with their obligations to date.

 

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Subdivision consents

Recent changes to planning rules

In the Autumn 2022 edition of Property Speaking we discussed different types of resource consents. Since then, the government has released a new National Policy Statement for Highly Productive Land (NPS-HPL), which you can read here. The purpose of the NPS-HPL is to ensure that highly productive land is protected for use in land-based primary production, both now and for future generations. Councils are now required to consider the need to preserve highly productive land when determining any application for a subdivision consent.

Subdivision consent

If you want to change the size of your section by purchasing some of your neighbour’s property and merging it with your own (a boundary adjustment) or you want to split your property into additional property titles, then you will need subdivision consent from your local council.

Requirements

Your region’s district plan sets out the requirements that you must meet in order to subdivide your property. In addition to the requirements being different between regions, the requirements are also different depending on the zone in which your property is located. Properties are divided into zones that consider the standard characteristics expected in that area. The zones are:

  • Residential
  • Commercial/retail/town
  • Industrial
  • Rural lifestyle
  • Rural production, and
  • Special purpose.

The names of the zones may differ between regions but there will be a zone for each of those standard characteristics.

Conditions

Consent for your subdivision is likely to come with conditions.  Your local council may also ask that part of your property is transferred to the council; this is known as ‘vesting.’ Sometimes the council will pay you for that land but other times it will form part of your development contribution.

Areas around waterways may be taken for an esplanade reserve or esplanade strip, whereas areas of land that will become roads may be taken for road reserves.

The council can also require that new subdivisions have certain design specifications which are dictated through the district plan; these are recorded on the property title in a consent notice.

Affected parties

Where your subdivision is not a permitted activity, or it does not fit within the standard requirements for a subdivision in that area, the council may still grant you consent on a ‘notified basis.’ This means that it provides notice to affected people who can then raise any concerns with your proposed subdivision within a specified time.

The council may add further conditions to the development or even refuse the consent depending on any concerns raised.

Highly productive land (HPL)

In addition to the prior considerations that councils had to consider, since 17 October 2022, they now must map the land within their region to determine if it is HPL. In general, land will be mapped as HPL if it is:

  1. In a general rural zone or a rural production zone
  2. Predominantly within an area with a Land Use Capability class of between 1–3. A helpful map shows the current class of land within New Zealand here
  3. Not identified for future development within the relevant district’s district plan as at 17 October 2022, and
  4. Forms a large and geographically cohesive area.

Councils have the next three years to remap all the land within their region. Until that mapping is completed, all land will be treated as HPL if it falls within categories 1–3 above.

Most of the Land Use Capability class 1–3 land is within Northland, Auckland, Waikato, Bay of Plenty (between Tauranga and Whakatāne), Taranaki, Manawatu, Canterbury, Otago and Southland, although there are smaller areas of class 1–3 land throughout New Zealand.

If you are applying for a subdivision consent, your local council will consider whether the land is HPL and, where it is, it will be much more difficult for you to obtain a subdivision consent.

Since the NPS-HPL came into force on17 October 2022, it has caused problems for landowners who had subdivision consent applications for land within class 1–3 areas pending on that date. Councils had to reassess applications taking HPL into account. This, in some cases, resulted in consent being refused.

If you are thinking about subdividing your property, especially in a rural zone, do talk with us and your surveyor early on. We can discuss the specific planning requirements that now apply to your property and help assess whether your subdivision is likely to receive consent before you proceed any further on the development.

 

 

DISCLAIMER: All the information published in Property eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Property eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Land covenants

Rules on how you can use your land

A covenant is an instrument registered against land that governs how an owner or occupier can use their land. The land bound by the terms of the covenant is referred to as the ‘burdened land’ as that has the burden (although not all covenants are negative) of complying with the terms of the covenant. There can be either positive covenants which compel the owner or occupier to do something, or restrictive covenants that prevent the owner or occupier from carrying out a particular activity.

 

Common covenants

Generally, people encounter covenants when their lawyer reviews the Record of Title of a property and advises that it is subject to a land covenant. Often the covenant will dictate that certain activities or uses are restricted or prohibited on the property. Examples include the maximum height of buildings allowed to be built on a property or a prohibition on keeping certain animals.

Covenants are commonly seen in subdivisions where the developer intends to sell multiple sections for the construction of new homes. Often a developer will register extensive land covenants that prescribe various design features of the houses to be built in the subdivision. This helps the developer dictate the look and feel of the subdivision; it will generally include covenants such as a minimum build cost, the type of cladding permitted for the exterior of new builds and maximum heights of fences and plants, along with prohibitions on collecting rubbish on properties, the visibility of clotheslines and many other visual features which are all designed to help the developer preserve the aesthetic appeal of the subdivision.

Another type of land covenant is a reverse sensitivity covenant (sometimes called a no-complaints covenant). These are used where a party in a rural or industrial setting may wish to subdivide or develop part of their land for residential use. A no-complaints covenant would be used in this instance to protect the existing property use of the farm or the factory from complaints made by the new residential neighbours who might object to certain smells or noises generated by that existing use which will continue on the retained land. This ensures that farms and factories can continue their normal business despite the development of purely residential property next door without fear of those neighbours complaining and interfering in how those businesses operate.

If you are looking to purchase a property, particularly if it is bare land, it is important to check that it isn’t subject to covenants. If there are any covenants registered against the Record of Title, you should ensure they won’t restrict your intended use of the land or leave you bound to put up with offensive noise or smell from neighbouring properties without any right to complain.

 

Enforceability of covenants

In a similar way that the owner or occupier of ‘burdened land’ bears the obligation of complying with the terms of a land covenant, the owner of ‘benefitted land’ has the right to enforce covenants affecting the burdened land.

The covenant will often contain penalty provisions that state the burdened landowner will be penalised a punitive amount for non-compliance with a covenant registered against their land.

If the burdened landowner fails to comply, the owner of the benefitted land may have the right to have the work required to comply with the covenant completed and to recover those costs from the burdened landowner.

Covenants can also benefit a party in gross meaning that the party with the right to enforce the terms of the covenant isn’t necessarily an adjoining landowner but often the development company responsible for a subdivision, or a local or territorial authority. Covenants in gross can give the developer the control over the design of buildings in their subdivision to ensure they can maximise the profitability and marketability of their sections without having to rely on individuals to enforce covenants themselves.

As land covenants can vary so broadly depending on their purpose or the way they are drafted, it is important to talk with us early on if land you own, or are looking to buy, is affected by a covenant. It is particularly important if you have a unique plan for a build or slightly unusual use for your land in mind that might be precluded by a restrictive covenant. A quick check by us can alleviate any doubt and ensure you won’t be caught once it is too late.

DISCLAIMER: All the information published in Property eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Property eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


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Latest EJ Update

The latest EJ newsletter the EJ Update is available here. The latest Fineprint is available here.

This EJ Update includes information about:

  • The ‘Legal Warrant of Fitness’ a new and simple survey that ensures that your personal and business affairs are up-to-date
  • Changes to witnessing of enduring power of attorney documents
  • The Government’s proposal to do away with gift duty
  • Changes to the definition of ‘beneficiary income’

Latest Fineprint

Is available here.

In this edition:

  • Financial Advisers Act 2008
  • The Major Events Management Act
  • Subdivision nightmare
  • A note about notaries

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