What is Restrictive Covenant Indemnity Insurance?
Restrictive covenant indemnity insurance is a specialised legal indemnity insurance policy that protects property owners, property developers and buyers from claims arising from restrictive covenants. These covenants, registered with the Land Registry or found in historic property deeds, can restrict how land is used, affecting development, planning permissions and market value.
Common examples of restrictive covenants include:
- Preventing a property from being used for business purposes.
- Prohibiting building extensions or other developments.
- Restricting alterations without consent from other parties.
If a restrictive covenant is broken, the original beneficiary (or their successor) could enforce it, leading to legal action, financial costs or an injunction that could stop the planned development. Restrictive covenant indemnity insurance provides vital protection in these circumstances, covering the expense of legal defence, compensation payments and potential market value loss.
When Do You Need Covenant Indemnity Insurance?
You may need covenant indemnity insurance if:
- The previous owner broke a covenant and you’re unsure of potential claims.
- You’re submitting a planning application for a future development on land with restrictive covenants.
- A mortgage lender, independent broker or buyer requires insurance cover before approving a property transaction.
- You want to ensure the continued use of a site or building without risk of legal challenges.
- There are unknown covenants in the title that could affect future sales or market transactions.
This type of indemnity insurance is essential for property developers, buyers and sellers who want to limit the risks associated with historic restrictive covenants.
What Does the Insurance Cover?
A covenant indemnity insurance policy will cover:
- Legal costs in the event of a claim against the planned use or development of a property.
- Compensation payments if enforcement affects the market value or sale of the property.
- Costs of defending against a covenant breach claim.* Payment for delays in the planning process or needing to obtain retrospective consent.
- Regulated insurance protection against the risks of previous owner breaches.
This insurance policy is a one-off premium and usually lasts for the continued use of the site. It can often be transferred when you sell the property, so other parties have ongoing protection.
How to Get Restrictive Covenant Insurance
At GEP Legal, we help clients obtain restrictive covenant indemnity insurance that suits their needs. Our team can:
- Assess risks – Review your land title for existing restrictive covenants and their enforceability.
- Advise on legal options – Help you understand the potential impact of covenants on your planned development.
- Arrange the right policy – Work with a regulated insurer to provide a covenant indemnity insurance policy for you.
- Support your planning application – Ensure smooth navigation of the planning process without unnecessary costs or delays.
Whether you’re a buyer, seller or property developer, having the right indemnity insurance can protect you from unexpected claims and legal expenses.
Why Are Restrictive Covenants a Problem?
Restrictive covenants are often found in old property deeds and their enforceability is uncertain. However, even if a covenant seems outdated or the original beneficiary is unknown, it does not mean it cannot be enforced. A successor in title may still have legal standing to enforce the restriction, which can lead to legal disputes, financial loss or development delays.
In many cases, restrictive covenants were imposed to protect the interests of previous landowners, neighboring properties or local authorities. However, they can cause significant problems for modern homeowners and property developers who may not be aware of them until an issue arises. Indemnity insurance is a practical solution to mitigate these risks.
Can You Remove a Restrictive Covenant Instead of Getting Insurance?
You can apply to remove or vary a restrictive covenant but this process can be time consuming, costly and complex. Options include:
- Negotiate with the beneficiary – If the covenant holder is known, you can request written consent or pay for a discharge.
- Lands Tribunal application – Under the Law of Property Act 1925, you can apply to have the covenant discharged or varied but success is not guaranteed.
- Title rectification – If a covenant is incorrectly recorded or applied, legal action may be able to remove it.
Each of these options carries legal risks, costs and potential objections. In contrast restrictive covenant indemnity insurance is a much quicker and more cost effective solution without the need to engage with the covenant holder.
How Much Does Restrictive Covenant Indemnity Insurance Cost?
The cost of restrictive covenant indemnity insurance depends on:
- The age and type of the covenant.
- The level of risk of enforcement.
- The value of the property or proposed development.
- Whether there have been previous breaches.
Premiums range from a few hundred to several thousand pounds depending on the circumstances. It’s usually a one off payment and remains valid for the duration of ownership, often transferring to future buyers to maintain protection.
Does Indemnity Insurance Cover Future Breaches?
No, restrictive covenant indemnity insurance only covers existing breaches or the risk of past breaches being enforced. If you breach a covenant after you have obtained insurance, the policy may no longer be valid.
Before you develop or change anything, you should seek legal advice to ensure you comply with existing covenants or explore options such as negotiating a discharge.
Why Choose GEP Legal?
At GEP Legal, we understand the complexities of restrictive covenants and how they can impact property ownership, sales, and development projects. Our team provides:
✔ Expert legal analysis – Identifying restrictive covenants and assessing their enforceability.
✔ Tailored indemnity solutions – Sourcing competitive insurance policies suited to your needs.
✔ Efficient transaction support – Helping property buyers, sellers, and developers proceed with confidence.
✔ Planning and development advice – Ensuring you take the right legal steps before carrying out any works.
We work closely with leading insurers to secure the best possible coverage, ensuring that your property interests remain protected.
Contact GEP Legal for Further Information
If you need further information on restrictive covenant indemnity insurance, our experienced team can help you deal with complex covenants and ensure you have the right insurance in place.