How to Challenge a Restrictive Covenant in Court

Restrictive covenants are contractual or property rights that limit how a person can use land or conduct business. In England and Wales, these restrictions can appear in commercial sale agreements, employment contracts (as post‑termination obligations), or deeds affecting property use. While they can be legally effective, they are also subject to challenge in the courts or tribunals if they are unreasonable, outdated, or otherwise unfair. This guide explains how such challenges work, what legal tests apply, the procedural routes to follow, and what practical steps you could consider when seeking to contest a restrictive covenant.

What Is a Restrictive Covenant?

A restrictive covenant is a legal term applied to obligations that restrict how a party can act. In property law, it often prevents certain uses of land (for example, prohibiting building on part of a site). In commercial or employment contexts, it may restrict a person from engaging in competing business activities after a sale or employment ends.

These covenants are grounded in the doctrine of restraint of trade - a principle that such restrictions are void unless they protect a legitimate interest and are reasonable in scope, duration and geographical reach.

Grounds for Challenging a Restrictive Covenant

1. Overly Broad or Unreasonable Terms

In business and employment contracts, restrictive covenants are presumed void unless they go no further than necessary to protect a legitimate business interest such as confidential information, client relationships or workforce stability. If a covenant is too broad - for example, imposing a long global ban on competition without justification - a court may refuse to enforce it.

For employment covenants, common challenges include:

• Arguing the restriction exceeds what is reasonable for the role or the legitimate interests of the employer.
• Asserting that the geographic area, duration or activities are unreasonably wide (e.g. 12‑month global ban on all business activities).
• Showing there was no valid consideration for a new or extended covenant (such as a pay rise or benefit) which would make it enforceable.

Courts will balance the interests of the party seeking enforcement against the individual's right to work and earn a living.

2. Obsolescence or Lack of Practical Benefit (Property Covenants)

For covenants affecting land, especially those that restrict property development or use, legal challenges often focus on whether the covenant still serves a valid purpose:

• The covenant may be obsolete because the character of the land or neighbourhood has changed so much that the restriction no longer makes sense.
• It may be shown that the restriction impedes reasonable use of the land without offering significant benefit to the persons entitled to enforce it.
• In some cases, it may be argued that the restriction no longer has practical value or is contrary to the public interest.

These arguments are relevant under statutory provisions (see below) when applying to modify or remove the covenant.

Legal Routes to Challenge a Restrictive Covenant

How you challenge a covenant depends on its nature - whether it affects land use or is part of a commercial or employment contract.

A. Property Covenants - Upper Tribunal (Lands Chamber)

For land use covenants, the principal legal route is an application to the Upper Tribunal (Lands Chamber) under Section 84 of the Law of Property Act 1925 to have the covenant modified or discharged.

An application can be successful if one or more of the statutory grounds are met:

• The covenant has become obsolete, given changes in the character of the land or neighbourhood.
• The covenant unreasonably impedes reasonable use of the land, and money compensation would be adequate for those with the benefit of the covenant.
• All of the beneficiaries of the covenant agree to its discharge or modification.
• Removing or modifying the covenant would not injure those entitled to enforce it.

The tribunal has broad discretion and can consider factors such as how long the covenant has been in place and whether modern development patterns have made it outdated.

Procedure for Tribunal Applications

• File the application using the prescribed form and pay the standard fee.
• Provide detailed evidence, including the covenant itself, title documents, and any supporting arguments (e.g. planning history or expert valuations).
• Notify those with the benefit of the covenant; objections may be made within a set period.
• Attend any hearing and present your case on the legal grounds for discharge or modification.

If the tribunal approves the application, it may award compensation to parties with benefits of the covenant or impose reasonable conditions on the release or alteration of restrictions.

B. Contractual Covenants - Court Challenges

For restrictive covenants in commercial sale or employment contracts:

1. Pre‑Action Negotiation: Often, the first step is to challenge enforceability through solicitor correspondence, identifying how the covenant is unreasonable or outside what is necessary to protect legitimate interests.
2. Declaratory Relief: You may seek a declaration from the High Court or Business and Property Courts as to whether the covenant is void, unenforceable or partially enforceable.
3. Defences to Enforcement: If an enforcement claim is made (for example, by the buyer or employer seeking an injunction), you can raise defences based on reasonableness, lack of legitimate interest, or delay by the enforcing party.

Courts may also apply the “blue pencil” test, whereby they remove excessively broad wording while upholding reasonable parts of a clause.

Evidence and Preparation

In any challenge:

• Gather documentary evidence: The covenant wording, contract history, negotiating records, and any correspondence relating to its purpose.
• Demonstrate impact: Expert reports, valuations or business plans showing how the covenant affects land use or business activity.
• Show changes: For property covenants, historical and current use patterns of the land or community.
• Seek legal advice: Specialist solicitors can advise on drafting robust arguments and procedural requirements.

Risks and Practical Considerations

• Time and Cost: Challenging restrictive covenants, particularly in tribunals or courts, can be time‑consuming and expensive.
• Uncertain Outcomes: Success depends on the specific words of the covenant, how it was created, and the evidence presented.
• Partial Success: Courts and tribunals may modify rather than fully discharge a covenant.
• Negotiated Solutions: In some cases, negotiated deeds of release with beneficiaries may resolve issues without formal proceedings.

Key Takeaways

Challenging a restrictive covenant in England and Wales rests on demonstrating that the restriction is unenforceable or no longer appropriate in its context. For property covenants affecting land, applications under Section 84 of the Law of Property Act 1925 to the Upper Tribunal (Lands Chamber) are the principal route. For contractual covenants in employment or business contexts, courts assess enforceability against reasonableness and legitimate interest tests, and challenges can be made through declaratory or defensive proceedings. Thorough preparation, proper legal grounds, and timely action are essential for effective challenges.

James William Steven Parker

James is the founder of UKLegalGuides.com and a former agent at the Ministry of Justice (UK). With a background in processing legal claims, he launched this platform to make the laws of England and Wales accessible to everyone.