What Is a Restrictive Covenant?

A restrictive covenant is a legally binding promise that limits how a person may use land or conduct business activities. In England and Wales, restrictive covenants commonly arise in property transactions, employment contracts, and commercial agreements. They are designed to protect legitimate interests such as property value, business goodwill, or confidential information.

Although they are often included in written contracts or title deeds, restrictive covenants are enforced differently depending on context. In property law, they may bind future owners of land. In employment and commercial law, they are assessed under the doctrine of restraint of trade.

Meaning of a Restrictive Covenant

A restrictive covenant is a negative obligation that prevents a party from doing something.

In legal terms, it is a promise not to engage in specified conduct. It differs from a positive covenant, which requires a person to take action (such as maintaining a fence or paying money).

In practice, restrictive covenants are most commonly seen in two areas:

• Land law: restrictions on how land can be used or developed
• Employment and commercial law: limits on competition or business activity after a contract ends

Restrictive Covenants in Property (Land Law)

How they arise

In property transactions, restrictive covenants are usually created when land is sold or subdivided. A seller may impose restrictions on a buyer to protect neighbouring land or maintain the character of an estate.

Examples include:

• Not building above a certain height
• Not using the property for business purposes
• Not making alterations without consent
• Not subdividing the land

Do they bind future owners?

Yes, in many cases. A key feature of restrictive covenants in land law is that they can “run with the land”, meaning they may bind subsequent owners.

For this to happen, several legal conditions must generally be met, including:

• The covenant must be negative in nature (a restriction rather than a requirement to act)
• It must benefit identifiable land
• It must have been intended to bind successors
• The purchaser must take with notice (often via land registration)

Enforcement

Restrictive covenants are enforced privately, usually by:

• The owner of the land that benefits from the restriction
• Successors in title of that land

They are not enforced by local authorities (unlike planning rules).

Restrictive Covenants in Employment Law

Purpose

In employment contracts, restrictive covenants are used to protect:

• Business customers and client relationships
• Confidential information
• Staff retention and workforce stability
• Trade connections and goodwill

Common types include:

• Non-compete clauses (restrict working for competitors)
• Non-solicitation clauses (restrict contacting former clients)
• Non-poaching clauses (restrict hiring former colleagues)
• Non-dealing clauses (restrict working with certain customers)

Legal test for enforceability

Employment restrictive covenants are not automatically valid. They are assessed under the doctrine of restraint of trade.

A clause is only enforceable if it:

• Protects a legitimate business interest
• Goes no further than reasonably necessary
• Is reasonable in scope, duration, and geography

If a covenant is too broad, it may be unenforceable.

Restrictive Covenants in Commercial Agreements

Restrictive covenants also appear in:

• Business sale agreements
• Share purchase agreements
• Franchise agreements
• Joint venture contracts

In business sales, wider restrictions are more likely to be upheld because the buyer is protecting the value of goodwill they have purchased.

Typical restrictions include:

• Not competing with the sold business for a defined period
• Not soliciting customers or suppliers
• Not recruiting employees

How Restrictive Covenants Are Enforced

Property covenants

If breached, the party benefiting from the covenant may seek:

• An injunction (to stop the breach)
• Damages (financial compensation)

Employment and commercial covenants

Employers or businesses may seek:

• Injunctive relief to prevent breach
• Compensation for loss of business
• Enforcement of contractual terms

Courts may also sever overly broad wording in some cases, but will not rewrite agreements.

Can Restrictive Covenants Be Removed or Changed?

Yes. Restrictive covenants can sometimes be:

1. Released by agreement

The benefiting party may agree to remove or vary the restriction.

2. Modified by tribunal or court

In England and Wales, the Upper Tribunal (Lands Chamber) can discharge or modify land covenants under section 84 of the Law of Property Act 1925.

Grounds may include:

• The covenant is obsolete
• It impedes reasonable use of land
• The beneficiary would not suffer harm
• The parties agree to variation

3. Challenged in court (employment law)

Employment restrictions may be challenged as unreasonable restraints of trade.

Common Issues and Legal Risks

1. Planning permission does not override covenants

Even if planning permission is granted, a restrictive covenant may still prevent development.

2. Historic covenants still apply

Older covenants can still be enforceable if not formally removed.

3. Undefined or unclear clauses

Ambiguous wording can lead to disputes over enforceability.

4. Overly broad restrictions

Courts are likely to strike down covenants that go further than necessary to protect legitimate interests.

Practical Steps When Facing a Restrictive Covenant

Where a restrictive covenant may affect property or employment decisions, typical steps include:

• Reviewing the title deed or contract in detail
• Identifying who benefits from the covenant
• Checking whether it is registered or enforceable
• Assessing whether the restriction is still relevant
• Considering negotiation for release or variation
• Seeking formal legal resolution where necessary (court or tribunal process)

Final Thoughts

A restrictive covenant is a binding legal restriction that limits how land or contractual freedoms can be used. In property law, it may restrict development or usage of land and can bind future owners. In employment and commercial law, it restricts competition and protects business interests after a relationship ends.

Enforceability depends heavily on context, reasonableness, and whether the restriction protects a legitimate interest. While some covenants are strictly enforced, others can be modified, negotiated, or struck out if they are outdated or excessive.

Understanding the nature and scope of a restrictive covenant is essential before buying property, signing an employment contract, or entering a business agreement.