Breach of Covenant: Our Panel of Solicitors

A breach of covenant occurs when one party fails to uphold the terms outlined in a contract or agreement, otherwise known as a covenant. These covenants are binding commitments made between parties, typically found in legal documents such as leases, deeds, or loan agreements.

The consequences of a breach of covenant can be significant, potentially leading to legal action, financial penalties, or other remedies designed to enforce the agreement or compensate the non-breaching party.

Understanding the nature of covenants and the implications of a breach is crucial for both parties to protect their rights and ensure compliance with the agreed terms. If you would like assistance with a potential breach of covenant, please get in touch with us today. We have access to an experienced panel of commercial law solicitors who are highly knowledgeable in this area of law.

Common breaches of covenant

Covenants are written obligations typically included in a deed, such as a lease or transfer deed, signed by the involved parties. These covenants govern the use and enjoyment of a property. Disputes over covenants often arise between landlords and tenants.

Breach of covenants in real estate

• Failure to obtain planning permission: One of the most common breaches in the UK involves making alterations or extensions to a property without obtaining the necessary planning permission, as required by the covenants in the property’s title deed.
• Breaching use restrictions: Covenants often restrict how a property can be used, such as limiting it to residential purposes only. A breach occurs if the property is used for commercial activities or other purposes not allowed by the covenant.
• Neglecting maintenance obligations: In the UK, property owners may be required to maintain their property to a certain standard. Failing to do so can breach the covenant, leading to property disputes.

Breach of financial covenants

• Default on mortgage payments: In the UK, a common breach of financial covenants occurs when a borrower fails to make mortgage payments as agreed. This can lead to repossession proceedings.
• Failure to maintain insurance: Mortgage agreements often require borrowers to maintain adequate buildings insurance. Failing to do so is a breach of covenant that can result in the lender taking action to protect their interest.

Breach of covenants in leasehold agreements

• Unauthorised subletting: Leaseholders may be prohibited from subletting their property without the landlord’s consent. Subletting without permission is a breach of covenant that can result in the lease being forfeited.
• Failure to pay rent or service charges: Leaseholders in the UK are typically required to pay ground rent and service charges. Non-payment of rent arrears is a common breach that can lead to legal action or even forfeiture of the commercial lease.

Breaches of covenant in the UK can lead to a range of consequences, including financial penalties, injunctions, or even the loss of commercial property rights, depending on the severity of the breach and the terms of the covenant.

Are covenants legally enforceable?

Restrictive covenants are generally legally enforceable and binding if properly established, but they may become unenforceable over time in certain situations. It is important to note that restrictive covenants cannot be too broad. Courts will generally only enforce them if they are reasonable and necessary to protect the legitimate interests of the person who benefits from the restriction.

In some instances, restrictive covenants can be removed, particularly if circumstances have significantly changed since the covenant was established, or if the benefiting landowner agrees to remove it. It is crucial to seek expert legal advice if you wish to challenge a restrictive covenant or if you are uncertain about whether you have breached it.

Remedies to a breach of covenant

In the UK, when a breach of covenant occurs, various remedies are available to the aggrieved party, depending on the nature of the breach and the terms of the agreement. These remedies aim to either enforce the covenant, compensate the non-breaching party, or provide other forms of relief.

The most common remedy is where the aggrieved party can claim damages. This is when the breaching party is ordered to pay a sum of money to compensate for the loss suffered due to the breach. The amount typically reflects the financial impact of the breach on the non-breaching party.

In some cases, the court may issue an injunction to prevent the breaching party from continuing the breach. For example, if a tenant is using the premises for an unauthorised purpose, a landlord could seek an injunction to stop that use.

In lease agreements, if a tenant breaches a covenant, the landlord may have the right to forfeit (terminate) the lease following a Section 146 Notice. This remedy is often subject to conditions, such as providing the tenant with notice and an opportunity to remedy the breach.

The choice of remedy will depend on the specifics of the breach, the type of covenant involved, and the relief that the non-breaching party seeks. Therefore, it is important to consult with a solicitor in order to determine the correct step for your case and keep legal costs at a minimum.

Can a covenant be challenged?

Yes, you can challenge a covenant, but the process can be complex and depends on the type of covenant, the circumstances surrounding it, and the specific legal grounds for the challenge.

You can approach the person or entity benefiting from the covenant (such as a neighbour or developer) and negotiate its removal or modification. If they agree, the covenant can be formally altered or discharged through a legal process.

If negotiation fails, you can apply to the Upper Tribunal (Lands Chamber) to modify or discharge a restrictive covenant. This application can be made on several grounds, such as:

• Obsolescence: The covenant is outdated or irrelevant due to significant changes in the character of the land or the neighbourhood.
• Lack of Benefit: The covenant no longer provides any practical benefit to the person entitled to enforce it.
• Agreement: The parties benefiting from the covenant have agreed to its discharge.

How can Expert Commercial Law assist?

When dealing with a breach of covenant, it is important to seek expert legal advice and assistance. A litigation team can ensure the right approach is being taken and that applications are being made correctly.

Please note we are not a firm of solicitors. We maintain a panel of trusted and regulated legal experts and litigation solicitors who provide an excellent service. If you contact us in relation to a commercial law case, we will pass your case on to a panel firm in return for a fee from our panel firms. We will never charge you for passing on your case to a panel firm.

Each solicitor is vetted before being allowed onto our panel, and we only select the best in the business. All of our solicitor firms are authorised and regulated by the Solicitors Regulation Authority (SRA).

Our panel solicitors also help with commercial claims, such as breach of contract, winding up proceedings and statutory demands.

Please get in touch with a member of our team today using the form below to speak to a solicitor on our panel.