Land covenants under section 116 Land Transfer Act 2017

Land covenants in gross

The LTA 2017 amended the PLA by permitting land covenants in gross and confirming that they may now be noted on the land transfer register. Previously a land covenant was generally made between the owners of the burdened land (servient tenement) and benefited plan (dominant tenement). A land covenant can now be granted ‘in gross’ i.e. for the benefit of a specific person or legal entity, rather than being attached to benefited land.

Land covenants in gross are prepared using the same covenant instruments as a standard land covenant between benefited and burdened land.

Instrument codes

LCOV, TE, VLC, RLC and PRLC are all image only instruments. You will need:

• • to attach an image of the instrument setting out the conditions of the land covenant etc
  • electronic certifications under section 27 LTA to be completed by the Conveyancing Professional
  • A&I forms from all parties
  • consents from any caveator and statutory land charge holder .

Covenant or covenant variation instruments may be in any form, provided that the prescribed information set out in the Land Transfer Regulations 2018 is included. Approved forms can be found on the Land registration forms page.

The Landonline instruments Covenant (COV) and Revocation of a Covenant (RCOV) should not be used for land covenants. Other types of covenants (e.g. open space) should be created/surrendered using the COV and RCOV instrument codes.

Mutual land covenant schemes

Mutual land covenant schemes that restrict or control land use or building styles are a common feature of modern multi-lot subdivisions. These schemes can be complex and give rise to requisitions or queries in the registration process. Some suggestions for streamlining and simplifying the conveyancing associated with these arrangements are set out below.

Creation of land covenants by individual transfer

The most commonly used method of securing mutual covenants was to use a series of standard form transfers, in which:

• each purchaser covenants with the vendor/developer’s covenants, for the benefit of all the other lots in the development;
• the developer covenants with each purchaser to impose similar covenants on every other lot; and
• each lot then becomes both the burdened and benefited land for the covenants in relation to all the other lots in the scheme.

The incremental nature of the process has some disadvantages, such as:

• the documentation for each transfer must repeat all the details of the covenant arrangement;
• the scheme won’t be fully implemented until all the allotments in the subdivision have been disposed of;
• there is greater potential for practitioners to accidentally omit covenants
• the transfer must be executed by both the transferor and the transferee
• the conveyancing costs associated with each disposition can be more than those incurred on a simple transfer.

Creation of covenants prior to disposition - 'developer to developer'

A simpler approach is to put the land covenant arrangement in place prior to the disposition of the affected allotments. Both the PLA and the LTA allow this.

This means a developer can impose covenants on a subdivision, by transfer or covenant instrument, before each lot is separately disposed of. If this is done at the time the subdivision plan is deposited, the land covenants will be included in the new titles and will bind any future land purchaser from that point on (section 307 PLA).

Section 116 LTA allows land covenants to be created using covenant instruments, even though the covenantor and covenantee may be the registered owner of both the benefited and burdened land, or the covenant is to be granted in gross for the benefit of another person (rather than land).

A 'developer to developer' transfer containing land covenants must be executed by the subdividing landowner in the capacities both of transferor and transferee.

A 'developer to developer' covenant instrument creating land covenants must be executed by the subdividing landowner in the capacities of both registered owner of the dominant and of the servient tenements.

See also Land covenants over land that is vesting in a subdivision for more information.

Varying and revoking a land covenant

A covenant variation instrument is used to vary a covenant. A covenant instrument is used to partially or fully revoke a covenant.

Instruments revoking a covenant (RLC or PRLC) or varying a covenant (VLC) must be executed by the registered owners of the:

• land burdened by the covenant, and
• land with the benefit of the covenant, or the person with the benefit of a covenant in gross.

Any chargeholder or caveator of the benefited land must consent to the variation or revocation.

A covenant or covenant variation instrument may be in any form, provided that it includes the prescribed information set out in the Land Transfer Regulations 2018. Approved forms can be found on the Land registration forms page.

The High Court also has jurisdiction to modify or extinguish land covenants under section 317 PLA. A court order modifying or extinguishing a land covenant is lodged using instrument CO.