Deeds of Covenant Made Simple: What You Need to Know
What is a Deed of Covenant?
A Deed of Covenant is a legally binding document in which one party formally agrees to comply with certain obligations owed to another party. It is commonly required when ownership of a property or an interest in a property changes hands.
The requirement to enter into a Deed of Covenant is usually set out in an existing legal document, such as a lease of transfer deed. For example, when a leasehold property is sold, the incoming tenant may be required to enter into a Deed of Covenant in favour of the landlord or management company, confirming that they will observe and perform the tenant obligations contained in the lease.
The purpose of the Deed of Covenant is to give reassurance to the party benefiting from those obligations that the incoming owner or occupier will be legally bound by them. The party giving the promise is known as a Covenantor and the party receiving the benefit of the promise is known as the Covenantee.
Deeds of Covenant are commonly required when a property is sold, assigned, transferred or sublet.
Who drafts a Deed of Covenant?
A Deed of Covenant is ordinarily drafted by a solicitor or licensed conveyancer as part of the conveyancing process.
There are standard Land Registry forms available, however completing them correctly requires legal knowledge and attention to detail. Professional advice is particularly important as, by entering into a Deed of Covenant, the Covenantor is taking on legal obligations which may have a significant financial or practical consequence.
What do Deeds of Covenants cost?
There is no fixed cost for a Deed of Covenant. The cost depends on the complexity of the covenants given and whether the main document contains a standard form of Deed of Covenant to be entered into. Transfer Deeds and Leases often contain exemplar forms of Deeds of Covenants which should be used and the originating document will explain when this is required to be used (usually after a disposal of the land or property to which the promise relates to).
Who pays for the Deed of Covenant?
In most cases, the incoming owner or tenant or assignee is responsible for the costs associated with the Deed of Covenant, though not always.
Where a landlord, management company or other third party is required to approve or enter into the deed, they will often require their legal fees to be paid before they agree to do so. The incoming party will generally also be responsible for their own fees.
This requirement is often linked to a restriction registered against the property’s title at HM Land Registry (see below).
Does a Deed of Covenant need to be Registered?
A Deed of Covenant itself does not usually need to be registered at HM Land Registry. However, the lease, transfer deed or other document requiring the Deed of Covenant will often contain provisions requiring a restriction to be entered on the title register of the property. The restriction is designed to ensure that any transfer or other disposition cannot be registered unless the relevant covenant provisions have been complied with.
When an application is made to HM Land Registry following a transfer or other disposition, it is often necessary to provide a certificate confirming that the requirement to enter into a Deed of Covenant has been complied with, or that the requirement does not apply in the circumstances. In most cases, a copy of the Deed of Covenant itself does not need to be lodged with the Land Registry.
If you would like help with preparing or entering into a Deed of Covenant or complying with restriction requirements, please do reach out to our Real Estate Team who would be happy to assist.
This article is for information only and does not constitute legal advice. We recommend seeking professional advice before taking any action on the information provided. If you would like to discuss your specific circumstances, please feel free to contact us on 0118 951 6200.
