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Last edited 18 Feb 2020
A covenant is a formal agreement (or undertaking) between two or more parties to do something or to refrain from doing something. The covenantor makes a undertaking to the covenantee to do something or to refrain from doing something. Covenants are binding on the party giving the covenant (the covenantor). Covenants are similar to contract conditions, but the burden they impose may remain enforceable by parties who were not a party to the original arrangement.
For example, a restrictive covenant is a formal agreement between two or more parties that restricts the rights or actions of one or more of the parties. Restrictive covenants may be imposed by a seller of a piece of land, preventing the buyer from using it in a way that could cause harm to land the seller has retained. For example, a restrictive covenants might:
- Prevent buildings or structures being erected on the land.
- Prevent use of the land for business activity.
- Prevent residential development on the land.
Leasehold covenants are the undertakings made in contracts concerning the leasing of property. Leasehold covenants are sometimes referred to as ‘positive covenants’ because they oblige the parties to do something, as opposed to a restrictive covenant which is an obligation not to do something.
An alienation covenant deals with the transfer of property from one party to another. It is a covenant in a lease which determines whether a tenant can ‘alienate’ the land. This refers to the tenant’s ability to do the following:
- Assigning the lease to another party.
- Underletting or sub-letting the property.
- Sharing occupation of the property.
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