In simple words a covenant is a formal and obligatory agreement in black and white. More elaborately, a covenant is an accord between two or multiple individuals or groups that develops a legally recognized responsibility by which each party promises to the other that is something existing or will be accomplished. Covenants may be of two types - positive or negative. When they are positive they lay down the execution of several actions, but when they are negative, they prohibit the execution or performance of specific actions.

For instance, covenants signed for securing or granting a mortgage enclose covenants that have an effect on both the lender as well as the borrower. In effect, a mortgage agreement includes a covenant whereby the mortgagor or borrower is personally obliged to pay the requisite taxes for the property against which he or she is securing a credit and also maintain it.

Covenant, (implied or oblique)

It needs to be mentioned here that even if a covenant is not directly mentioned in black and white or declared, it still does lead to an affirmative or negative commitment.

It is possible than mortgage agreements listed with any land record office can entail oblique pledges on the part of the borrower. For instance, in Ontario, if the mortgage agreement does not mention a series of typical charge stipulations, three disguised legal contracts automatically become a part of the document. In this case, the primary disguised covenant is mentioned as the typical covenants like making payments for the loan secured against the real estate security, make tax payments, arrange insurance coverage for the secured building, and offering settled down possession of the property when the mortgagor is not in defaulting. The second indirect covenant states that the mortgagor agrees that the land possessed in fee simple is owned with good title. The third implied covenant is related to the leased property where the lender pledges that the lease is a legitimate one and current. In this case, the mortgagor also concedes to make payments by him or her for the non-imbursement or non-implementation of the other agreement covered by the lease contract.

The Real Property Act in Manitoba affirms that but for any direct mention in the lease contract, the person to whom a part of land covenant is being transferred will be required to reimburse the principal amount as well as the interest fees due under a mortgage that is listed and henceforth will be obliged to act according to all other pledges, stipulations or clauses in the original mortgage agreement. In simple terms this means that when an individual or group purchases a real estate and it is passed on to them, it will be taken for granted that the buyer agrees to abide by all the contracts and pledges included in any mortgage listed earlier in such a manner as if he or she had themselves implemented the original mortgage agreement. In brief, while transferring the mortgage to a new buyer, it is essential that all liabilities associated with the secured property are also passed on to the new buyer.

Apart from mortgages and leaseholds, indirect covenant may be applicable even in the case of a deed. And like in the case of mortgages, the covenants are determined by the law and are not incorporated in the recorded document.

Restrictive covenant

A restricted covenant may be described as a constraint imposed on the use of a real estate property as is specified in the deed or ownership of that specific asset. In other words, a restrictive covenant is an arrangement between two property proprietors whereby the landlord acquiring the promise in the agreement (known as the covenantee) also obtains the privilege to hold back the landlord making the covenant (known as the covenanter) from making use of the property/ land for any specific purpose. In fact, restrictive covenants between two property owners club together with the property and are capable of engaging an assortment of preventive measures concerning a real estate property.

Usually the restrictive covenants possess some definite features and few of them are mentioned below.

  • There ought to be a dominant tenement (a land that benefits from an easement or access on another property) and servient tenement (a land which suffers or has the burden of an easement) in a restrictive covenant.
  • The nature of the agreement or contract ought to be adverse and indicate a problem or encumbrance on the property of the covenanter. Barring a special decree, a helpful or positive agreement/ covenant cannot be enforced on the covenanter's property or land.
  • The agreement or covenant should openly promote or augment the worth/ price of the property/ land belonging to the covenantee.
  • It is essential to evidently delineate the land/ property belonging to the covenantee as well as the covenanter. In addition, the contract between the two land owners should specify that a covenant is being enforced and unless it is granted otherwise by a decree, the deeds of the benefited as well as the burdened real estate properties should be listed.
  • The disposition of the covenant ought to be logical and not irrational or against the advantage or interest of the community.

Traditionally, the use of restrictive covenants was widespread in suburban areas and they intended to control the uses of land only for purposes that were permissible. Characteristically, restrictive covenants banned the use of land in residential areas for any other purpose, restricted the constructions on the lands to just dwellings for a single family, and ensured that the home owners maintained a least frontage area stipulated by the laws while constructing their houses and so on.

It is advisable that it would be an intelligent move on the part of a discreet person who desires to purchase land to put it to specific use should to undertake some elementary survey of the deeds of the properties in the locality of his or her preference and also make zoning probe prior to carrying out their purchase offer. Such investigations are essential keeping in view the fact that if the limitations are conformed during the purchase of the land, it cannot be brought into play as a protest to the buyer's entitlement until and unless special and suitable riders or stipulations are incorporated into the contract to defend the buyer's interests. It is important to mention here that the precise phrasings in the printed agreement forms related to restrictive covenants available with the provincial regulatory authorities are likely to be different in different regions.

More often than not, restrictive covenants are a result of specific assurances incorporated in the endowment of the real estate property to the purchaser who had earlier consented to accept the deed conditional on such agreements. One will usually find restrictive covenants in the sub-divisions where all the land owners are compelled to comply with several prerequisites. Such restrictive covenants functioned as the precursor of the statutes or by-laws set up by the municipalities. All real estate practitioners, including brokerage firms and sales persons, are supposed to be conscious of all the limitations that have an effect on any sub-division where they are selling residential properties in order to be equipped to offer correct facts to the prospective real estate purchasers.

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