What You Need To Know About Restrictive Covenants on Commercial Property

Article summary

• A restrictive covenant is a binding obligation attached to land that limits how the owner can use it. On commercial property, these covenants can prevent specific trades, restrict development, or limit the type of business carried on at the premises.
• Restrictive covenants run with the land and can bind successive owners, not just the original parties to the agreement. Discovering one after purchase is not a defence against enforcement.
• Section 84 of the Law of Property Act 1925 gives the Upper Tribunal (Lands Chamber) power to modify or discharge a restrictive covenant on specific grounds, including obsolescence and lack of practical benefit to those entitled to enforce it.
• The most cost-effective first step is usually to approach the person or entity with the benefit of the covenant directly and negotiate a release, potentially with a payment of compensation.
• Covenants imposed by a company that has since been dissolved may be unenforceable, but this requires careful legal analysis rather than assumption.

When land is sold or leased, the seller or landlord can impose conditions on how the buyer or tenant can use it – this is a ‘restrictive covenant’. A restrictive covenant might prevent the land from being used for anything other than a specific purpose, prohibit certain trades, restrict building work, or limit the number of units on a site. Once registered against the title, the covenant runs with the land. That means it binds whoever owns or occupies the property later, not just the person who originally agreed to it.

For a business buying commercial premises, a covenant that was perfectly manageable for the previous owner may be a direct obstacle to the intended use. A unit previously used as a storage facility may carry a covenant prohibiting retail. A building earmarked for conversion may be subject to restrictions on alterations. The starting point is always to take proper legal advice on what the covenant says, who holds its benefit, and whether it is actually enforceable. Cocks Lloyd’s commercial property team regularly advises buyers and tenants on covenants identified during the purchase or letting process.

When a covenant might not be enforceable

Not every covenant on a title register can actually be enforced. For a restrictive covenant to bind a successor in title, the original parties must have intended it to run with the land, and there must be a dominant tenement, meaning land that benefits from the restriction. Where those conditions are not met, the covenant may be unenforceable even if it appears on the register.

A covenant imposed by a company that has since been dissolved is another situation worth examining. If the covenantee no longer exists and the benefit has not passed to any identifiable successor, the practical ability to enforce the covenant may have gone with it. This is not a conclusion to reach without advice, since the position can be more complicated where the benefit has passed to a group of neighbouring owners or was annexed to a development scheme. Indemnity insurance is often a practical solution where the enforceability is genuinely doubtful but not certain.

Applying to modify or discharge a covenant

Where a covenant is enforceable but problematic, section 84 of the Law of Property Act 1925 provides the statutory route to modify or discharge it. The application is made to the Upper Tribunal (Lands Chamber), and the Tribunal can grant it on one of four grounds: the covenant is obsolete due to changes in the character of the property or neighbourhood; it impedes a reasonable use of the land and provides no practical benefit of substantial value to those with its benefit; those entitled to the benefit have agreed to the discharge; or the proposed discharge will not injure those persons at all.

Under section 84, one of the grounds for asking the Tribunal to remove a restrictive covenant is that the covenant is getting in the way of a sensible use of the land without actually giving any real benefit to the person who holds it. This is the ground most commonly used in commercial property disputes. Even if you can prove that the ground applies, the Tribunal does not have to remove the covenant. It has a choice, and it can decide to award money to the person who loses the protection of the covenant as a condition of removing it. The application process itself can take a long time and usually requires a surveyor to produce evidence about the impact of the covenant and what it is worth.

All of which is why, if you can identify the person who benefits from the covenant and have a conversation with them, it is nearly always faster and cheaper to agree a release directly, often with a one-off payment, than to go to the Tribunal.

The practical approach for buyers and developers

Before completing a purchase, any restrictive covenant that conflicts with the intended use should be dealt with, not left to be addressed later. Options include seeking an express release from the covenantee, obtaining restrictive covenant indemnity insurance, or making a section 84 application before the purchase completes. Each carries different costs, timescales, and risk implications. Cocks Lloyd’s commercial property acquisition and disposal team can advise on the right approach for each situation, including whether insurance is appropriate or whether a formal application to the Tribunal is the stronger option.

Frequently asked questions

Can I just ignore a restrictive covenant on commercial property?

No, contravening a registered restrictive covenant can result in an injunction requiring you to undo the offending works or cease the prohibited use, as well as an award of damages. Ignorance of the covenant is not a defence. The position needs to be understood before you commit to a purchase or start development, not after.

What does ‘the covenant runs with the land’ mean?

It means the obligation does not just bind the original party who agreed to it. It passes to subsequent owners of the burdened land. So if a business purchases a property and the covenant was created decades ago between two previous owners, it may still bind the new buyer, provided the legal requirements for the covenant to run have been satisfied.

How do I find out who can enforce a restrictive covenant?

Your solicitor will investigate the title and trace the benefit of the covenant. In some cases, it will be held by an identifiable neighbour. In others, it may have been annexed to a wider estate and held by multiple owners. Where the original covenantee was a company that has since been dissolved, the question of who now holds the benefit requires careful investigation.

Is a section 84 application the right first step?

Usually not. The Upper Tribunal (Lands Chamber) route is available, but it is often the most expensive and time-consuming option. Direct negotiation with the covenantee, with a view to agreeing a release for a reasonable consideration, is typically the starting point. A section 84 application becomes more appropriate where the covenantee is uncooperative, the covenant is genuinely obsolete, or the only realistic alternative is to abandon the development or change of use.

This article is provided for general information only and does not constitute legal advice. It reflects the law of England and Wales as at 23rd April 2026. Specific legal advice should be obtained before acting on anything contained here. Cocks Lloyd Solicitors is authorised and regulated by the Solicitors Regulation Authority.