When buying a property in the UK, you may come across something called a deed of covenant. Understanding what it is and how it impacts you is essential for a smooth conveyancing process.

In this article, we'll explain what a deed of covenant is, why it's important, and how it could affect you as a homeowner.

What Is a Deed of Covenant?

A deed of covenant is a legal agreement between a homeowner and another party, often a freeholder or a management company, which outlines specific obligations that the homeowner must follow. These obligations typically relate to the property's upkeep, payment of service charges, or adhering to certain rules and regulations.

The deed of covenant is a separate legal document and is often required in leasehold properties or properties with shared ownership arrangements.

Why Is a Deed of Covenant Important?

A deed of covenant is important because it outlines the ongoing responsibilities you, as the property owner, will have after purchasing the property. By signing this deed, you are legally agreeing to comply with certain conditions, which could include:

  • Paying service charges for the maintenance of communal areas.
  • Contributing to the upkeep of shared facilities, such as gardens or parking.
  • Adhering to specific restrictions on property use, such as limitations on subletting or making alterations to the building.

Failure to comply with the deed of covenant could result in legal consequences or disputes with the freeholder or management company.

When Is a Deed of Covenant Required?

A deed of covenant is typically required in leasehold properties. In the UK, leasehold properties mean you own the property but not the land it's built on, which belongs to the freeholder. A deed of covenant helps protect the freeholder's interests and ensures that you, as the leaseholder, fulfil your responsibilities.

If you're purchasing a leasehold flat or a house in a shared ownership scheme, you'll likely need to sign a deed of covenant as part of the conveyancing process.

How Does a Deed of Covenant Affect Me?

Signing a deed of covenant can have several effects on you as a property owner. Here are the key areas where it can impact you:

  1. Financial Obligations
    You may be required to pay annual service charges or other fees to cover the maintenance of shared spaces. This financial responsibility will be legally binding, so it's important to understand how much these costs will be before you sign the deed.
  2. Property Restrictions
    A deed of covenant may place certain restrictions on what you can do with your property. For example, it could limit your ability to make structural changes or rent out the property. Make sure you're clear on these restrictions to avoid any issues later.
  3. Future Sales
    When selling the property, future buyers will also need to agree to the terms of the deed of covenant. If they don't, it could delay or complicate the sale. It's essential to keep the deed of covenant in mind if you plan to sell in the future.

Who Pays for the Deed of Covenant?

The cost of preparing and registering a deed of covenant is usually borne by the buyer. The freeholder or management company may charge an administrative fee for processing the deed. You'll also need a solicitor to ensure the deed is legally sound and meets all the necessary requirements.

Do I Need a Solicitor for a Deed of Covenant?

Yes, having a solicitor is highly recommended when dealing with a deed of covenant. They will review the document to ensure you fully understand the obligations and can negotiate terms on your behalf if necessary. Your solicitor will also handle the registration of the deed with the Land Registry, ensuring everything is legally compliant.

Conclusion

A deed of covenant is an essential legal document, particularly for leasehold properties, that outlines the obligations and restrictions on the property. As a homeowner, it's crucial to fully understand the terms of the deed to avoid future issues.

By working closely with your solicitor and staying informed, you can ensure the deed of covenant works in your favour and doesn't cause any unexpected complications down the line.