Restrictive Covenants FAQs (Frequently Asked Questions)

What is a restrictive covenant?

A restrictive covenant is a contract that runs with the land, that is negative in nature. More particularly, a restrictive covenant is an agreement creating an obligation which is negative or restrictive, forbidding the commission of some act. In its most common form it is a contract between neighbouring land owners by which the covenantee determined to maintain the value of a parcel of land or to preserve its enjoyment, acquires a right to restrain the other party, namely the covenantor, from using the land in a certain way: Fitt v Luxury Developments Pty Ltd (2000) VSC 258. The land subject to a restrictive covenant is known as the burdened land and the land with the corresponding ability to enforce the covenant is known as the benefited land.

How do I know if land is burdened by a restrictive covenant

If a restrictive covenant burdens or runs with a parcel of land, it should be noted under the heading “Encumbrances, Caveats and Notices” on a certificate of title available from Landata. You can then search Landata again for the relevant covenant that is often contained within a Transfer of Land, or ask a title searching firm to do this for you. One such title searching firm is Feigl & Newell on (03) 9620 7022.

How do I know if land has the benefit of a restrictive covenant?

Typically, the extent of beneficiaries can be discerned from a careful reading of the words of the covenant itself, but this may require further title searches and a careful examination of the Parent Title. Some covenants purport to convey the benefit of a covenant to all land in a subdivision, which may not be legally effective, see Re Mack and the Conveyancing Act [1975] NSWLR 623. Before you become a party to proceedings concerning the modification or enforcement of a covenant, seek advice from a lawyer with experience in this area. Many people assume that because their land is located within an estate burdened by a network of similar covenants, they are necessarily a beneficiary to other comparable covenants, which may not be the case. See too, the section on Building Schemes, below.

How do I vary or modify a restrictive covenant?

There are several ways in which restrictive covenants can be varied or modified, but the two most common means are via a planning permit application to the local council or by application to the Supreme Court.

There is an initial appeal to applying for a permit to modify a covenant via the planning permit or Planning and Environment Act 1987 process, because it is seen to be cheaper and easier, but this appeal diminishes when one understands that all beneficiaries need to be notified (unless a pre-existing breach is being regularised) and for covenants created before 25 June 1991, only one genuine objection from a beneficiary is sufficient to bring the process to an abrupt halt.

For this reason, applications that might be seen as even slightly controversial, such as increasing the number of dwellings on a lot, routinely go straight to the Supreme Court. Most applications to the Supreme Court are successful as they proceed through the process without sustained objection, but the challenge here is to pitch your application at something a judge will be comfortable with, for the Courts have traditionally acted with caution when it comes to modifying restrictive covenants.

For more information about the various options for modifying or removing a restrictive covenant in Victoria see here.

How do I modify a covenant through the Supreme Court?

To modify a covenant through the Property Law Act 1958, or Supreme Court, process, an applicant will typically need a planning report prepared by a planner with experience in this area of law and an Originating Motion drafted by a solicitor. There are numerous other procedural requirements that invariably require the involvement of an experienced and competent lawyer.

Once the application is lodged with the Court, a hearing is convened at which directions for advertising is given by an Associate Judge. Typically the notification process will take eight to ten weeks before a further hearing is convened at which objections may be considered by the Court.

If no objectors appear to be heard, which is routinely the case, the Court will consider granting the relief sought, but a judge may still want to be convinced about the appropriateness of the application. If it is positively received, relief may be granted at that time. However, if the matter is contested, directions may be given for the exchange of evidence and submissions and the hearing may be listed some six months or so later for determination.

A detailed description of the process of modifying or removing a restrictive covenant in the Supreme Court is set out here along with a comprehensive collection of precedents.

How do I object to an application to vary a restrictive covenant?

An objection to vary a restrictive covenant does not need to take any particular form. However, it is useful to understand what the Court deems to be a relevant or persuasive reason to object against what is typically seen as being irrelevant or difficult to establish. A useful indication was given by Justice Cavanough in Prowse v Johnston who gave weight to objections that complained of loss of character, loss of privacy, the bulk of the proposed building, additional noise, traffic, parking and access issues and most importantly, that of precedent, that is, is this proposal the thin edge of the wedge?

An article setting out the process of objecting to a restrictive covenant in Victoria is set out here.

The Supreme Court published a guide for objectors in December 2017.

What is a building scheme?

Where a building scheme, or scheme of development is established, all purchasers and their assigns are bound by, and entitled to the benefit of, the restrictive covenant. However, notwithstanding the frequency with which they are discussed, in Victoria, they are something of a unicorn–often talked about, but never actually seen. The real difficulty in attempting to uphold a building scheme in this state is establishing that a purchaser of land was or should have been aware that a building scheme was in place prior to purchase and therefore ought to be bound by its terms. An authority that helpfully sets the relevant principles is Vrakas v Mills [2006] VSC 463.

How to interpret a restrictive covenant

An article setting out some principles for the construction or interpretation of a restrictive covenant in Victoria is set out here.

Should I buy land subject to a restrictive covenant?

If the land is of no use to you unless the covenant is modified, it is probably unwise to buy it. The process of modifying a covenant is often too uncertain, too time consuming and too expensive to justify taking the risk. Covenants can cost as little as a few thousand dollars to modify if things go well. On the other hand, parties have spent close to half a million dollars to modify covenants without success. Equally, some modifications may be completed within weeks. Others may take years. Most applications to modify covenants receive little or no sustained opposition, others ignite well orchestrated and well resourced community campaigns. Any estimate as to prospects is just a well informed guess. If you’re not dissuaded, get a beneficiary report from Feigl and Newell and then find a lawyer with experience in the modification of restrictive covenants to give you an estimate of the likely opposition to change. You may be lucky and find there only a few beneficiaries who live some distance away.

How can I find a restrictive covenant lawyer?

The modification or removal of restrictive covenants is a specialised area of law and regularly done by only a handful of lawyers in Victoria. An article setting out a reliable means of finding a lawyer with experience in the jurisdiction is set out here.

Costs in an application to modify a restrictive covenant

An article summarising the principles in relation to orders of costs in s84/Supreme Court proceedings is set out here.

Representing yourself in an application to modify a restrictive covenant

Judges make every effort to accommodate self-represented litigants. The Supreme Court even has a self-represented litigant coordinator who may be able to provide you with some guidance.

Traditionally, the practice has been to set the matter down for a contested hearing in the normal manner, with the exchange of evidence and submissions. This can involve much time and a large amount of preparation. But more recently, the Supreme Court has facilitated self-represented litigants in covenant cases, by giving people an opportunity to present a short submission at the second return of the application, that is, immediately after advertising. In this way, litigants in person can put a short summary of their views to the judge, without becoming a party to the proceedings; without the need to prepare evidence or cross examine witnesses; and without the potential costs consequences of running a contested case to its conclusion. It must be remembered though, that this will occur in the course of a busy Court list and the judge’s capacity or preparedness to entertain detailed submissions will be limited. The Plaintiff also may elect to not press its case at this second return, and may ask the Court to set the case down on a future occasion, at which time the application can be heard and determined in a more considered manner.

Further, although there are cases in which the court has refused applications to modify covenants, even where there are no parties in opposition such as in Re: Jensen and in Re: Morihovitis, in practice, it is probably fair to say that a defendant has far lower prospects of success if they are not represented, and the plaintiff’s case is not thoroughly tested.

As mentioned above, the matters you wish to put before the Court are set out here.

Mediation and applications to modify restrictive covenants

An article explaining the role and utility of mediating covenant disputes in the Supreme Court is set out here.

How do I deal with a restrictive covenant that gives a discretion to a deregistered company?

An article setting out the process for dealing with a restrictive covenant that confers a discretion on a deregistered company is set out here.

Matthew Townsend
townsend@vicbar.com.au
(04) 1122 0277

An overview of the process for modifying a restrictive covenant under the Property Law Act 1958 with precedents

Originating motion in support of an application to modify or remove a restrictive covenant

If you are yet to decide which process to follow to modify or remove a restrictive covenant, you should read this article first. If you have already elected to pursue the Property Law Act 1958 or Supreme Court process, then the following discussion is an overview, along with some precedents you may wish to use. These are updated regularly.

To begin, when applying to remove or modify a covenant in the Supreme Court, an Originating Motion will need to be prepared, setting out the relief sought. Most applications will only need a simple Originating Motion such as this, this, this or this. More complex examples that incorporate applications for declarations can be found here, herehere and here.

In determining how to phrase the modification sought, you should seek the minimum change necessary to achieve your objectives. That is, if you are after a dual occupancy, seek to replace ‘one dwelling’ with ‘two dwellings’ or draft a variation to allow a particular form of development. Although a practice has been to vary covenants with the addition of the following words “… but this covenant will not prohibit the construction of any development generally in accordance with the development described in the plans prepared by ABC Architects dated 1 July 2016 numbered A00 to A30”, this technique known as the ‘proviso’ has recently fallen out of favour with the Court because it means attaching plans to an instrument of transfer that may sit in the Office of Titles for decades to come. For this reason, orders that incorporate a simple building envelope are preferred. The broader point, however, is that if you ask for removal of the covenant and you don’t actually need it, you may attract unwarranted opposition. Moreover, the Court is increasingly unwilling to allow the complete removal of anything but obsolete covenants.

No summons is required at this time given that the first hearing will ordinarily be ex parte.

While the schedules of parties may have been removed from the attached examples, such a schedule is ordinarily not added until after the first return of the application, for the identity of the Defendants is not likely to be known until that time.

Overarching Obligations Certification and Proper Basis Certification should also be provided.

The Court will also want an application form completed.

A helpful Guide for Practitioners has also been prepared by the Supreme Court. This provides a checklist for applications and some draft precedents. This version was updated by the Court in December 2016, but to be prudent, download the latest version from the Supreme Court website. As at March 2018, it is understood that a review is presently underway.

Affidavit in support of and in opposition to an application to remove a single dwelling covenant

Current practice is to include an affidavit from the Plaintiff setting out the intended use and development for the property. If the land is to be sold, that should be disclosed and the Court given a realistic understanding as to how the land might be used or developed. An example of a Plaintiff’s affidavit can be found here. Traditionally, solicitors would give this information to the Court on instructions, but the emerging best practice is to hear from the applicant directly.

The Court will also want to know whether there has been previous applications to modify or remove a restrictive covenant on the land.

If the land is under contract, full details of that should be out too. Indeed, there is an argument to suggest that the application should be made under the name of the owner, even if the land is under contract.

The objective is to provide the Court with reliable information about the covenant; its purpose; the identification of land with the benefit of the covenant; and any relevant circumstances surrounding the application. Ensure you have an up-to-date certificate of title for the land and that the application is made on behalf of that party or those parties.

If relying on a map showing the location of beneficiaries, ensure the map is clear and legible and accurately reflects the location of beneficiaries.

The quickest and most cost-effective means of establishing who has the benefit and the burden of the relevant covenant is to call a professional title searching service such as Feigl and Newell on (03) 9629 3011. Dinah Newell should be able to provide you with a colour-coded cadastral plan such as this. However, you should double-check any advice you receive to identify transcription or other errors. Mistakes made at this point of the process can be expensive to fix later on.

Evidence in support and in opposition to the modification of a covenant

Once you have the above information, you can provide it to a town planner for the preparation of a planning report. Two further examples can be found here and here. This version was in support of an application to modify a covenant restricting the height of a dwelling and was praised by the Court for its clarity.

A letter instructing a town planner in a s84 application can be found here. If you want the names of planners to prepare evidence in support of (or against) an application to modify or remove a covenant, find someone who has given evidence in a contested s84 application. You can look through Supreme Court cases in relation to restrictive covenants here. Unfortunately, all too often, planners approach the task as if it were a common or garden planning application in VCAT relying on principles of public policy rather than analysing impacts on proprietary rights. This evidence will almost certainly be useless. Just as importantly, a ‘cheap’ planning report may end up becoming expensive once it becomes clear how much additional work it will create for the lawyers to fix it up. Applicants are reminded that the Supreme Court is not the Victorian Civil and Administrative Tribunal where the tribunal member can patch up evidentiary gaps with their own knowledge and experience. In the Court, judges are confined to the evidence and if your planner does not adequately address the merits of the application in his or her written evidence, at trial, any significant omissions can be fatal.

A planning report should include photographs of the neighbourhood so the Court can gain a clear understanding of the context in which the application is being made.

It should also identify land within the parent title that has been varied since the time of the original subdivision, whether this is by order of the Court, planning permission or simply a breach that has gone unchallenged. Evidence demonstrating how that change has occurred, should be annexed to the planning report when available. Often this will be the pivotal evidence in the hearing and it must be done with precision.

Applicants are sometimes keen to lodge the application without planning evidence to save costs or time, but this risks the application being dismissed for being improperly supported. Any planning evidence should be before the Court at or before the first return of the application.

In some cases, lay evidence may be sufficient, at least in opposition to a modification or removal application. For instance, in Gardencity v Grech, the defendants were successful despite the absence of any expert evidence, for the Court found the plaintiff had failed to prove the absence of substantial injury. Evidence from the defendants in that case can be found here, here and here. An example of an expert report in support of an application to oppose a modification can be found here.

For a separate discussion about what to include in an objection, look here.

The first return of the application

At the first hearing of an application, which is usually done ex parte, the Court is likely to make further orders, similar to the following for a sign to be placed on the land and for direct notice to be given to the closest beneficiaries. This raises a tactical question for applicants for it may be prudent to suggest to the Court that all beneficiaries be notified directly rather risk attracting the attention of non-beneficiaries via a sign on the land.

On the other hand, the Court has been known to be content with simply a sign on the land and no direct notification if there are no nearby beneficiaries.

The Court now also directs applicants to notify the beneficiary at the address indicated on title and at the street address, if different.

As always, practitioners should attend the Court with draft orders, preferably forwarded to the Court a few days beforehand. The Court is now directing the attachment of Information for Objectors to the draft orders. An example can be found here.

The normal standards expected of practitioners in ex parte applications apply, and you should disclose to the Court any necessary countervailing facts even if they are not helpful to your case. For instance, if your client is running a simultaneous application to modify a covenant elsewhere (which isn’t a good idea), the Court will want to know about it.

The second return–if the application is opposed

Once advertising has been carried out, an affidavit should be prepared that describes the process undertaken, the nature of responses received and whether any beneficiaries objected. This is a short example and a more comprehensive example. Leave sufficient time to complete this as it may be time consuming.

A sample letter sent should be included in the affidavit–not a copy of each letter sent.

In answering queries from third parties, including beneficiaries, avoid giving advice about who has the benefit of the covenant. Inquirers need to make their own investigations about their entitlement to participate in the proceedings and the answer is not always clear. Record details of all phone calls and emails as a summary should also be included in the affidavit of compliance.

The Court may then make orders providing for the further provision of evidence and the listing of the matter for hearing. Two examples can be found here and here. The schedule of parties may have been removed.

Increasingly, covenant cases are being set down for mediation.

The second return–if the application is not opposed

If no person seeks to become a Defendant, draft orders should be provided to the Court along with an affidavit to that effect (see examples above). Try to get the papers to the court three or four days in advance of the directions hearing so that the judge has time to read them before the hearing. Two examples can be found here and here.

Significantly, you may find that despite the absence of any defendants, you may still need to make out your argument for modification on the basis of the evidence provided. For instance, in Re Jensen, and Re: Morihovitis the Court refused relief despite the absence of any objectors.

A written outline of argument setting out why the variation or removal of the covenant should be provided to the Court, preferably in advance of the hearing. Two examples can be found here and here.

Submissions in support and in opposition to application to modify a single dwelling covenant

If the matter runs to a contested hearing, you will need to prepare a more comprehensive outline of argument. Submissions in support of a modification application can be found here: from Wong v McConville (opening); Wong (closing) and Re: Milbex. Submissions in opposition to a modification application can be found here from Re Pivotel; Suhr v Michelmore; and Prowse v Johnstone; and Re: Morrison.

To improve your client’s costs position in the litigation, a Calderbank letter or offer of compromise may be appropriate to disturb the defendants’ presumption that their costs will be reimbursed by the Plaintiff at the conclusion of the proceedings, irrespective of the outcome. A Calderbank letter needs to be drafted with precision and according to established principles if it is to be effective. Examples can be provided upon request.

Needless to say, all applications are different and great care should be taken to ensure that the relevant matters are placed before the Court.

Matthew Townsend
Owen Dixon Chambers
https://www.vicbar.com.au/profile/6975
townsend@vicbar.com.au (04) 1122 0277
Liability limited by a scheme approved under Professional Standards Legislation.

Removing or modifying a restrictive covenant in Victoria

This article briefly describes a number of ways to modify or remove a restrictive covenant in Victoria, namely:

–        by planning permit pursuant to clause 52.02 of a planning scheme–mostly useful for a deadwood or non-contentious covenant;[1]

–        the making of orders pursuant to s84 of the Property Law Act 1958 (PLA)–the most common route for potentially contentious applications;

–        by amending the relevant planning scheme–useful where there is considerable support for the proposed change at the municipal or state level;

–        by consent–useful where there is a small number of beneficiaries and/or good relations amongst beneficiaries; and

–        at the direction of the Registrar of Titles–useful where the covenant might be said to be personal or where the benefit of the covenant fails to pass.

For completeness, there has also been at least one instance, where the Court has been prepared to amend a restrictive covenant under s103(1) of the Transfer of Land Act 1958, where the Court concluded there had been a common mistake made by the parties to a transfer of land in the expression of a restrictive covenant.

The planning permit process

For what might be described as “deadwood” covenants, an application may be made for a planning permit to remove or modify a covenant pursuant to clause 52.02 of the relevant planning scheme.

However, the operation of s60(5) of the Planning and Environment Act 1987 (PEA) means that where there is a real prospect of genuine opposition, this avenue is to be avoided. Section 60(5) provides:

The responsible authority must not grant a permit which allows the removal or variation of a restriction … unless it is satisfied that—

(a)          the owner of any land benefited by the restriction … will be unlikely to suffer any detriment of any kind (including any perceived detriment) as a consequence of the removal or variation of the restriction;

As described by DP Gibson of the Victorian Civil and Administrative Tribunal (VCAT) in Hill v Campaspe SC [2011] VCAT 949 this is “a high barrier that prevents a large proportion of proposals.” For covenants created on or after 25 June 1991, a less restrictive test applies.[3] Hill v Campaspe was recently applied in Dacre v Yarra Ranges SC [2015] VCAT 1453.

A further disincentive to rely on this provision is the need to notify all, rather than the closest beneficiaries of the application.[4]

Interestingly, however, there is a little-known provision that allows the circumvention of the onerous advertising provisions in the PEA where the breach has been in existence for two years or more. Section 47(2) of the PEA provides:

(2)          Sections 52 and 55 do not apply to an application for a permit to remove a restriction (within the meaning of the Subdivision Act 1988) over land if the land has been used or developed for more than 2 years before the date of the application in a manner which would have been lawful under this Act but for the existence of the restriction.

Section 52 of the Act deals with advertising of applications for permits to potentially affected third parties and section 55 deals with referral to bodies such as DELWP, Telstra, VicRoads and so on.

In Hill v Campaspe SC [2004] VCAT 1399, the Tribunal explained:

26           My conclusion is that if part of a covenant is breached, and the breach continues for 2 years without any action on the part of those having the  benefit of the covenant, it is reasonable that no notice should be given of  an application to vary by removal part of the covenant of which there is a breach.  But this exemption from notice pursuant to section 47(2) of the Act should not extend to the removal of any aspect of a covenant of which there is no breach.

Although the proper interpretation of this provision is not free from doubt, this decision suggests that if a use or development has been in breach of a covenant for more than two years, a permit can be granted to remove or modify the covenant to regularise the use or development. If you rely on this provision, the relevant responsible authority under the Act should issue the permit to remove or amend the covenant without notifying other beneficiaries. However, as DP Gibson cautions, the power is limited, so any application should be judiciously drafted.

Section 84 of the Property Law Act 1958

Where some degree of opposition is expected from one or more beneficiaries, an application may be made to remove or modify the covenant pursuant to s84(1) of the PLA.

S84(1) is currently structured as a series of threshold tests to be satisfied before the court’s discretion to exercise the power is enlivened. The two most commonly relied upon are ss84(1)(a) and (c):

(1)          The Court shall have power … to discharge or modify any such restriction (subject or not to the payment by the applicant of compensation to any person suffering loss in consequence of the order) upon being satisfied:

(a)          that by reason of changes in the character of the property or the neighbourhood or other circumstances of the case which the Court deems material the restriction ought to be deemed obsolete or that the continued existence thereof would impede the reasonable user of the land without securing practical benefits to other persons or (as the case may be) would unless modified so impede such user; or …

(c)           that the proposed discharge or modification will not substantially injure the persons entitled to the benefit of the restriction…

An application under s84(1) usually involves the filing of an Originating Motion and Summons for Relief with the Supreme Court. This application should be accompanied by planning or other evidence in support of the application for modification or removal.

This is returnable before an Associate Judge who may inquire as to the nature and location of beneficiaries before determining the extent of advertising—often a combination of letters to the closest beneficiaries and the posting of a sign on the land.

Orders may then be made for the return of the summons at a future directions hearing at which objectors may attend.[5]

A surprising number of applications attract no objections. Upon being satisfied that this is the case, the Court may grant the application.

Alternatively, objections may be received and/or objectors may attend court on the return.

If a mutually acceptable agreement on the application cannot be reached with the objectors, orders may be made for the exchange of further evidence before the matter is listed for mediation and/or final hearing.

Historically, the courts have taken a conservative approach to applications for the removal or modification of restrictive covenants. In the often cited words of Farwell J in Re Henderson’s Conveyance:

… I do not view this section of the Act as designed to enable a person to expropriate the private rights of another purely for his own profit. I am not suggesting that there may not be cases where it would be right to remove or modify a restriction against the will of the person who has the benefit of that restriction, either with or without compensation, in a case where it seems necessary to do so because it prevents in some way the proper development of the neighbouring property, or for some such reason of that kind; but in my judgment this section of the Act was not designed, at any rate prima facie, to enable one owner to get a benefit by being freed from the restrictions imposed upon his property in favour of a neighbouring owner, merely because, in the view of the person who desires the restriction to go, it would make his property more enjoyable or more convenient for his own private purposes.[6]

However, in recent times, the Court has been more prepared to agree to modification applications based on s84(1)(c) of the Property Law Act 1958. See Wong v McConville & Ors and Maclurkin v Searle.

The practical challenge is to reassure the court about the likely impacts of the proposed development scheme, while allowing sufficient flexibility in the subsequent town planning permit application process.

As Morris J explained in Stanhill:

… the lack of specific plans makes it more difficult for the plaintiff to discharge the onus of showing that a modification of a restriction will not substantially injure persons entitled to the benefit of the restriction.[16]

In view of this judicial need for certainty, or at least reassurance based on the ability to consider the detail of a development proposal, it would be sensible to allow the grant of a planning permit conditional upon the subsequent removal or variation of the subject covenant, but this possibility was ruled out by VCAT in Design 2u v Glen Eira CC[17]. In that case, DP Gibson held:

5             … I find that unless there is a prior or simultaneous grant of a permit or decision to grant a permit to allow the removal of variation of the covenant, a permit cannot be granted by either the responsible authority or the Tribunal if the grant of a permit would authorise anything which would result in a breach of the covenant.  I find that as the grant of a permit in this particular case would result in a breach of the covenant affecting the subject land, the application for review must fail and should therefore be dismissed.

Regrettably, the Victorian Government elected to not remove this obstruction in its Response To The Key Findings Of The Initial Report of the Victorian Planning System Ministerial Advisory Committee.[18]

Applicants now need to substantially reduce the scope of development schemes in anticipation of a worst-case assessment by VCAT or simply articulate building envelopes into which future applications for planning permission may subsequently be contained.

Alternatively, for modest variations to covenants there is some scope to rely on the planning system as a means of ensuring that substantial injury would not result from the variation. This recently occurred in Hermez v Karahan [2012] VSC 443 when Associate Justice Daly held:

4             … in respect of the relevance of town planning principles in determining whether an applicant has established a ground for removal or modification of a restrictive covenant, Cavanough J agreed with the general principle laid down by the authorities that the desirability or otherwise of a proposed development, taking into account such considerations was not part of the Court’s function. However, his Honour was prepared to assume, without finally deciding the matter, that the existence of statutory planning provisions aimed at protecting the amenity of neighbours might be relevant for assessing substantial injury. For the purposes of this application, I am also prepared to assume that planning and building regulations governing building size and height, set backs, and allowable overshadowing and overlooking are relevant to assessing whether modifying the covenant would cause substantial injury.

Significantly, the court in Hermez allowed a variation of the covenant to replace the reference to “one dwelling” with “two dwellings” and didn’t confine the applicant to building two dwellings generally in accordance with a given set of plans.

Notwithstanding these matters, it would be a mistake to frame an application under s84(1)(c) solely on town planning concepts of amenity. For instance, in Fraser v Di Paolo[19] Coghlan J reviewed a number of authorities before observing: “These decisions were made more than 30 years ago but they do give an insight into the importance of the rights which go with a covenant beyond town planning rights.” In other words, substantial injury may occur merely through the diminution of proprietary rights, particularly if the decision may set a precedent.

The importance of costs in s84 applications

Potential applicants should be familiar with the cost implications of Re: Withers[20] that:

… unless the objections taken are frivolous, an objector in a proper case should not have to bear the bitter burden of his own costs when all he has been doing is seeking to maintain the continuance of a privilege which by law is his.

Re Withers was applied by Justice Morris in Stanhill v Jackon[21] who noted:

The principle set out in Re Withers is consistent with other decisions of the Court, such as that by Gillard J in Re Markin[22], Lush J in Re Shelford Church of England Girls’ Grammar School[23] and McGarvie J in Re Ulman.[24] In my opinion, it is a sound principle.

When acting for objectors, this rule may be of corresponding significance.

The combined permit/amendment process

Interestingly, the least-used means of removing or amending a covenant is also that arguably capable of delivering the most ambitious proposals, namely amending the planning scheme to remove or amend a covenant.[25]

In this process, the assessment is made according to ordinary planning principles:[26]

In the Mornington Peninsula C46 Panel Report, Member Ball explained:

First, the Panel should be satisfied that the Amendment would further the objectives of planning in Victoria. …

Second, the Panel should consider the interests of affected parties, including the beneficiaries of the covenant. It may be a wise precaution in some instances to direct the Council to engage a lawyer to ensure that the beneficiaries have been correctly identified and notified.

Third, the Panel should consider whether the removal or variation of the covenant would enable a use or development that complies with the planning scheme.

Finally, the Panel should balance conflicting policy objectives in favour of net community benefit and sustainable development. If the Panel concludes that there will be a net community benefit and sustainable development it should recommend the variation or removal of the covenant.[27]

Here an applicant runs an entirely different risk, for while the planning system might eschew Farwell J’s disdain for profitable property ventures, to succeed, an application will need the support of the local council and the relevant Minister at the time the amendment is both prepared and adopted. In the worst case, the period between these two events may be many months and punctuated by Council elections thus adding a political wildcard into an already unpredictable process.

An example of this process being successfully employed was the recent approval of a Place of Assembly (museum) at 217 And 219 Cotham Road, Kew as part of Amendment C143 to the Boroondara Planning Scheme. The proposal involved the conversion of two dwellings into a contemporary museum with liquor licence and few on-site parking spaces, contrary to a restrictive covenant that prevented the use of the land for anything other than dwellings. Arguably, there would have been no prospect that such an ambitious project would have been approved under s84 of the Property Law Act 1958, but the project received Council backing at both ends of the process and a highly favourable planning panel report.[28]

Removing or modifying a covenant by consent

A restrictive covenant can be removed or modified by consent. Section 88(1AC) of the Transfer of Land Act 1958 provides:

A recording on a folio of a restrictive covenant that was created or authorised in any way other than by—

(a) a plan of subdivision or consolidation; or
(b) a planning scheme or permit under the Planning and Environment Act 1987—
may be deleted or amended by the Registrar if the restrictive covenant is released or varied by—

(d) the agreement of all of the registered proprietors of all land affected by the covenant; …

If the proposed modification or removal is not controversial and/or the number of beneficiaries is not large, this may be the most efficient means of proceeding.

Removing a covenant at the direction of the Registrar of Titles

Finally, a covenant may be removed at the direction of the Registrar of Titles pursuant to s106(1)(c) of the Transfer of Land Act 1958. This provides:

(1)     The Registrar—

(c)     if it is proved to his satisfaction that any encumbrance recorded in the Register has been fully satisfied extinguished or otherwise determined and no longer affects the land, may make a recording to that effect in the Register;

This provision can be used for covenants that do not define the land to which the benefit is affixed or where the benefit of the covenant might be said to have not passed to subsequent successors or transferees. Covenants of this nature were discussed in Prowse v Johnstone [No. 2] [2015] VSC 621 at [62].

Download a .pdf of this article.

Matthew Townsend
Owen Dixon Chambers
http://www.vicbar.com.au/profile?3183
townsend@vicbar.com.au (04) 1122 0277
Liability limited by a scheme approved under Professional Standards Legislation.


[1] “A permit is required before a person proceeds: –   Under s23 of the Subdivision Act 1988 to create, vary or remove an easement or restriction or vary or remove a condition in the nature of an easement in a Crown grant.”

[2] [2011] VCAT 949 at [65]

[3] PEA s60(2): … must not grant a permit which allows the removal or variation of a restriction unless … the owner of any land benefited by the restriction … will be unlikely to suffer “a) financial loss; or b) loss of amenity; or c) loss arising from change to the character of the neighbourhood; or d) any other material detriment—as a consequence of the removal or variation of the restriction.”

[4] PEA s52(1)(cb).

[5] See R52.09 of the Supreme Court (General Civil Procedure) Rules 2005.

[6] [1940] Ch 835 at 846

[7] [2005] VSC 169; (2005) 12 VR 224, 231

[8] [2005] VSC 169; (2005) 12 VR 224, 231 [13], 239 [41]-[42]

[9] Per Daly AJ in Grant v Preece [2012] VSC 55 at [55]

[10] [2006] VSC 298

[11] [2007] VSC 426

[12] [2011] VSC 346

[13] [2008] VSC 281 at [48]

[14] (2007) 81 ALJ 68 at 71

[15] [2012] VSC 4

[16] [69]

[17] [2010] VCAT 1865

[18] Response to Committee Finding 26

[19] [2008] VSC 117 at [42]

[20] [1970] VR 319-320 at 320

[21] [2005] VSC 355

[22] [1966] VR 494.

[23] Unreported, 6 June 1967.

[24] (1985) VConVR 54-178.

[25] See Division 5 of the PEA “Combined permit and amendment process” or the use of site specific controls pursuant to clause 52.03 as occurred in Amendment C143 to the Boroondara Planning Scheme.

[26] M.A. Zeltoff Pty Ltd v Stonnington City Council [1999] VSC 270

[27] Amendment C46 to the Mornington Peninsula Planning Scheme at 25. Applied by the panels considering amendments C23 to the Stonnington Planning Scheme; C72 to the Manningham Planning Scheme; and C137 to the Mornington Peninsula Planning Scheme.

[29] Easements and Covenants, Final Report #22; Recommendation 43.

Supreme Court accepts a rooming house is a legitimate ‘comparator’ when modifying a single dwelling covenant

In April 2019, in Re: EAPE (Holdings) Pty Ltd [2019] VSC 242, the Supreme Court found that when advancing a case for the modification of a single dwelling covenant, it is legitimate to say that the proposal for modification should be compared against a rooming house–an as-of-right land use arguably providing accommodation to the lowest end of the rental market.

This is potentially significant, because until this time, the comparator typically used in argument before the Court is a large single dwelling that would not need planning permission. In other words, applicants often argue:

– I can build this large house without modifying the covenant;

– given that my proposal for two or more dwellings is lower in impact than a large house, I should be allowed to modify the covenant for there is, relatively speaking, no substantial injury to beneficiaries by the covenant being so modified.

Now, applicants before the Court can legitimately invite the court to compare the proposed modification with the impact that beneficiaries might experience if the land was instead developed and used as a rooming house, with the increased activity, noise and parking impacts that routinely accompany such uses.

In EAPE the Court placed considerable emphasis on the plaintiff’s apparently genuine intentions to pursue the rooming house option in the event the modification was not granted, but one can imagine judges in future cases simply being convinced that a rooming house was a reasonably likely outcome of its refusal to modify a covenant: see Prowse v Johnston [2012] VSC 4 at 120.

Easements FAQs (Frequently Asked Questions)

What is an easement?

An easement comes in a number of forms but may generally be described as the right to use another person’s land without occupying it.

It may be a private right between specified landowners, or an easement in gross, granted to a public authority by operation of statute. Easements may be implied if not expressly created; and easements may be prescribed by using land for at least 20 years without secrecy, permission or force.

What types of easements are there?

  1. A private easement is a property right to make a limited use of land by someone other than an owner. It cannot give exclusive possession, and must be for the benefit of other land (the dominant land).
  2. An easement in gross is an easement for the benefit of the holder of the easement (usually a service provider) which is not attached to dominant land. It is not recognised at common law and is a creature of statute. An example might be a drainage easement along the rear of a number residential properties in favour of a water authority.
  3. An implied easement is an easement that is not expressly created by grant or reservation in an instrument or by statute but is implied by common law or statute so that the land can continue to be used in a particular way.
  4. A prescriptive easement is an easement acquired by using land for at least 20 years without secrecy, permission or force.

What are the key elements of a private easement?

  1. There must be a dominant and servient tenement;
  2. the easement must accommodate the dominant tenement;
  3. the owners of the dominant and servient tenements must be different from each other; and
  4. the right or claim must be capable of being the subject matter of a grant.

In Victoria, private easements can be expressly created by grant or reservation:

  • Creating an easement by ‘grant’ means that the servient owner grants the dominant owner an easement over his or her land for the benefit of the dominant land.
  • An easement is created by ‘reservation’ when a vendor conveys land to a purchaser but reserves an easement over that land, for the benefit of other land that the vendor owns.

How do I know if land is burdened by an easement?

Typically, if land is burdened by an easement, it will be noted under the heading “Encumbrances, Caveats and Notices” on a register search or on a plan of subdivision.

However, under section 42(2)(d) of the Transfer of Land Act 1958, all easements, ‘howsoever acquired’, exist over land even if they do not appear on the register. This is significant, because while covenants can fall away if they not clear on the face of the title, easements may survive the sale process even if they are not revealed on an inspection of the Register.

How do I know if land is benefited by an easement?

Assessing who takes the benefit of an easement requires careful analysis.

The benefit of private easements cannot flow to the public at large. The exception is an easement in gross, which will confer a licence upon the person for whom the right was created.  Easements in gross are commonly created in favour of statutory bodies, such as the local government  or water authorities.

That said, the case of Anderson & Anor v City of Stonnington & Anor [2016] VSC 374 provides a detailed explanation of how easements can become roads, and if and when that occurs, the operation of the Road Management Act 2004, may mean the easement is permanently displaced.

How can I remove or modify an easement?

Presently, there is no judicial means of removing or modifying easements in Victoria.

There are two options: claim of abandonment and s 23 of the Subdivision Act 1988 in combination with the Planning and Environment Act 1987.

Claims for abandonment are notoriously difficult to prosecute. In Brookville Pty Ltd v O’Loghlen [2007] VSC 67, Kaye J found that in order to establish abandonment, the plaintiff must prove that the owner of the dominant tenement intended to relinquish their rights to the easement forever.

Section 23 of the Subdivision Act 1988 in combination with the Planning and Environment Act 1987, allow for easements to be removed or varied, without the consent of or compensation being paid to beneficiaries. For this to occur, a planning permit must first be granted under clause 52.02 of the relevant planning scheme, the purpose of which is “to enable the removal and variation of an easement or restrictions to enable a use or development that complies with the planning scheme after the interests of affected people are considered.” An example of this in operation can be found in Warner Crest Pty Ltd v Stonnington CC [2019] VCAT 36.

How is an express subdivisional easement created?

There are overlapping provisions for the creation of express subdivisional easements contained in two different statutes:

  1. section 12(1) of the Subdivision Act 1988; and
  2. section 98(a) of the Transfer of Land Act 1958.

Section 12(1) of the Subdivision Act 1988 requires all proposed and existing easements to be specified in subdivision plans. These easements are then created upon registration of the plan. Easements created under this section are in addition to those created under section 98(a) of the Transfer of Land Act 1958.

Section 36 of the Subdivision Act 1988 also provides for an owner of land to acquire an easement compulsorily over other land in the subdivision or consolidation, or in the vicinity, if granted leave to do so by the Victorian Civil and Administrative Tribunal. The best step by step analysis of this provision can be seen in JT Snipe Investments Pty Ltd v Hume CC (Red Dot) [2007] VCAT 1831, however, Gale v Frankston CC [2019] VCAT 62 suggested a slight change in emphasis.

How is a prescriptive easement created?

Another way easements can arise without being expressly created is under a common law rule called prescription. A prescriptive easement can be acquired by what is called ‘long user’ or 20 years of continuous use.

Victoria retains many common law rules of implication and prescription that predate the subdivisional planning system, as well as the new statutory provisions for implied subdivisional easements.

In Laming v Jennings [2018] VSCA 335, the Court of Appeal made some interesting comments about the apparent inconsistency of prescriptive easements with the Torrens system. It concluded by noting that the historical rationale of legal fictions such as the doctrine of lost modern grant has significantly diminished with the advent of modern systems for the registration of title, comprehensive planning laws and more mature land law jurisprudence.

Do covenants prohibiting advertising hoardings prevent real estate signage?

It’s long been thought that a covenant prohibiting the use of land for advertising hoardings would make the putting up for display of real estate signage, a breach of that covenant.

A recent decision of the Supreme Court has thrown that view into doubt. In Re: Zhang 2018 VSC 721, Derham AsJ assessed a covenant that provided:

No hoarding for advertisement purposes shall be erected on the said lot hereby transferred.

His Honour concluded that if one looks at the intention of the covenant, it might be said that real estate signage and other domestic forms of advertising were not intended to be prohibited:

This part of the covenant is a basic form of advertising control. In the Easton Report, the opinion is given that it is now obsolete as large commercial advertising hoardings are no longer able to be placed in residential areas.  Small residential signs, real estate signs and signs relating to a lawful use on the land are the only signs generally allowed under present day planning controls.   Mr Gambaro suggested that the restriction was intended to prevent ‘suburban neighbourhood homes for families’ being turned into business premises. There was no opposition by any person to the discharge of this part of the covenant.  It is in my view obsolete as a form of planning control.  Indeed, Mr Gambaro had, at the time of my view, affixed to the fence of his property an array of boards advertising a candidate for election to, I think, the local Council.

The Macquarie Dictionary defines:

-‘hoarding’, relevantly, as ‘a large board on which advertisements or notices are displayed; a billboard’;

-‘advertisement’ as any device or public announcement, as a printed notice in a newspaper, commercial film on television, a neon sign, etc., designed to attract public attention, bring in custom, etc. 

Construed literally, this restriction would prevent the erection on the land of a real estate ‘for sale’ or ‘for lease’ sign, for example, or a board supporting a candidate for election. But when construed in the context of a residential property in a residential neighbourhood, it seems to me that the purpose of the restriction is not to prevent reasonable advertising of properties for sale or for lease, or supporting a candidate for election.  Its purpose is to prevent the erection on the Land of a board on which are displayed advertisements, particularly business advertisements, of a kind unconnected with the residential character of the land.  Thus, advertising a business or advertisements for the sale of goods or land (other than the land in question) are covered by this restriction.  In my opinion, the reasonable reader knows that in the Melbourne metropolitan area, ‘for sale’ signs on properties using a large board, sometimes with pictures of the dwelling, and details of its features is so common (and permitted by the planning laws) that to construe this restriction in accordance with its literal meaning would be to misread its purpose. 

In other words, real estate signage might be said to be ancillary to the use of land as a dwelling.

Could that reasoning be extended to permit signage for medical centres and other uses permitted in residential areas, where that signage is to promote goods and services available on the land?

 

Supreme Court modifies Urban Land Authority covenant

It has been estimated that there may be as many as 35,000 covenants created by in Victoria by the Urban Land Authority, or statutory corporations that have carried on similar functions, including:

  • Urban Land Corporation;
  • Urban or Regional Land Corporation;
  • Victorian Urban Development Authority; or
  • Development Victoria.

These restrictive covenants can contain a combination of orthodox and unorthodox covenants, for instance:

i) there will not be erected on the land hereby transferred any building other than one house and usual outbuildings; and
ii) such house will not have less than seventy five percent (75%) of all external walls (save for provisions of windows, doors, fascias and gables) of brick or brick veneer; and
iii) such house will be for his own occupation; and
iv) he shall occupy the said house as his home for a period of at least five years.

Significantly, these covenants are unlike ordinary covenants that transfer the benefit to enforce a covenant to other landowners in the neighbourhood. Rather, the covenants are created by statute, and the only party with the ability to enforce the covenant may be the statutory corporation that created the covenant (or its successor).

However, officers of those authorities have expressed the view that they will not consent or assist in the removal of existing covenants. That is, they say, a matter for the responsible authority pursuant to the Planning and Environment Act 1987–typically Councils, or VCAT on review.

Yet at least one Council says it has no ability to remove the covenant, via the Planning and Environment Act 1987. Thus, there seems to be a lack of consensus on how these covenants may be modified or removed.

However, we now know that the Supreme Court of Victoria does have the power, and is prepared to modify statutory covenants in appropriate circumstances. See Re: Hamdan S CI 2018 02512.

Plaintiffs, prove your case

The Supreme Court has again dismissed an application to vary a covenant by reason of a plaintiff’s failure to discharge its evidentiary burden under s84(1)(c) of the Property Law Act 1958.

In Del Papa v Falting & Ors, Lansdowne AsJ held:

80 It is important to keep in mind, however, that the burden is not on the defendants to establish injury; rather, it is on the plaintiff to discount it. Mr Chapman concedes that he did not inspect the rear of the Subject Land and so its interface with the only adjacent benefited land, that owned by the eleventh and twelfth defendants. Accordingly, there is no evidence that there will be no substantial direct injury to this portion of benefited land.

81 This absence of evidence in relation to direct impact on the land of the eleventh and twelfth defendants, does undermine the plaintiff’s case pursuant to s 84(1)(c). The more significant factor in its failure, is, however, that the plaintiff has failed, in my view, to show that there will be no substantially injurious precedential effect of the proposed modification.

The Court was also unimpressed with the Plaintiff’s bifurcated application:

20 Mr Del Papa’s evidence is that he and his wife would be prepared to build in accordance with schematic design plans dated February 2017 that he attaches to his affidavit. An enlarged version is Exhibit F. These plans show two options. Option A is for two very substantial two storey dwellings, one five bedroom plus rumpus room and study, and one four bedroom plus rumpus room and study. Option B is for three slightly smaller, but still very substantial, two storey dwellings, each five bedroom plus rumpus room.

131 I would also have been troubled by the fact that the proposed development is not even certain as to number of dwellings, as the plaintiff seeks either a two, or a three, lot subdivision. This is a matter that the Court can of course determine, if persuaded to grant the application, but it does raise a question as to the degree of commitment of the plaintiff to pursue her advanced proposals if the application is granted.

The take away lesson for applicants is that when you move from an uncontested application to a contested hearing, you need to make a first-principles re-assessment of the evidentiary basis of your application: revisit the plans, revisit the site and reassess the forensic basis upon which you say a precedent will not be created.

The brutal consequences of breaching a restrictive covenant

In Manderson v Wright (No 2) [2018] VSC 162, the Supreme Court revealed the devastating potential consequences of breaching a restrictive covenant.

In this case Justice John Dixon ordered the demolition of about $1 million of building renovations at a property at Barwon Heads, saying the building works occurred outside the permitted building envelope governed by a restrictive covenant, “I am not persuaded in all of the circumstances that the hardship to the defendant from a demolition order is out of all proportion to the relief assured to the plaintiff.”

A subsequent decision on costs of the proceedings, saw the unsuccessful defendant, Ms Wright, liable for 50% of the costs of the proceeding, claimed by the plaintiff to be $460,000.

VCAT restates the difficulties in amending a covenant through the planning process

VCAT has again shown how difficult it is to modify a covenant via the Planning and Environment Act 1987 process, when a beneficiary of the covenant opposes the application.

In Stuart v Mornington Peninsula SC [2018] VCAT 67, the permit applicant sought a permit to vary a covenant that limited the height of a boundary fence to 18 inches (0.46m) in height. The application sought to allow a fence ranging in heights between about 1.5m to 2.2m, extending for a length of ~30m.

The Council refused the application on the basis that it could not be satisfied that the proposed covenant variation met the tests required by section 60(5) of the Planning and Environment Act 1987, because an objection had been received from a beneficiary who expressed a perceived detriment.

The applicant submitted that there would be no detriment to any beneficiary in allowing the new fence and that the objection was so clearly without merit that it should be considered to be vexatious or not made with good faith within the meaning of s 60(5) of the PE Act.

The objector submitted that the variation of the covenant would be detrimental to the enjoyment of her property, the amenity of the area and contrary to the purposes of the covenant.

The Tribunal also entertained the submissions of another objector who was not a beneficiary of the covenant, consistent with DP Gibson’s ruling in Hill v Campaspe SC (Red Dot) (2011) VCAT.

The Tribunal explained that because the covenant was created or registered before 25 June 1991, s 60(5) of the Act applies. This provides:

(5)     The responsible authority must not grant a permit which allows the removal or variation of a restriction referred to in subsection (4) unless it is satisfied that—

(a)    the owner of any land benefited by the restriction (other than an owner who, before or after the making of the application for the permit but not more than three months before its making, has consented in writing to the grant of the permit) will be unlikely to suffer any detriment of any kind (including any perceived detriment) as a consequence of the removal or variation of the restriction; and

(b)    if that owner has objected to the grant of the permit, the objection is vexatious or not made in good faith.

The decision maker is required to be satisfied of both limbs of s 60(5) before directing the grant of a permit for the variation of the covenant.

Ultimately, the Tribunal rejected the application because it did not find the beneficiaries’ objection to be vexatious or not made in good faith. This was so, even though the beneficiary would not be able to see the fence from her own property.

The take away lesson from this case is that if you are attempting to modify a covenant created before 25 June 1991 and you have a beneficiary opposing that application, it is rarely, if ever, worthwhile taking the matter on appeal to VCAT. Your remedy is more likely to be via the Property Law Act 1958 or Supreme Court process.