Restrictive covenant

Restrictive Covenants FAQs (Frequently Asked Questions)

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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 not often established. 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. See Randell v Uhl [2019] VSC 668. 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.

For a more detailed analysis, see here:

2022-12-10-restrictive-covenants-in-victoria-theory-and-practice-1Download

Feel free to contact me by email for further information.

Matthew Townsend
townsend@vicbar.com.au

Dealing with deregistered companies referred to in restrictive covenants

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Restrictive covenants in Victoria often give development discretion to companies that have long been deregistered. A good example is the series of covenants affecting the area around Altona that may provide:

… nor will I or my heirs executors administrators or transferees use any material other than brick and/or stone for the main walls of any such shop or dwelling house without the consent in writing of the said Altona Beach Estates Limited

Altona Beach Estates Limited, the original developer of the land, has long ceased to exist.

A question is then raised: how will the Australian Securities & Investments Commission (ASIC) exercise its discretion if it is called upon to act in the capacity of the deregistered company pursuant to section 601AE(2) of the Corporations Act 2001?

Helpfully, ASIC has produced a practice note of sorts to explain its policy in relation to such requests.

This policy states that ASIC may consider applications for consent under an encumbrance (e.g. plans of subdivision where there is no specific prohibition to subdivision in the encumbrance; construction of a fence within the restrictions/conditions of the encumbrance) and may consider applications to discharge expired encumbrances. However, ASIC will not otherwise vary the restrictions/conditions of an encumbrance or discharge a current encumbrance.

It is not then, as some might have you believe, a fait accomplis that the discretion will be exercised in the applicant’s favour.

The policy can be found here: http://asic.gov.au/for-business/closing-your-company/effects-of-deregistration/property-of-deregistered-companies/there-is-an-encumbrance-also-known-as-a-covenant-or-restrictive-covenant-over-my-property-in-favour-of-a-deregistered-company/

Objecting to an application to modify or discharge a restrictive covenant

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If you own land with the benefit of a restrictive covenant, you may receive a letter by mail or see a sign on land giving notice of an application to modify or discharge it pursuant to s84 of the Property Law Act 1958.

If you wish to contest this application you may wish to:

  • write an objection; and/or
  • appear in court to support that objection.

The first step is to ascertain whether you have the benefit of the covenant. Because covenants are essentially contracts that run with the land, the law generally says that if you are not party to a contract you have no standing to enforce it.

If you have received written notice of the application, the chances are that your land has been identified as having the benefit of the covenant. If you have simply seen the sign on the land and live nearby, someone may have formed the view that your land either does not have the benefit of the covenant or that the modification or removal will not affect you. Or it may mean that the address for correspondence on your land title is out of date. This is surprisingly common.

If you are unsure whether your land has the benefit of a covenant, the cheapest and quickest option is to contact an experienced title searcher such as Dinah Newell from Feigl & Newell on (03) 9629-3011 or info@feiglnewell.com.au This is a specialised task and it is risky to leave it to someone who hasn’t done it before.

Once you have established a benefit, the question might then be what to write in your objection. Two decisions of the Victorian Supreme Court provide some guidance. The first is Prowse v Johnston in which Justice Cavanough listed the concerns of residents that he accepted were reasons a single dwelling covenant was not obsolete:

108 The objections of the defendants are set out in the various affidavits sworn by them. They are summarised in their written outline of submissions as follows:

(a) Loss of character of the residential estate being an estate with large single dwelling family homes and substantial gardens;

(b) Loss of privacy and overlooking into neighbouring private outdoor living areas and gardens;

(c) Bulk and dominance of proposed building particularly when viewed from adjoining residences and property;

(d) Loss of large, spacious Edwardian family home on the burdened land and surrounding mature trees and established garden;

(e) Loss of family neighbourhood with front and rear garden;

(f) Loss of spaciousness, beauty and privacy;

(g) Construction of a three-storey building with basement car parking over virtually the entire site in conflict with the prevalent single dwelling residential character of the area;

(h) Additional noise, traffic, parking and access issues associated with 18 units and 33 [actually 36] basement car spaces;

(i) This is the “thin end of the wedge” and the precedent effect of the removal of a covenant for the construction of a large unit development would be very significant;

(j) The character of the Coonil Estate has been maintained for over 90 years and should be preserved;

(k) Much of the Coonil Estate is a recognised heritage overlay area which should be preserved;

(l) The proposed development will be an isolated “eye sore” in stark contrast to the many period and heritage homes surrounding the burdened land; and

(m) The plaintiff’s land was purchased as part of the Coonil Estate, and has benefited from the reciprocal covenants given by others.

109 I accept that these are all admissible objections, though some are stronger than others. They are relevant to show that the covenant is not obsolete. They are also relevant for other purposes, to which I will come. The covenant is not obsolete. The purposes of the covenant are still being achieved throughout the Estate and on the burdened land, with a contribution in that respect from the covenant on the burdened land.

In the more recent decision of Oostemeyer v Powell Justice Riordan set out in paragraphs [36] to [45] the evidence he relied upon to reject an application to modify a covenant made pursuant to s84(1)(c) of the Property Law Act 1958 the so-called “substantial injury” test.

Once you have registered your opposition to the application to modify or remove the covenant you may be required to appear in the Supreme Court to support your objection. That is not to say the court will not consider your objection if you don’t appear. The Court generally reads every objection closely. However, in the standard form notice in the Court’s Guide for practitioners, the court makes it clear that “Written objections without an attendance may not be considered.”

Once at court, the Judge in charge of the list will set the matter down for a contested hearing.

It’s a matter of judgement at what point you wish to get a solicitor and/or barrister involved, if at all. Oostemeyer v Powell (above) demonstrates that unrepresented residents can succeed in fending off an attack on a covenant. However, it is relatively rare that objectors represent themselves in a contested hearing, partly because of the complexity of the proceedings and the time involved; and partly because objectors are typically reimbursed most of their costs, even if they are unsuccessful, in accordance with the principle in Re Withers.

The Supreme Court published information for objectors in December 2017.

Download a .pdf of this note.

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.

 

Construing a covenant: a restatement of principles

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In the decision of Clare & Ors v Bedelis [2016] VSC 381 AsJ Derham has usefully restated the principles for construing or interpreting a covenants:

(a)               subject to the qualifications mentioned below, the ordinary principles of interpretation of written documents apply.[1]  The object of interpretation is to discover the intention of the parties as revealed by the language of the document in question;[2]

(b)               the words of a restrictive covenant:

(i)     should generally be given their ordinary and everyday meaning and not be interpreted using a technical or legal approach.[3]  Evidence may be admitted, however, as to the meaning of technical engineering, building or surveying terms and abbreviations;[4]

(ii)  must always be construed in their context, upon a reading of the whole of the instrument,[5]  and having regard to the purpose or object of the restriction;[6]

(c)                importantly, the words of a restrictive covenant should be given the meaning that a reasonable reader would attribute to them.[7]   The reasonable reader may have knowledge of such of the surrounding circumstances as are available.[8]   These circumstances may be limited to the most obvious circumstances having regard to the operation of the Torrens system and the fact that the covenant is recorded in the register kept by the Registrar of Titles.[9]  As the High Court held in Westfield:

The third party who inspects the Register cannot be expected, consistently with the scheme of the Torrens system, to look further for extrinsic material which might establish facts or circumstances existing at the time of the creation of the registered dealing and placing the third party (or any court later seized of a dispute) in the situation of the grantee…[10]

(d)              the words of the covenant should be construed not in the abstract but by reference to the location and the physical characteristics of the properties which are affected by it,[11] and having regard to the plan of subdivision and, depending on the evidence, possibly having regard to corresponding covenants affecting other lots in the estate;[12]

(e)               because the meaning of particular words depend upon their context (including the purpose or object of the restriction in a covenant) cases that consider similar words provide no more than persuasive authority as to the meaning of words in a different document.[13]  Further, the decisions upon an expression in one instrument are of very dubious utility in relation to another;[14]

(f)                 the rules of evidence assisting the construction of contracts inter partes, of the nature explained by Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales,[15] do not apply to the construction of easements and covenants;[16]

(g)               if the meaning remains in doubt after other rules of interpretation have been applied, as a last resort or ‘very late resort,’ the covenant should be construed contra proferentem, that is, against the covenantor;[17]

(h)               whether a covenant has been breached or not is a question of fact to be determined according to the facts of the case and in the light of the actual language in which the restrictive covenant is framed;[18] and

(i)                 generally speaking, the proper construction of an instrument intended to have legal effect is a question of law, not fact.[19]  On the other hand, the meaning of a particular word or expression in such an instrument may be a question of fact, particularly where the Court has already determined as a matter of construction that the word or expression is used in its ordinary and natural meaning.[20]

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]               Bradbrook and Neave’s Easements and Restrictive Covenants, AJ Bradbrook and SV MacCallum, 3rd Ed, (‘Bradbrook & Neave’), [15.3].

[2]               Bradbrook & Neave; But see Prowse v Johnston & Ors [2012] VSC 4 at [55]–[58] (‘Prowse’).

[3]               Re Marshall and Scott’s Contract [1938] VLR 98, 99; Ferella v Otvosi (2005) 64 NSWLR 101 at 107 (‘Ferella’); Ex parte High Standard Constructions Limited (1928) 29 SR (NSW) 274 at 278 (‘High Standard’); Prowse at [52].

[4]               Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 at [157]-[158](‘Phoenix’); Westfield Management Limited v Perpetual Trustee Company Limited, (2007) 233 CLR 528 at [44] (‘Westfield’).

[5]               Ferella at 107; High Standard at 278;  Prowse at [52].

[6]               Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22], 462 per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Phoenix at [148]-[149].

[7]               Phoenix at [157]-[158].   

[8]               These are limited by the decision in Westfield and subsequent decisions: see Sertari Pty Ltd v Nirimba Developments Pty Ltd [2007] NSWCA 324; Berryman v Sonnenschein [2008] NSWSC 213; Shelbina Pty Ltd v Richards [2009] NSWSC 1449; Neighbourhood Association DP No 285220 v Moffat [2008] NSWSC 54; Fermora Pty Ltd v Kelvedon Pty Ltd [2011] WASC 281 at [33]-[34]; Prowse at [58].

[9]               Westfield at [37]-[42]; Sertari at [15]; Phoenix at [148]-[158].

[10]             Westfield at [39].

[11]             Richard van Brugge v Hare [2011] NSWSC 1364 at [36]; Big River Paradise Ltd v Congreve [2008] NZCA 78 at [23].

[12]             Sertari Pty Ltd v Nirimba Developments Pty Ltd [2007] NSWCA 324 at [16]; See Fermora Pty Ltd v Kelvedon Pty Ltd [2011] WASC 281 at [33]; Prowse at [58].

[13]             Bradbrook & Neave at [15.4] citing Christie & Purdon v Dalco Holdings Pty Ltd [1964] Tas SR 34 at 41.

[14]             Ferella at [17]; In Re Marshall and Scott’s Contract [1938] VLR 98, at 100 where Mann CJ observed that small differences of language can be of great importance and that the decision often turns on them; Prowse at [54].

[15]             (1982) 149 CLR 337.

[16]             Westfield; Ryan v Sutherland [2011] NSWSC 1397 at [10]; Prowse at [57].

[17]             Ferella at [21]; Bradbrook & Neave’s at [15.6].

[18]             Per Herring CJ in In Re Bishop and Lynch’s Contract [1957] VLR 179 at 181; Prowse at [53].

[19]             See, in relation to statutes, S v Crimes Compensation Tribunal [1998] 1 VR 83 at 88 (J D Phillips JA).  See, in relation to written contracts, FAI Insurance Co Ltd v Savoy Pty Ltd [1993] 2 VR 343 at 351 (Brooking J); O’Neill v Vero Insurance Ltd [2008] VSC 364 [10] (Beach J); Prowse at [53].

[20]             See S v Crimes Compensation Tribunal [1998] 1 VR 83 at 88; cf Phoenix at [158]; Prowse at [53].

Regularising a longstanding breach of a covenant

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One of the first questions often asked of aspiring applicants for covenant modification is whether there have been any longstanding breaches of the covenant.

The answer to this question can have significant implications, for where land has been used or developed for at least two years in breach of a restriction,[1] in a manner that would be lawful under the PE Act but for the restriction, an application to vary the restriction may be made pursuant to section 47(2) of the Planning and Environment Act 1987. Such an application may be made without:

    1. notice of the application under section 52 of the PE Act (including beneficiaries of the Covenant); and
    2. the application being referred under section 55 to any relevant referral authorities:

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.

Gibson DP explained the operation of section 47(2) in Hill v Campaspe SC:[2]

9… Section 47(2) of the Act exempts applications for the removal of covenants from the need to give notice under sections 52 and 55 of the Act in certain circumstances.

10     The section 52 notice requirements for an application to remove or vary a covenant include notice to the owners and occupiers of all land benefited by the covenant (section 52(1)(cb)). Section 55 of the Act relates to notice to referral authorities. …

…

26     … [I]f part of a covenant is breached, and the breach continues for 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.

DP Gibson’s analysis is consistent with the Explanatory Memorandum of the Subdivision (Miscellaneous Amendments) Bill that introduced section 47(2) into the Act:[3]

Clause 61 amends section 47, 68, 69, 81 and 85 of the Planning and Environment Act 1987 in relation to easements or restrictions. This is consequential on amendments outlined elsewhere in these notes.

It also provides that the notification procedures under the Planning and Environment Act 1987 do not apply to the removal of covenants from land where an otherwise lawful building has breached the covenant for more than 2 years.

In some respects, this is an awkward provision because:

    1. the provision contemplates an application to remove a covenant, whereas the effect of the decision in Hill v Campaspe SC is to essentially permit its modification;
    2. it is not clear how the responsible authority’s discretion is to be exercised in the absence of notification. For instance:
      • some council officers will endeavour to apply section 60 of the Planning and Environment Act 1987 against an application made under section 47(2) with its reference to the tests of “detriment” and “loss of amenity”, despite the fact that any reference to “perceived detriment” is at odds with a beneficiary not knowing about an application being made under the provision;
      • most commonly, however, council officers seem content to apply 47(2) without reference to any tests in section 60; and
    3. it is not clear whether the provision can be used in circumstances where the breach has since been rectified through demolition or the removal of non-complying materials.

This divergent approach to the application of section 47(2) is partly because there have been so few cases that have considered the provision. If the advantage offered by section 47(2) is to avoid having to bring an application to vary a covenant to the attention of beneficiaries, it makes less sense to appeal a Council’s refusal to exercise its powers under the provision.

Consistent with this, applications under section 47(2) should be pursued a separate planning application before the substantive use or development application is made.

[1] As that term is defined in section 3(1) of the Subdivision Act 1988 (Vic).

[2] [2004] VCAT 1456.

[3]Explanatory Memorandum, Subdivision (Miscellaneous Amendments) Bill 1991 No. 48, section 61(1)(c).

Building materials covenants still have work to do in Victoria

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In Gardencity Altona v Grech [2015] VSC 538 Associate Justice Lansdowne refused an application to remove a covenant requiring the main walls of any dwelling or shop on the land to be of brick and/or stone, on the basis that it could not be said that the covenant was obsolete, or that it’s removal would not occasion substantial injury to those with the benefit of the covenant.

No single dwelling covenant attached to the land, and so arguably, only the building materials covenant prevented the applicant from realising his development plans for the land.

Instrumental to her Honour’s reasoning was that the defendants had a genuine preference for the use of brick as a building material.

Her Honour also left open the possibility that if it were shown that removal of the brick or stone restriction would make a taller building less likely that may be a further benefit conferred by the restriction and so further reason why the restriction is not obsolete.

Significantly, the application was made in a neighbourhood found to be predominantly constructed with brick or stone:

142 I find on the whole of the evidence that the buildings in the neighbourhood predominantly have their main walls constructed in brick or stone. As indicated, I refer in this finding to the actual incidence of the use of brick or stone, rendered or exposed, not the visual incidence of exposed brick. By ‘predominantly’ I mean well more than half, and on a broad estimate at least two thirds.

This feature of the case will require close scrutiny for parties wishing to rely on the decision as a precedent.

Of particular interest is that the Court declined to apply the 1956 decision of Jacobs v Greig [1956] VLR 597, often cited as authority for the proposition that a requirement to build out of brick requires ‘double brick’ construction rather than brick veneer:

134 Having regard to Mr McLaughlin’s expert evidence that brick veneer is now an acceptable use of brick in construction, I consider the particular outcome in Jacobs v Greig to be limited to its particular facts and time. On the principle identified in that case, I find that an ordinary resident of Victoria would consider the covenants here in question do not now exclude brick veneer. Accordingly, I find that for this case at least, brick veneer is ‘brick’ for the purposes of the covenants, and like covenants in the area.

This is a welcome development given that double brick is now rarely used in Victoria for reasons of cost and energy efficiency.

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

The importance of choosing the right planner in a covenant modification application

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Once again, we’ve seen the importance of choosing an appropriately experienced town planner when applying to the Supreme Court for the modification of a restrictive covenant.

In Re: Morrison, the Plaintiff selected a town planner that hadn’t been involved in a contested covenant case before and the report in support of the application read like a report for a permit application under the Planning and Environment Act 1987.

In handing down his judgement, Associate Justice Derham dismissed this approach: “Looking at the expert reports, it is clear that Mr Chapman had a primary focus on planning considerations, considering his emphasis on restrictive covenants generally being an out-moded form of controlling development that had been largely rendered redundant by the introduction of planning schemes.”

In other words, the planner was downplaying or dismissing the need for restrictive covenants on the basis that any amenity impacts could be adequately protected by the planning scheme.

Unsurprisingly, this wasn’t accepted by the Court: “Ultimately, the planning process is a separate process with different objectives and considerations to be taken into account. As pointed out by the defendants, restrictive covenants are given explicit priority over the planning process in s 61(4) of the Planning and Environment Act 1987 (Vic). On the basis of these authorities, I do not consider that the amenity concerns of the defendants can be appropriately met through application of the planning scheme.”

Plaintiffs sometimes succeed in using town planners with little or no covenant experience in non-contested cases, but this strategy is soon exposed once put to their proof by a well-advised defendant. The better strategy for applicants is to chose the correct town planner from the start of the process and to craft the application with suitable precision.

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

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

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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, here, here 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.

VCAT confirms 60(5) of the Planning and Environment Act 1987 is only useful for removing “deadwood” restrictive covenants

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In the Red Dot decision of Giosis v Darebin CC [2013] VCAT 825, the Victorian Civil and Administrative Tribunal comprised of Senior Member H. McM Wright QC confirmed that 60(5) of the Planning and Environment Act 1987 (Act) is useful for little more than removing “deadwood” or non-contentious restrictive covenants.

The case concerned an applicant seeking to review the decision of the Darebin City Council to refuse a permit to vary a restrictive covenant burdening land at 26 Maclagan Crescent, Reservoir (refer detail from Land Victoria, plan below).

The part of the covenant sought to be varied vary provides as follows.

(c)           no shops, laundries, factories or works shall be erected on this Lot and not more than one dwelling house shall be erected on any one Lot and the cost of constructing each house shall not be less than Four Hundred Pounds (inclusive of all architect’s fees and the cost of erecting any outbuildings and fences). [emphasis added]

The variation sought to replace the words “one dwelling house” with the words “three dwellings” thereby enabling the application to be made to redevelop the land for three units or dwellings.

There were five objectors, three of which were beneficiaries, all of whom lived 100m away from the burdened land.

The Council had refused the application on the grounds that:

The proposed variation to the Covenant … to allow not more than three dwellings to be constructed on the lot will result in detriment to beneficiaries and is therefore contrary to Section 60(5) of the Planning and Environment Act 1987.

60(5) of the Act 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 benefitted by the restriction (other than a 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 a 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 Tribunal quoted from the second reading speech of the Planning and Environment (Amendment) Act 1993 (Vic) that inserted section 60(5) into the Act. This speech coined the term “deadwood” covenants or covenants without a continuing purpose:

The effect of the clause is that permits should be granted only for “dead wood” covenants if no owner benefitting from the covenant objects to its removal or variation. The alterative avenues to remove or vary a covenant remain in place, being applications to the Supreme Court under the Property Law Act 1958 and the preparation of a planning scheme amendment.

After quoting from Carabott and Ors v Hume City Council (1998) 22 AATR 261 that considered the effect of s60(5) of the Act in some detail, the Tribunal raised a particular flaw with the proposal before it—the absence of plans:

17           Unlike many applications for a variation of a restrictive covenant the present applicant has not concurrently sought approval for any particular form of development. This makes it difficult for the responsible authority to be satisfied as required by paragraph (a) because it must consider all possible forms of three unit multi-dwelling development and conclude that it is unlikely that any of them would cause detriment to a benefitting owner.

The Tribunal found in the absence of a firm development proposal there were an infinite number of three unit or three dwelling developments that could take place in consequence of the variation of the covenant and that it could not be “positively satisfied of a negative, namely, that there is unlikely to be detriment of any kind”:

21           … In my view it is simply not possible to say that none of those developments would be likely to have a detrimental impact of some kind on the benefitting properties, particularly the adjoining units at 28 Maclagan Crescent. The application for permit therefore falls at the first hurdle.

This case therefore underscores the limited utility of applying to VCAT to modify or remove a covenant in the face of heartfelt opposition on the part of one or more beneficiaries. The absence of plans simply made the task more difficult.

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Removing or modifying a restrictive covenant in Victoria

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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, there is a 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.