It might sound intimidating, but a deed of covenant is a straightforward legal agreement used in millions of property sales across the UK. But what is a deed of covenant actually for? Who needs to have it, and what do you need to know about them. Read on to discover all the key details in our simple guide to deeds of covenant.
What is a deed of covenant?
A deed of covenant is a form of legal agreement between two parties. It takes various forms, but in conveyancing, it’s usually used to lay out legal responsibilities and obligations between a property freeholder and their leaseholder.
If you need more information on the difference between freehold and leasehold, click the link for our dedicated guide.
Why do you need a deed of covenant?
You may need a deed of covenant if you are buying or renting a leasehold property. This will set out all of the terms and conditions between the freeholder and you, the leaseholder.
What does a deed of covenant cover?
A deed of covenant will cover all the relevant obligations and responsibilities of the leaseholder to the freeholder. These include the length of the lease itself, followed by a list of ‘positive covenants’ and ‘negative covenants’.
Positive covenants are things that the leaseholder must do. They may include paying service charges, keeping communal areas in good condition, and agreeing to maintenance works being carried out on the property.
Negative covenants are things that the leaseholder must not do. These may include things like subletting, owning pets, making excessive noise or using their home as a place of business.
What does a deed of covenant look like?
Deeds of covenant follow a fairly standard format. The document will lay out the property details, like its address, postcode and title number. It will then detail all the relevant parties involved.
Next, the deed will lay out all of the positive and negative covenants. This list can be long or short, simple or complex, depending on how the freeholder wants it arranged.
Finally, there will be the execution clause at the end. This provides details of who is signing, plus the date and any other relevant details.
How do you arrange a deed of covenant?
To arrange a deed of covenant, first you should see if the freeholder has a standard version that they prefer to use. If not, you can arrange for a general solicitor or conveyancer to draft one. Alternatively, you can draft your own using an online template provided by a reputable site.
Usually, you, the buyer/renter will receive the deed of covenant via your solicitors during the conveyancing process.
Who pays for a deed of covenant?
Deciding who pays for the drafting and execution of a deed of covenant is up to the freeholder and leaseholder. Usually, new leaseholders will pay for a deed of covenant. However, many freeholders will take the cost on themselves to build trust and make the transaction more appealing.
How much should a deed of covenant cost?
A standard deed of covenant should cost around £150-£200 to draft and execute. This cost may be higher if the deed is full of complicated clauses that require more legal work to explain and execute.
Is a deed of covenant legally binding?
If all mentioned parties in the document sign their names with witnesses, a deed of covenant is legally binding.
Can you refuse to sign a deed of covenant?
You can refuse to sign a deed of covenant, just like any other legal document involved in a monetary transaction. However, if you do refuse, you will almost certainly fail to complete the purchase or rental of the property.
Refusing to sign can be a perfectly legitimate response if you feel that the deed’s terms are too rigid or complicated. You can then raise any issue with the freeholder’s solicitors and hopefully come to an agreement or compromise.
Does a deed of covenant expire?
Generally, a deed of covenant will expire once the leaseholder gives up the lease. You can do this either by completing the tenancy or selling the property, if you are the owner.
What happens if you ignore or break a covenant?
If you ignore or break any of the terms listed on a deed of covenant, you may be liable to be sued for damages. A court injunction is another possibility, where you may be subjected to further fines or even lose your home.
However, in most cases, breaches of covenant are solved by a conversation between the leaseholder and the freeholder or their property management agent. The breach is discussed, the leaseholder is notified of what they have to do to make things right, and if they do so, the matter is closed.
We hope that this quick guide to deeds of covenant is useful. Remember, it’s always important to fully understand the terms of any legal document before signing it. For more advice on the legal terminology and processes involved in buying, renting and selling property, have a browse of our various guides.
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