We covered the basics of what it means to have land covenants registered against a record of title for property in our article here. Given that land covenants cannot usually be modified or extinguished, it is important to check the title to the property to see if there are any land covenants registered before you purchase a property.
In the case of Synlait Milk Limited v New Zealand Industrial Park SC 2020 NZSC 157 (Synlait case), certain covenants on the title to Synlait’s property limited the use of Synlait’s land to lifestyle farming and forestry. However, Synlait built a dairy factory on its land in breach of the land covenants. Synlait sought to have the covenants restricting the use of its land to lifestyle farming and forestry deleted under s317(1) of the PLA.
s317(1) of the PLA provides that a court may modify or extinguish a covenant if it is satisfied that (paraphrasing):
- the covenant ought to be modified due to a change since its creation in things like the character of the neighborhood or other circumstance the court considers relevant;
- the continuation of the covenant in its existing form would impede the reasonable use of the landowners land in a different way from that which could reasonably have been foreseen by the original parties to the covenant;
- all entitled persons have agreed to the modification or extinguishment of the land covenant;
- the proposed modification or extinguishment will not substantially injure any person; or
- for any other reason it is just and equitable to modify or extinguish the government.
In the Synlait case, while the Court noted that it traditionally takes a conservative approach to modifying covenants, the Court considered that three of the grounds for modification under s317(1) were made out (being sections 317(1)(a), (b) and (d)), and had the parties not settled out of Court, the appeal would have been allowed. This was due largely to the change in use of the surrounding area (including a zoning change).
The more recent case of Chand (Cs) v Auckland Council 2021 NZCA 282 (30 June 2021) (Chands case) emphasized that an appellant needs to have a strong case in order for a Court to modify or extinguish land covenants under s317(1) of the PLA.
In the Chands case, the Chands sought to extinguish a restrictive covenant affecting their property precluding further subdivision and dwellings on their property, because the Chands wished to further subdivide their 2,229m2 property. The Chands argument was that the modification of the covenants to allow subdivision and additional dwellings would not substantially injure the respondents. The respondents owned lots neighboring the Chands property (such lots being subject to and receiving the benefit of the same covenants).
Both the High Court and the Court of Appeal agreed that there was sufficient evidence to establish enduring injury to the owners of the surrounding properties in the form of loss of view and privacy, intrusion of traffic and noise, and likely loss of property values (all likely impacts if the Chands were able to proceed with their subdivision). Both Courts refused to modify the land covenants.
If there are land covenants on the title to a property you are thinking of purchasing or developing, or on the title to property you own, and you are thinking about seeking to modify or remove the land covenants in order to develop the property further, we would be happy to provide you with advice in relation to how the provisions of s317(1) might apply.
This article is current as at the date of publication and is only intended to provide general comments about the law. Harkness Henry accepts no responsibility for reliance by any person or organisation on the content of the article. Please contact the author of the article if you require specific advice about how the law applies to you.