Whether you are in the process of buying property or taking a lease, the consideration of restrictive covenants can form an important part of the acquisition process. The impact of restrictive covenants will continue to affect your use and enjoyment of the property after the purchase.
A restrictive covenant is a promise given in a property deed/transfer or lease not to use the land in a particular way or not to undertake certain acts on it. Once given, this promise in most circumstances binds the parties who made the original promise and their successors (any subsequent owners). In practical terms what this means is that if such a promise is broken, even if subsequent owners were not party to the original document creating the commitment, the person who benefi ts from the promise may be able to seek remedies against those that have broken it. The remedy can be an injunction that stops you committing the breach or compensation for losses incurred as a result of the breach.
Common breaches
In my experience the most prevalent examples of breaches in restrictive covenants within a dental field relate to restrictions on use. Usually these are restrictive covenants contained in the title, which in effect prohibit the use of the premises as a dental practice; or although use as a dental practice may be permitted, any ancillary complimentary use such as chiropody, laboratory or beauty treatments are prohibited.
Associated problems
You should also be aware that if the acquisition of the practice is through lender fi nance supported by a charge over the property, then those acting for the lender will require some form of assurance that any restrictive covenants will not affect the future mortgageabilty or marketability of the property.
The answer
In order to avoid any obstacles relating to restrictive covenants, it is wise to have a specialist dental solicitor consider the title/property documents from the outset; or even contact one when you wish to make major changes in the property, particularly to expand your business. They will be able to see if there are any restrictions in the title and provide you with a full report.
Depending on the nature of the restrictive covenant, how old it is and whether it is a pre-existing historical breach, a specialist dental lawyer will be able to guide you as how to proceed. There are various options available ranging from obtaining a release or variation to the covenant from those that benefit from it, to obtaining indemnity insurance or seeking remedy under statutory provisions. The final resort if no viable option is suitable would be to reconsider the acquisition or expansion plans altogether.
Selling
If you are granting a lease to a tenant, selling only part of the building, or will remain an adjoining neighbour after the sale, restrictive covenants are important tools to ensure that the person acquiring does not carry out any acts which would result in loss to you. They are vital to ensure the acquirer does not block a particular access or does not carry out a particular activity which would result in a nuisance to you or be harmful to your business. Again a specialist lawyer can help you identify what is important to you in the sale process and ensure your concerns are protected.