Covenant Explained for Property Buyers
A covenant is a legal restriction on a property title that limits how the land or building can be used or developed. It continues to bind all future owners, regardless of when it was created.
What Does Covenant Mean?
A covenant is a legal obligation attached to the title of a property. It is a form of restriction — something the landowner agrees not to do, or in some cases must do. Unlike conditions set by a council or planning authority, a covenant is typically a private agreement that was entered into at some point in the property's history, often when land was first subdivided and sold.
Buyers most commonly encounter covenants when reviewing a contract of sale or a section 10.7 certificate. The covenant will be noted on the title, and a copy is usually found in the title search results. It may have been created decades ago by a developer who wanted to maintain consistency across an estate — restricting things like fence heights, building materials, or minimum floor areas. It might also have been placed by a previous owner as part of a deal when the land was sold.
The key thing to understand is that a covenant runs with the land. It does not expire when the property is sold, and it binds every future owner. If you buy a property with a covenant on the title, you take on that obligation — whether or not you were aware of it or agreed to it personally.
Why This Matters for Buyers
A covenant matters because it can directly limit what you are allowed to do with a property after you buy it. If you plan to build a granny flat, add a second storey, change the building material on a facade, or run a business from home, and there is a covenant against any of those things, you may be prevented from proceeding — even if council would otherwise approve it.
The practical risk is that some buyers overlook covenants during due diligence or assume they are outdated and unenforceable. In many cases that assumption is correct. Older covenants — particularly those that contradict current zoning or are no longer relevant to the area — can be difficult to enforce. But that is not always the case. Some covenants, especially those benefiting an adjacent lot or a developer who still holds interest in nearby land, remain very much enforceable.
It is also worth noting that covenants and council zoning operate separately. A covenant may restrict something that council permits, meaning the council cannot override it. Removing or modifying a covenant generally requires a court application or the agreement of whoever holds the benefit, which can be a slow and expensive process with no guaranteed outcome.
For buyers comparing properties side by side, a covenant on one title is worth factoring into the purchase price and development potential, not just flagging and forgetting.
Common Mistakes Buyers Make
Covenants are easy to miss on first read and easy to underestimate. These are the situations where buyers tend to come unstuck:
- Assuming the covenant is unenforceable — older covenants are not automatically void. Unless you have legal advice confirming no party retains the benefit, do not assume it won't be enforced.
- Not reading the actual covenant document — the contract of sale will note that a covenant exists, but many buyers stop there. The actual wording matters enormously. A restriction on "building materials" may be narrow or very broad depending on how it was drafted.
- Overlooking the impact on renovation or development plans — if your buying case depends on adding a secondary dwelling, building above two storeys, or operating a home business, a covenant may prevent any of those plans regardless of council approval.
- Conflating covenants with easements — both appear on a title search but they do different things. An easement gives someone a right to use part of the land; a covenant restricts what you can do with it. Both need to be understood separately.
- Not checking who holds the benefit — the enforceability of a covenant depends partly on whether someone still holds the benefit and has an interest in enforcing it. Your conveyancer can help identify this.
How This Shows Up in the Illawarra
In the Illawarra, covenants appear most commonly in established estates and older residential subdivisions, particularly in areas like Figtree, Albion Park, Shellharbour, and parts of North Wollongong developed during the post-war era. It was common for developers of these estates to impose covenants restricting things like minimum build quality, building materials, or the use of the land for anything other than a single residential dwelling. In some cases those covenants still technically exist on title, even if they have not been actively enforced for many years.
For buyers looking at properties with granny flat or dual occupancy potential — a common buying strategy in the Illawarra given land sizes and rental demand — covenants are worth checking carefully. A covenant against secondary dwellings on a block that otherwise meets council's requirements could derail a purchase plan that looked viable from the zoning alone. This is particularly relevant in Shellharbour and southern Wollongong areas where older subdivisions are common.
Buyers considering properties in newer estates, including some coastal and southern growth areas, should also check for design covenants imposed by the original developer. These often control external finishes, fence styles, or minimum floor areas, and they can affect what a property looks like and what it costs to build on vacant land or extend an existing home.
Practical Takeaway
When you receive a contract for a property, your conveyancer will check the title search for any covenants. Ask them specifically whether any covenants are noted, what they restrict, and whether those restrictions are likely to be enforceable given the current circumstances. This is not a box-ticking exercise — you want a plain-English summary of what each covenant actually limits.
If you have development plans that depend on something the covenant restricts, do not proceed on the assumption that it will be ignored or is too old to matter. Get specific advice before you exchange. Removing a covenant after exchange is possible but not simple, and it is not a given outcome.
A buyers agent who knows the area can flag properties where covenants are known to be a practical factor — and help you weigh whether the restriction actually changes the value of the property for your purposes.
Frequently Asked Questions
What is a covenant on a property title?
A covenant is a legal restriction that limits how the property can be used or developed. It is recorded on the title and continues to bind future owners.
When will I find out if a property has a covenant?
Covenants appear on the title search, which is part of the contract of sale. Your conveyancer will review this and flag any covenants when they examine the contract.
Are old covenants still enforceable?
Not always, but they can be. Age alone does not make a covenant void. Enforceability depends on whether someone still holds the benefit and has an interest in enforcing it. Always get legal advice before assuming an older covenant is irrelevant.
Can I negotiate the removal of a covenant before buying?
In theory yes, but in practice it is difficult to remove a covenant quickly. It typically requires either a court application or the agreement of the person or entity holding the benefit. This is rarely resolved before exchange.
Does a covenant affect first home buyers?
It can, particularly if you have plans for the property — like adding a granny flat for rental income or running a business from home. First home buyers should check covenants just as closely as any other buyer.
How does a covenant affect development approval?
A covenant operates separately from council approval. Even if council permits what you want to do, a covenant may still prevent it. The two systems do not override each other.
Does a covenant show up on a section 10.7 certificate?
Not directly — a section 10.7 certificate covers council planning matters. Covenants are recorded on the property title itself, which is why reviewing the full contract of sale and title search is essential.
Can a buyers agent help with a property that has a covenant?
Yes. A buyers agent can flag properties where covenants may affect your plans, help you understand what the restriction means in practical terms, and refer you to the right legal advice before you commit.
If you have questions about a covenant on a property you're considering, we're happy to walk through what it means in practice. Reach out and we can look at it with you before you commit.
