Restrictive Covenants and Rules

Developers of subdivisions use restrictive covenants to enforce a particular building scheme or architectural appearance of their project.

For example, a developer may require all future homes in an area to meet a minimum size and architectural theme (e.g. contemporary western ranch). In Olds, restrictive covenants have been used in the Vistas subdivisions, the Lakeridge area around Winter Lake, and the Highlands subdivisions.

Restrictive covenants are interest in land regulated under the Land Titles Act, RSA 2000, Chapter L-4. The restrictive covenant dates to the mid-nineteenth century. The common law established certain requirements that had to be satisfied for a restrictive covenant to be enforced by and against subsequent owners of the affected parcels.

A Restrictive Covenant Must Have Four Elements To Be Legally Enforceable:

1. There must be a parcel of land which is subject to a restriction (called the servient tenement) and a parcel of land which benefits from the restriction (called a dominant tenement).
2. At least one restrictive or negative covenant (an item that is prohibiting something as opposed to allowing something) must be included so that a court can remedy a breach by granting an injunction.
3. The covenant must “touch or concern the land” through a restriction that enhances the use or value of the dominant tenement.
4. The covenant must be annexed to the land through express words stating such or by implication through the provisions included in the agreement.

The servient and dominant tenements must be clearly identified, typically listed in a schedule attached to the agreement. A property can be both a servient and a dominant tenement, creating a shared obligation between the properties involved in the agreement.

A developer, their lawyer, a consultant, or a combination of these typically prepares the content of a restrictive covenant. Since the developer usually owns all the parcels created at the time of subdivision they are able to unilaterally establish the agreement between all servient and dominant tenements.

The municipality does not participate in the content of a restrictive covenant unless the developer or person creating it chooses to include municipal input. Restrictive covenants are not subject to any requirement for municipal approval before being registered at Land Titles.

A restrictive covenant is only enforceable by the parties of the agreement. This means enforcement is limited to the developer (if they still own a dominant tenement) and any other registered owner of a dominant tenement. For a municipality to have enforcement authority, it must be registered owner of at least one of the dominant tenements.
While the decision to pursue enforcement can be made by any eligible party, actual enforcement is done by the courts rather than the municipality. The person(s) who decides to seek enforcement must obtain a court order (injunction) to stop a use or development that violates the covenant.

The most serious consequence of violating a restrictive covenant, when enforced through a court order, is financial liability. This may include legal costs related to court preparation and appearances. It may also include the cost of removing any structures or changes that violate the covenant and restoring the property to its previous condition.

A restrictive covenant can be removed or changed in one of two ways. One is with the written consent of all registered owners of each dominant tenement. This is done through a restrictive covenant amending agreement, which must be registered at Land Titles.
The other way is through a court order under Section 48(4) of the Land Titles Act. The court can modify or discharge a restrictive covenant on proof, to the satisfaction of the court, that the modification:

1. will be beneficial to the persons principally interested in the enforcement of the condition or covenant (meaning the owners of the dominant tenements), or
2. that the condition or covenant conflicts with the provisions of a land use bylaw or statutory plan under Part 17 of the Municipal Government Act, and
3. the modification or discharge is in the public interest.

If the court decides to modify or discharge then the court order is registered at Land Titles.

A restrictive covenant only expires if the agreement contains a set term or sunset clause (e.g. this covenant is void after July 2150).

If the municipality is not a party to the restrictive covenant, meaning it does not own a servient or dominant tenement, then it is not bound by the covenant and cannot enforce its restrictions. If the municipality owns a servient tenement, its decisions for that parcel must follow the covenant. If it owns a dominant tenement, then it can seek leave from the court to enforce the covenant against the owners of one or more servient tenements. Planning decisions made by the municipality are not bound by the content of restrictive covenants.

Yes. The municipality must meet all the expectations of the Municipal Government Act and the Land Titles Act regarding the form and structure of the restrictive covenant.

The difference between the private role and rules set out in a restrictive covenant and the public role and rules set out in the Land Use Bylaw is not well understood. Landowners and the public frequently assume that the municipality is responsible for enforcing restrictive covenants and that all development approvals must align with them.  This can put landowner and public expectations at odds with the reality of the municipality’s legal authority.

Some restrictive covenants are registered even though they may not meet the legal requirements of the to properly run with the land and be binding on future property owners. Where the structure of the document is unclear, a court decision is required to interpret it. Landowners often ask the municipality to provide an opinion in hopes of avoiding the cost of going to court. Answering the question in any way, other than to advise the inquiring party to seek legal advice, exposes the municipality to liability.

The restrictions may leave considerable discretion to the Developer, or someone acting on their  behalf, to interpret and apply restrictions like architectural appearance. There may be no obligation for consistency. Records of decisions made for each property are not available to the municipality.

The restrictions require purchasers and servient tenements to obtain “pre-approval” of their building and site plans before applying for municipal approvals. This requirement and/or the outcome may or may not be known to the municipality. It can also conflict with the municipality’s duty to process an application and the municipality’s obligations to the owner of the servient tenement.

A restrictive covenant may assign a pre-approval or decision-making role to the Developer or a person acting on their behalf without naming a clear successor. After the Developer has sold all their lots, they may no longer own a dominant tenement. This means the developer is no longer legally able to act under the covenant. In other cases, the Developer was a corporation established for the project and the corporation may have been dissolved once the project was completed.

In other words, the legal entity that was the Developer no longer exists. This can leave the property owners without a clear means of seeking “pre-approval” and confirming that their proposed property improvements meet the requirements of the restrictive covenant.

Restrictive covenants often address items that the municipality does not to regulate or may be more permissive or restrictive than the municipal regulation. This creates conflict between private restrictions and the municipal regulations that apply to the broader community. As a result, it can lead to a development being approved by the municipality but contrary to the restrictive covenant and vice versa. For example, a restrictive covenant may require a certain concrete pattern for a driveway, but the municipality may not even require development permit approval for installing or replacing a driveway.

Where a restrictive covenant is properly structured to allow for enforcement by owners of dominant tenements, it may pit neighbours against one another. This can involve disagreements over how the restrictions are interpreted or applied, and may even lead to legal action to enforce the covenant.

The existing owner(s) may have difficulty closing a sale of their property when no clear answer can be provided to a potential purchaser. This can happen where it is unclear who has authority to approve changes under the restrictive covenant, or the party that would make the determination no longer exists.

The Developer may or may not choose to enforce the restrictions. Owners of dominant tenements have the same discretion. This can lead to uncertainty as one owner appears to be allowed to do something to their property that another owner was denied. Enforcement can also occur at any time which may lead to interpersonal conflict between neighbours or inconsistent interpretations as ownership changes.

Restrictive covenants often focus on the initial wave of development within a subdivision. The restrictions may not account for how properties evolve over time. This means the area can become fixed in time. For example, a covenant might mandate the use of brand name exterior treatments that eventually become unavailable. It can become more difficult if there is no party assigned the role of checking proposals against the restrictions and providing approval.

Changing or removing a restrictive covenant is not easily accomplished. The easiest method involves the written consent of every registered owner of a dominant tenement. This means achieving 100% consensus on any proposed change. Failing that, a court remedy needs to be obtained.