A restrictive covenant is, in effect, a restriction registered against the title to a property, which prevents a particular activity being carried out on the land. The property was situated in a rural location and the secluded nature of the area was important to the claimants. Sign up now. The courts would look at that claim on its merits before determining whether there had indeed been a breach of contract by the employer before confirming whether or not the restrictive covenants should be enforced. These two cases were considered in the recent case of  Humphrey v Rogers [2017]. The subject matter that is restricted can vary from caravans being parked on the property, using the property for the purposes of a business or even the placement of a new satellite dish. Provided that there is no breach of contract by the employer, restrictive covenants can still apply in a redundancy situation. Typically, covenants are intended to maintain the character of the area and are imposed by developers to ensure uniformity. Copyright © Gateley, All Rights Reserved. As examples, common covenants that our conveyancing solicitors see on a daily basis include: - Not to use the property for any other purpose other than that of a private dwelling house; The claimants applied for an injunction. Are restrictive covenants enforceable when an employee claims constructive dismissal? Sign up to insight, news and updates from across the Gateley group of companies. Our advice to you on this is privileged from disclosure; so if you opt for a restriction we think might be difficult to enforce, your employee cannot demand to see that advice if you end up in litigation. It is usually possible to agree a fixed fee to draft a contract containing restrictive covenants. Off the shelf contractual terms with boilerplate restrictive covenants prove difficult if not impossible to enforce. Restrictive covenants can be used in conjunction with garden leave, but they are more likely to be enforced if the time period is reduced by the amount of time spent on garden leave when the employee is not able to contact key clients and staff. Instead of treating damages as an exceptional remedy, it was considered that judges should instead exercise full discretion and consider whether it would be appropriate to compensate the claimant in money. Restrictive covenants allow surrounding property owners, who have similar covenants in their deeds, to enforce the terms of the covenants in a court of law. Compensatory damages to reflect the diminution in the value of the benefited land by reason of the breach 2. They may also be imposed when someone is transferring part of their property to another person. You can also be liable for damages. For example, if someone was selling off part of t… If a restrictive covenant is breached then the usual remedy is to seek an injunction to stop the breach. Home > Media > News > Injunctions to enforce restrictive covenants – some pitfalls Tue, 08 Sep 2020 If you are looking to enforce a restrictive covenant in a business protection case, the High Court’s recent decision in Peltrade Ltd v Scanlan [2020] 9 WLUK 34 is a timely reminder of how not to do things: The Courts can enforce a restrictive covenant through an injunction prohibiting the landowner from taking an action which breaches the covenant. Where a party applies for an injunction to restrain a breach of restrictive covenant, the Court has the option to award damages (i.e. A restrictive covenant is a promise attached to the land which binds the owner for the time being and forbids him from doing something with the land. This serves two purposes: reminding the employee that they exist and ensuring they have opportunity to seek independent legal advice about them when they take the Settlement Agreement to a Solicitor. Although the usual remedy for enforcing restrictive covenants is an injunction to prevent further breach, sometimes the damage is already done. Injunction Orders are enforced through the same Court using the criminal law burden of proof, of “beyond a reasonable doubt”, due to the threat of imprisonment of a fine. A restrictive covenant is a promise by one person to another not to do certain things with specific land or property We regularly advise clients in relation to the validity and enforceability of restrictive covenants whether they are considering purchasing a property to live in, … A commercial view will need to be taken comparing the cost of action and the potential damage of inaction. The court will make a decision on the matter and may grant an injunction that upholds the covenant, prohibits changes being made or forces any completed changes or building works to be reversed or demolished. Blanket bans on working for a competitor are less likely to be enforced than time-limited focused restrictions on contacting or working with key clients. In the first instance the injunction was granted, on the basis that the restrictive covenant had been a key consideration when deciding to buy the property. The agreement is enforced by granting an injunction forbidding the landowner to break the agreement. Conversely, if employees are made redundant when a business is struggling but it is trying to retain key clients, the enforcement of restrictive covenants could be essential to its survival. This topic is generally addressed in the author’s previous ar-ticles reviewing the law of restrictive covenants and deed restrictions in Michigan.1 A restrictive covenant or deed restriction represents a contract between the buyer and the seller of property… Many senior level employment contracts contain restrictive covenants. The remedy for breach of a restrictive covenant is an injunction. It can be sought whether or not that employee has restrictive covenants against competition provided that there is breach of duty regarding confidential information. Landlords should be very cautious before entering into a lease that contains a restrictive covenant. If you need emergency help on a criminal matter, if you have been arrested or are worried that you, or someone you know, may be arrested, our line is open 24 hours a day. More specifically does the enforcer need to be a “beneficiary” of the covenant or is there a legal mechanism for other parties to serve an injunction to enforce? Restrictive covenants or non-compete clauses are clauses in employment contracts that restrict what an employee can do after leaving employment. In short, it uses names of locations where activities occur rather than … 668114 ‘Freemans Solicitors’ is the trading name of Freemans Law LLP which is a limited liability partnership registered in England and Wales (with number OC Restrictive covenants are binding conditions that are written into a property’s deeds or contract by a seller to determine what a homeowner can or cannot do with their house or land under particular circumstances. This applies in the case of constructive dismissal. The defendants were therefore prevented from carrying out any further works to the barns or selling them. The injunction was not found to be oppressive to the defendants as they had agreed to the original restrictive covenant and all they would lose was the profit from the development. and. If the breach is yet to be committed then an injunction is likely to be awarded. Failing to do so can prevent recovery of legal fees. Gateley Plc is authorised and regulated by the SRA (Solicitors' Regulation Authority). A restrictive covenant is frequently found in relation to the use of residential property. None of these arguments was successful. Restrictive covenants, once agreed between the parties, are placed in the title deeds to the property … The restrictions usually relate to the ex-employee not working for a competitor within a specific geographical area for a specific period of time and not poaching your key staff members. If an injunction is awarded, it may even require a completed building to be demolished. Before commencing injunctive proceedings, it is usual to write to an ex-employee suspected to be in breach of restrictive covenants to seek undertakings that they will cease the activities said to be in breach. The main remedies for a breach, or a threatened breach, are damages or an injunction to prevent the breach or to discontinue one. The law on the enforceability of restrictive covenants is complex. Restrictive covenants can be found against freehold and leasehold properties. A restrictive covenant is, in effect, a restriction registered against the title to a property, which prevents a particular activity being carried out on the land. For this reason, it is important that restrictive covenants are bespoke – drafted after understanding the employee’s role and how they might be able to damage the business after leaving. Contracts of Employment containing restrictive covenants are included in our retainer offering for employment matters. The Court will attach weight to factors that a party can show are more important than money. The Court found that the judge had not confined himself to the Shelfer test, but had set out the consequences of both remedies. 7. (2) Although the default position is that a restrictive covenant is annexed both to the whole and each and every part of it,8section 78 of the Law of Property Act 1925 does not prevent the parties from providing that a given covenant will have some more limited geographic application. monetary compensation) as an alternative remedy. How the doctrine of “laches” applies to an injunction in a claim for equitable relief; Indemnity insurance for prudent property buyers; Examples of restrictive covenants include: Limiting the possible uses of the land; Prohibiting particular trades or businesses; Restricting the number or … Our property is subject to a restrictive covenant held by our neighbour & it states that only a single dwelling to be built upon our property/land. Before drafting any restrictions, we will get to know you, your business and the role to ensure that you are best protected. This procedure is known as “committal”. Restrictive covenants on property are important legal agreements that can affect not only the parties signing them, but also the parties that purchase or inherit property with restrictive covenants. parking a caravan in front of the property), adding new structures to the land, and whether owners can operate a business from home. This firm is authorised and regulated by the Solicitors Regulation Authority – SRA No. If you choose to ignore a restrictive covenant, you could potentially face a claim in damages for the breach in addition to any injunctions granted. Can we include restrictive covenants in a Settlement Agreement? The Court made an assessment of the amount of damages it thought the claimants would be entitled to, but went on to find that it would not be an appropriate remedy given the circumstances of the case. It is not uncommon for an employee in breach of a restrictive covenant to allege constructive dismissal as part of a defence to injunctive proceedings. Restrictive covenants, as the name suggests, restrict you from doing or allowing to be done certain things on your property. We believe, the current neighbour resides in the ‘original dwelling’ from which, decades ago, numerous parcels of land were sold off as single building plots all I imagine bound by the same covenant. A springboard injunction is used when employees have used confidential information to gain a head start in a competing business. Employees can be required to account for profits earned because of that unfair head start as well as being injuncted from further use of confidential information. You can try and negotiate a release from a restrictive covenant. It is common for a Settlement Agreement to confirm that the restrictive covenants in the Contract of Employment will remain in force. Where employees do attempt to compete in breach of their obligations, we can advise on the prospects and potential pitfalls involved in seeking to enforce restrictive covenants or obtain springboard injunctions preventing use of confidential information. Even where legal costs can be claimed from the ex-employee s/he may not be in a position to pay them. Restrictive Covenants apply to many properties and are usually created to limit the development or use of land to protect the amenity of land still owned by the seller.