Introduction
Most developers in recent years have placed land covenants (also called restrictive covenants) on the titles to the lots in new subdivisions. These are intended to restrict what can be built on the property, and in some cases what the property can be used for.
The recent High Court case of Whittiker v Jericevich looked at the extent of a restrictive covenant.
Background
The Jericevichs owned a property in a subdivision. All of the titles in the subdivision had a restrictive covenant on them which said, among other things, that:
‘The transferee (being the owner) shall …(b) not permit the placement or erection on the Lot (of) any building other than a one single storey residential dwelling together with not more than two single storey accessory buildings.’
The Jericevichs built a single storey dwelling on their property for use as a residence, and also for use as a bed and breakfast business.
The owner of another property in the subdivision, Mr Whittaker, applied for a Court order to prevent the Jericevichs’ property being used for a bed and breakfast business. He claimed that the use of the words ‘one single storey residential dwelling’ prevented and restricted not only the type of structure that could be built, but also the use to which is could be put, so that any use of the building other than as a residential dwelling was prohibited.
Court Decision
The Court did not agree that the use of the building for a bed and breakfast business breached the restrictive covenant, for the following reasons:
1. The design of the house
Other clauses in the covenant required any house to have a floor area of at least 200m2, together with other restrictions.
The developer had approved of the plans for the Jericevichs’ house before it was built, and the house did not in any way breach the size or the quality restrictions in the covenant.
2. Additional Structural Requirements
The Court said that the house had been built in accordance with the structural requirements for a bed and breakfast operation under the relevant building code.
3. Developers Intentions
The Court decided that the developer had used the restrictive covenants as a way to preserve the quality and uniformity of houses in the subdivision, rather than to restrict the use to which any building could be put to. The Court did not agree that the covenant required the character of the building to be exclusively that of a residential dwelling, ‘when the character sought to be established for the subdivision could reasonably accommodate residential dwellings with other components that did not compromise their overall character as such’. The developer’s intention was to maintain a certain standard for the buildings in the development, rather than to restrict the activities of the residents.
4. Essential Character
The Court also said that the existence of a commercial operation within a dwelling/house does not necessarily change the ‘essential character’ of the dwelling/house. The Court said that society accepts that a dwelling may have multiple uses, and that the boundaries between activities such as hobbies, projects, and activities that have a commercial aspect are no longer strictly defined. Therefore, in the absence of ‘clear signals’ to suggest otherwise, that Court was reluctant to imply a limitation on what a building could be used for. The Court said that reasonable ‘adjuncts’ that would be found in residential dwellings would be allowed, so long as they did not deprive the building of its essential character as a residential dwelling. The Judge said that the operation of a commercial bed and breakfast was not ‘antithetical” (i.e. contrary to) a residential dwelling.
Summary
If a restrictive covenant prohibits any dwellings apart from a ‘residential dwelling’, it does not in itself mean that the dwelling cannot be used for some types of commercial purposes. If a developer wants to restrict the use to which a dwelling can be put, a clause containing that specific restriction will have to be added to the covenant when it is registered.
If a restrictive covenant only prevents ’residential dwellings’, and does not specifically prohibit certain uses or activities, some commercial activities may still be able to take place in the dwelling, as long as they do not change the essential character of the building as a residential dwelling. Of course, the Council’s District Plan will also contain restrictions on what the building can be used for.
Although some commercial activities may be allowed in a ‘residential dwelling’, those commercial activities will have to be closely aligned with the purpose and character of a residential dwelling.
