Restrictive covenants and overage payments: a ‘touching concern’

A restrictive covenant is an agreement between two parties whereby one of the parties agrees to restrict the use of its land for the benefit of the other party. 

For example, Mr Jones decides to sell some land adjoining his house to Mr Smith. Mr Smith plans to open a coffee shop and Mr Jones is keen to ensure that no alcohol is sold from the shop (as he is fearful of the anti-social behaviour this may cause). Mr Smith and Mr Jones therefore agree that Mr Smith will not sell alcohol from his premises and a restrictive covenant is inserted into the transfer. 

Mr Smith’s land has the ‘burden’ of the covenant (he can’t sell alcohol from his premises) and Mr Jones’ land has the ‘benefit’ of the covenant (his land will benefit from the fact that Mr Smith can’t sell alcohol)…

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