Restrictive Covenant Victoria

Buying or owning property in Melbourne is exciting, but it can also reveal hidden strings attached to the land title. One of the most common and most misunderstood is the restrictive covenant. These historical promises, often dating back a century or more, can stop you from building a second dwelling, using certain materials, or even running a small business from home. In this in depth guide we explain what restrictive covenants are, how they work in Victoria, and the practical steps to follow if you need to comply with, vary, or remove one. Whether you are a first time buyer in Footscray or a developer eyeing a site in Glen Eira, understanding covenants early will save you time, stress, and money.

1. What is a restrictive covenant?

A restrictive covenant is a private agreement registered on a property title that restricts how the land can be used or developed. Because it "runs with the land", every future owner remains bound until the covenant lapses or is formally removed. Typical wording might limit the land to "one brick residence" or forbid anything "other than a dwelling house built of brick". These covenants were popular in early twentieth century subdivisions to maintain a uniform neighbourhood character, and they continue to bite today.

2. How are covenants created in Victoria?

Under Victorian law there are two main ways a restrictive covenant is placed on title:

Transfer of Land Act 1958 – section 91A. The covenant is written into a transfer of land document and recorded under section 88 of the Register. Since May 2021 Land Use Victoria has required the Memorandum of Common Provisions (MCP) format when creating a new covenant by transfer to ensure standard wording.
Subdivision Act 1988 – section 23. A restriction can be created on a plan of subdivision lodged with Land Use Victoria. Modern plans often bundle the covenant with an owners corporation, easements, and building envelopes in the one document.

Whatever the mechanism, once registered the covenant becomes part of the "legal fabric" of the lot and will show up on any title search.

3. Finding out if your property is burdened

The quickest way to check is to order a current title search and plan from Land Use Victoria's authorised brokers. The search will list "restrictions" or "covenants" and the dealing number. When you are buying, the vendor must also disclose any covenant in the Section 32 statement under section 32C of the Sale of Land Act 1962. If you are selling, failing to include that information can give the purchaser a right to rescind the contract.

4. Common covenant themes in Melbourne

While every covenant is unique, several themes recur across Greater Melbourne:

Single dwelling restriction. Limits the lot to one private residence a headache if you plan dual occupancy or a granny flat.
Building material clauses. Typically require face brick or prohibit timber and galvanised iron roofs in older suburbs.
Minimum setback or value covenants. Dictate how far a house sits from the street or set a minimum construction cost (now indexed in today's dollars).
Use restrictions. Ban workshops, commercial signage, short stay accommodation or livestock.

Because Melbourne's growth has marched well beyond the 1930s suburbs where many covenants began, clashes between modern planning goals and outdated private restrictions are increasingly common.

5. Why restrictive covenants matter

A covenant can derail a planning permit application even if the zone supports the use. Councils must refuse a permit that would authorise a breach of covenant (Planning and Environment Act 1987, s61(4)). Banks may also withhold finance if proposed works contravene the covenant. Finally, any owner of land benefited by the covenant can commence Supreme Court proceedings to enforce it, seeking an injunction and damages.

6. Who enforces the covenant?

Enforcement is private. The council has no automatic role unless a planning permit is involved. Only the registered owners of land specified as "benefited" usually adjoining or nearby lots in the original subdivision have standing to sue. That means an owner five streets away cannot enforce your single dwelling covenant unless their title is listed in the instrument.

7. Three recognised pathways to vary or remove a covenant

7.1 Supreme Court of Victoria – Property Law Act 1958, section 84

This is the traditional and still the most certain route. You file an originating motion asking the Court to discharge or modify the covenant on one of three grounds: (a) the covenant is obsolete, (b) continued existence unreasonably impedes reasonable user of the land without benefiting others, or (c) beneficiaries consent. Applicants must serve all beneficiaries, place advertisements, and often engage planning and valuation experts. Costs typically exceed A$40,000. Recent decisions for example Jeshing Property Management v Yang [2022] VSC 306 show the Court remains cautious about intensifying density where a single dwelling covenant protects neighbourhood character.

7.2 Planning permit – Clause 52.02 of the Victorian Planning Provisions

Since 2000 the Planning and Environment (Restrictive Covenants) Act has allowed councils to issue a planning permit to vary or remove a covenant, provided the covenant was created after 25 June 1991 (the commencement of section 6(2)(j) of the Act) or, if earlier, all beneficiaries are notified and do not object. The application follows the usual permit process but any single objection from a beneficiary forces refusal. The applicant may appeal to the Victorian Civil and Administrative Tribunal (VCAT), which then applies similar tests to the Supreme Court.

7.3 Planning scheme amendment – Subdivision Act 1988, section 23 & Planning and Environment Act 1987, Part 3

For large or strategic projects a proponent can request a council (or the Minister) to prepare a planning scheme amendment that removes or varies the covenant across multiple lots. This process involves public exhibition, panel hearings, and ultimately ministerial approval. It is slow 18 months is common and costly, but it can solve estate‑wide problems such as outdated building material covenants.

8. Practical steps before you decide

Obtain the instrument. Read the exact wording and locate the map or plan that marks burdened and benefited land.
Check dates. If the covenant pre dates 1991, a planning permit pathway may be impossible unless all beneficiaries agree.
Seek beneficiary support. Early engagement with neighbours often avoids formal objections later.
Commission planning and legal advice. A planner can test compliance with the local planning scheme, while a solicitor can assess section 84 prospects.
Budget realistically. Court or VCAT filing fees, expert reports, potential objector costs, and Land Use Victoria registration fees (currently A$108.60 for section 91A instruments) all add up.

9. Recent developments and emerging trends

Land Use Victoria's 2023 bulletin 212 streamlined how variations under the Subdivision Act appear on electronic titles, reducing post‑order delays. Meanwhile, demand for medium density infill near activity centres has sharpened conflicts between single dwelling covenants and state housing policy. Although the Housing Statement reforms introduced in late 2024 prioritise higher density around transport corridors, they do not override private covenants so court or amendment processes remain essential.

Case law also shows the Court's willingness to remove covenants that are plainly obsolete, such as those referring to horse drawn vehicle sheds, while refusing requests that would significantly change neighbourhood character without broad support. Practitioners note the Court is increasingly receptive to using section 84(1)(a) to cleanse titles of "dead" covenants, saving applicants the cost of a full contested trial.

10. Frequently asked questions

Does a planning permit override a covenant?
No. A permit cannot authorise a breach unless it is expressly for the purpose of removing or varying the covenant under clause 52.02 – and even then only after the statutory tests are met. Otherwise the covenant continues to bind the land.

Can the local council ignore an old covenant when granting a permit?
No. Section 61(4) of the Planning and Environment Act requires a responsible authority refuse a permit that would cause the owner to breach a registered restrictive covenant.

What happens if I simply build in breach of the covenant?
Any beneficiary can seek an injunction in the Supreme Court forcing you to demolish non compliant works and pay damages. Insurers rarely cover that risk. Always sort the covenant first.

Conclusion: take action early

Restrictive covenants are a fact of life across Melbourne's suburbs. They safeguard neighbourhood character, but they can also hinder sensible upgrades or much needed housing diversity. The key is to identify the covenant the moment you think of buying or developing, understand its legal weight, and choose the right pathway for variation or removal if necessary.

Need tailored advice? Pearson Chambers Conveyancing specialises in Victorian property transactions and covenant strategy. For clear guidance and a free Section 32 contract review, contact us today:

Phone: 03 9969 2405
Email: contact@pearsonchambers.com.au