As many properties in Melbourne are affected by covenants, keeping up to date with these issues is important.

One avenue to vary or remove a restrictive covenant is via s84(1)(c) of the Property Law Act 1958 and through the Supreme Court. One such recent decision is worth reporting on and that is the decision of Lascon Investments Pty Ltd v Phelan (2021) VSC80. This decision related to an application to vary a single dwelling covenant to enable the construction of a second dwelling.

The case was defended by three beneficiaries of the covenant.

It was determined in this case that the Plaintiffs failed to establish that the proposed variation will not substantially injure the beneficiaries of the covenant for the following reasons.

  • The expert evidence presenting that the area would continue to evolve towards a more diversified neighbourhood including a greater number of multi-dwellings was not accepted. This was considered speculative and relied on other similar covenants being modified.
  • The Defendants evidence was accepted that the proposed construction would break up the streetscape, impact on the spaciousness of the area and be out of character.
  • The Defendants submission was accepted that the unique character of the area was defined by the large number of single dwellings and overall spaciousness and as a result lots benefitting from the covenant experience practical benefits even though they do not abut the subject land (and even do not reside in the same street).
  • Allowing this variation would create a precedent for modifying the covenant, setting an undesirable precedent that would undermine the benefits beneficiaries enjoy by the existence of the covenant.

This seems to be a conservative decision but a decision that we need to reflect on as it recognises the high protection afforded to covenants in a planning and legal sense. In addition, the decision recognises that even small modifications can be seen as undermining the rights of beneficiaries embodied in their title.

Based on this decision, we suggest that you tread carefully when purchasing land affected by a restrictive covenant, particularly single dwelling covenants, where there is an expectation to remove or amend the covenant.

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