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Finding a great property development site only to discover it has a restriction on the title like a single dwelling covenant can be very frustrating and often leads to a potential project being ruled out. However, getting covenants lifted or modified is not an impossible task, but it can be tricky.
Fortunately, we are speaking with a previous guest who has lifted not only one, but two, restrictive covenants in two very different ways.
So let’s find out what’s involved with varying or removing a single dwelling covenant or other restriction on a property’s title.
“Be inquisitive and you might learn something useful.” John Marquez
Lifting Restrictive Land Covenants
- What is a covenant
- How do I know I have a restrictive covenant
- Ways to remove a covenant
- Who to use
- Removing via Planning Process
- Removing via Supreme Court
- Determining which option to go with
Listen out for how John ended up at sitting in the Supreme Court thinking they may lose his case…
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Transcription
Justin
Hello and welcome to episode 81 of the show. Thanks for joining me. Trust you well. I’m doing OK just sitting in another lock down in Melbourne, so it’s been another couple of weeks of just sitting at home with the kids around and. Everyone getting a bit bored, but we’re working our way through it and we’re just about to come out the other side, so fingers crossed that we can continue being open.
So fortunately, residential construction has remained open, which has been good for my project because workers continued things are looking good on site. All the scaffolding is come down now so it looks really nice on site without any of the scaffolding around and you can see the designs of the buildings shining through. The interiors are being worked on. Some of the interiors of the. Town houses are just about done is starting on the landscaping.
They’ve poured some of the driveway and the finish line is insight, so it’s been quite good. Although there’s been the usual issues that have popped up that require some solutions to problems, but that’s part of developing so things are moving along there, which is really exciting on my other project. The site has been cleared. It’s looking really good. We’ve submitted our town planning package into council for endorsement, so we’re just waiting for them to hopefully stamp that.
We’ve managed to achieve our pre sales which is good and we’re just getting ready to start construction. So going through all the financial documentation and getting all the conditions sorted out so everything happening there as well. So it’s been a very busy couple of months for me now. One good part about the lock down in Melbourne is that I had a little bit of time to wrap up my training program which has been good and I now have some people in there testing it out. And I’ll be opening it up soon to other people.
So if you are interested in learning how to develop property then please email me justin@propertydeveloperpodcast.com and I can send you some more information about the program. I’m sure it’s going to be something that people really enjoy now. Speaking of my project updates, be sure to check out my social channels on Insta and Facebook under the handle of property developer podcasts and you can see all my latest project updates. I do video updates about how the sites are looking, so if you want to check out how they’re progressing, that’s where you can find them. And I also post other property development related news, so go check him out.
OK, onto today’s guest. A friend of mine, John Marquez, will be familiar to people who listen to the show. John was my very first guest on the show way back in Episode 2 and we also talked to him in episode 12. John is a very active developer, done a number of projects, couple of four units sites a couple of 10 unit sites. He’s got quite a few projects happening and we’re going to talk about John’s experience getting restrictive covenants lifted off property.
So this is a conversation we haven’t had before on the show. It’s quite interesting about how you can get a covenant lifted off a potential development site. So in this conversation with John, we’re going to talk about what is a restrictive covenant and how do you know if the land you’re looking at has one? Who do you need help from to remove a covenant?
And how do you actually go about getting them lifted? So keep an ear out in this conversation for how John ended up sitting in the Supreme Court of Victoria, wondering whether or not he may be losing his case. So this discussion between John and I is just that, a conversation. It’s not legal advice about how to get a covenant removed. You need to talk to a good lawyer about getting that done.
If it’s something that you’re thinking of doing anyway, I really enjoyed this chat about restrictive covenants. It’s a good one. I’m sure you’ll get something out of it, so let’s head over to Jaune. John Marquez from Arena equity.
John – 0:04:25
Welcome back to the Property Developer Podcast. Thanks again Justin. Good to be back for those who joined the podcast a bit late in the piece.
Justin – 0:04:37
John was actually my very first guest on the show in episode #2 and then you came back and joined us for episode #12. So if you want to find out a bit more about John go back and have a listen to those two episodes. But you’ve had a pretty interesting property development career so far. You’ve decided to tackle a couple of interesting projects which we might touch on a couple of them today, but you did a small. For you to project is your first project and then you partnered up with someone and took on some bigger projects. And one of them involved removing a covenant which we’re going to talk about today.
Removing covenants, but maybe just give us a quick snapshot of what you’ve been up to since we last spoke. You’ve definitely had a few more projects under the belt. Well, one of them that I forgot to mention was a trip to the Planning Tribunal, which you weren’t successful at.
John – 0:05:40
So yeah, you’ve had a pretty colorful developing career. Yeah, that’s correct. I mean, it’s it’s funny, isn’t it that when we first start developing and for those of us that have had mentors in the past where sort of told this is what you should look for in relation to a site has let your agents know these dimensions this size. This and that? And then we just find that the properties that we actually come across and end up buying completely curveballs an. In tough markets, sometimes you just have to accept the fact that.
You will come across sites with problems and challenges and we’ve just found that that’s been the best learning for us. Yes, I think we last spoke.
Justin – 0:06:28
You tackling an 8 unit site that’s definitely been wrapped up. Or maybe it was a 10 units. I think he did another 10 units site. So then you’ve got a. I think you’re just finishing a four unit site. You’ve just acquired another 4 unit site, so you’ve been pretty active.
John – 0:06:49
Yeah, so as soon as I joined forces with my other business partner we. We just spent the time we both, uh, sorry, tell that an auction where the prices blue beyond anything we thought it would, and so we sort of both had the idea. At the same time that we need to step up to the next level because there’s just too many people like this three to four unit sites. Just too much competition, so it’s finally as soon as we make that decision. We started finding larger sites quite easily. Things have changed now, but.
Yeah, it’s quite surprising how quickly we found them.
Justin – 0:07:33
So I think your first project as a partnership was this. Is that a 10 unit site anyway? Was the site that had a single dwelling covenant. So let’s talk about we’re going to focus on covenants and removal of them. So let’s give you’ve got two projects that you’ve done now, so perhaps you could talk us through that first sight, and then we’ll move on to the other side. That has had a covenant in, and how they were slightly different.
John – 0:08:01
OK so the it’s funny the first sight. But we actually came across the header covenants with the one dwelling covenant. We were aware of it from the start. Uh, at that stage we worked really well with Hurst in how the whole process is gonna work in relation to removing it. We did gather enough information to give us understanding that. We could potentially remove it through the Council process or the planning process.
The vendor at the time had quite a bit of Intel in. In the street. He knew just about everyone on that street, which were all the beneficiaries to that covenant. And because most of the people on that street either had large blocks like the one we purchased. Four were living in already subdivided blocks.
None really had an interest to challenge us because obviously the guys with the bigger blocks were thinking of doing the same as us, so we probably I think we were the first sight on the streets. Large site to remove a covenant. Uhm, so the process for that one. Surprisingly sorry to jump in.
Justin – 0:09:23
How big was that block again?
John – 0:09:25
Was it 3000 square meters? 2 two 2200 so it’s quite a big block. It was in a general residential zone and it had a DD 08 so. Close proximity to group shops there. So I was in a good position so it’s a bit. Sad to say, it just had a little house in the middle.
This massive block and no one could do anything with it or no one had done anything with it. Uhm? Yeah, so I’m not sure if it was a bit of naviti at the time. The fact that we thought things would go smoothly, which they did. Uhm, and then obviously later on with other projects, we found that it can be quite challenging the removal process.
Do you want me to talk about how we went through it? Yeah, well, we might just take one step back before we get into the mechanics of how you went about it.
Justin – 0:10:21
But when you’re looking at a site, how do you know? That it’s got a covenant and what is a restrictive covenant or a covenant.
John – 0:10:33
Yeah, I’ll just. It’s interesting, I was reading the other day on some covenant forum about the number of developers in the past that have been called out. With some covenants there, so easy to miss and I’ve actually heard stories. Developers have gone all the way through the planning process, only to find out toward the end that they probably had a one volume covenant. And that’s the fact that Council don’t really look into the title till right at the end of the process. So unless you’ve got a team, I mean look in most cases you expect the real estate agent to make you aware of this or your solicitor when he’s reviewing the contracts.
But yeah, it’s interesting to know that it’s actually gotten. Under the radar of a lot of people. So. Just mostly to to describe a covenant. Basically it’s an agreement between land owners which may restrict how land is used and developed. So. I think if you look at new estates today you could not sure if they actually covenants, but you know that new estates have rules and regulations around what can be built on there besides the materials.
So this is very similar, so there are many covenants, but the most important one that you need to know is the one dwelling covenant. That’s the one that can really stop your tracks. Uhm? So where to find it? There’s really only one place to know or see, and it feels like it’s hidden away in a way because it’s only a one line and you’ll find it on the title under encumbrances and caveats.
There you will see a little one sentence saying that there’s a covenant. Now you may not know what the covenant is, so the best step is, once you’ve identified that is, get someone. Up in the legal in your legal team or yourself to find further information about that covenant. Two titles office.
Justin – 0:12:49
Yes, normally there’s one line on the title that says there’s a covenant or reference to a number related to the land, and then someone who has the skills to be able to go and look that up can then go and have a look at what the actual details of that restriction are.
John – 0:13:11
Yeah, that’s right. So I think it’s more restrictive covenant document which you can obtain from the tunnels office and that then elaborates on what it is exactly much, and that’s something obviously that you need to know before you can move forward.
Justin – 0:13:25
Yeah, and some of these can be quite old, because what happens when you think about cities. 5060 seventy 8000 years ago, for example Melbourne or Sydney. Any of these big cities? The outer areas were large trucks farming land and then they slowly get carved up into parcels of land to sell to homeowners and then quite often the farmers of the developers put restrictions on the land and that’s how they ended up with these single dwelling covenants and then the cities of continued to grow around them and then suddenly having one house on a on a big block on 1000 square meters or 2000 square meters just seems ridiculous, but. I’ve still got the the covenant on them.
John – 0:14:13
Yeah, and some of the reasons for the covenants seem quite. Don’t seem to relate to today’s times anymore, so you may have one where it says no removal of soil, no quarry. Must have slight rooves. So although when we see stuff like that, we think we don’t think much of it. The Supreme Court takes covenant removals very seriously. So although we may think that they are outdated, they’re not relevant today. The Supreme Court season a serious matter because it is an agreement that was made in the past.
Justin – 0:14:50
Yes, well, it’s good that you touched on the Supreme Court, so you’ve had one covenant removal that went pretty smoothly. It went through the planning process. The other one that you had to go through the Supreme Court.
John – 0:15:02
So let’s talk about the two ways that you can get a covenant removed and then let’s go through your experience with both those options. OK, so. There’s a few ways, but the most popular ways are either through the town planning process. For the Supreme Court. Uhm? Deciding on which way to go about it.
You would find out through digging information about a covenant. So you would usually as soon as you buy a synergy committed to a site safe food, due diligence. During that time you will try and find out as much information as you can about the covenant, the beneficiaries, or the people affected. The number of beneficiaries. Where the beneficiaries live in relation to your site.
And so obviously information you would. Either you would achieve through your land surveyor, a town planner, or even legal experts and covenants. So once all that’s revealed, it gives you a good understanding of which way to go because. When most people sit down and talk to the land surveyor or their solicitor, they usually find that it’s a no brainer to go through the town planning process. It’s more straightforward process, so it’s similar to just a planning application you submit.
It goes to advertising and council make the decision so you think, well, it’s cheaper, it’s faster. So it’s a bit of a no brainer until you find out that you only need one beneficially to object to bring the whole process to a standstill. Once that happens, Council just issue a refusal and then you end up with the Supreme Court basically. So. You would have to be quite confident that you’re not gonna get any challenges for many beneficiaries, which may seem like an insurmountable task. However, it all depends on how many beneficiaries are are.
If we find that there’s only, say, five or six beneficient, you may be able to meet with them and have a discussion around whether they’re thinking of challenging. If not, you can you can formulate a legal letter, but they can sign saying that they won’t be taking the action. And you can submit that with your application, so that sort of covers you from the start. However, in most cases you’ll find that you’ll have more beneficiaries in that.
Justin – 0:17:40
Yeah, the funny part about beneficiaries is that the land that the beneficiary is or the land that a little and that is considered beneficiaries. It may not just be next door, sometimes it can. They can be streets away,
John – 0:17:55
there’s it’s really. There’s no kind of rhyme or reason about where some of these titled beneficiarii blocks might be. Yeah, but there from the Supreme Court or even from councils. More from the Supreme Court. If you end up there. Uhm? The further away a beneficiarii is.
The less he’s gonna be. Uhm? Affected by what you’re doing. So visually you know it’s not gonna be. His views aren’t going to.
Any views that he may have, or any changes that you’re making won’t affect him as much as it would your immediate neighbors. So This is why it’s important to find out who they are and where they are, and then having that information. And if you do end up at the Supreme Court now, you the Supreme Court have got all this information, and then they know that the people they have all the Intel on the people that are challenging it and then based on that they will determine that. It’s not really affecting anybody that comentale depending on where they live.
Justin – 0:19:08
Alright, so for your first site that you did the covenant removal, you went through the town planning process and that all went fairly smoothly. Is that right? You went to advertising or were there many beneficiaries?
John – 0:19:22
No, but it was basically the people on the street and it wasn’t. It’s not a big St so. Uh, there weren’t many beneficiaries, and as I said, a bit of nobody from our behalf ’cause we just thought this is too easy so. Had no challenges from anybody we did. Meet with some of the neighbors. That we got in contact with through the vendor who knew quite well an.
So we had an understanding that we weren’t going to get challenged. However, as I said, it depends on. We didn’t actually talk to all the beneficiaries, but we had a fairly good understanding just based on the fact that most people on the street had large blocks or something, but it already blocked, so wasn’t really much of a issue to them. And also the fact that they didn’t have an understanding of what we were proposing. ’cause at that stage we try not to declare or make it obvious spot we were planning to do with that site, so all went smoothly. Uhm?
Justin – 0:20:27
I just had a recollection I just had a recollection. I just remembered that I think you had a clause in your sale contract with the vendor that related to you getting the covenant lifted.
John – 0:20:40
Is that correct? Yeah, it was quite surprising that he accepted that so. The deal was that the clause in the contract was that. Subject to removal of the covenant, which were a bit cheaper than getting there and didn’t think it would be accepted. But it was. So we’ve tried that sense on other sites and. I found in most cases that are van doors.
Not willing to accept such causes so it was pot. Surprising that the vendor at the time did. Yeah well, we’re talking about a different market.
Justin – 0:21:21
When you were purchasing that block, but so. You went through advertising. You got no objections, and then what happened?
John – 0:21:32
So then you get to the end of the process and then the most important part, once the process tension because up to that stage anybody could steal. Just like with planning processes, anybody is still able to object, so we were informed by our solicitor that the most important part of the whole process is to get it registered on title. The removal of the covenant or the modification. The most important thing until then you’re open to. Object is still coming into the picture, so it was vitally important that we got that done straight away, and I recall that once we had done that.
Uhm? We met with Council for pre approval application. And I just remember when the planner opened up the plans that we had an freaked out when you saw the number of units we have proposed. I think originally we propose 10 and as he opened unfolded. The document he basically passed out.
It was quite taken back and he said I thought this block had a one dwelling covenant that she removed who said yes and he said, oh, I didn’t expect this minute to be put on there. And so this is another reason why. Uhm, you have to be cautious about which Council with is. You’re dealing with certain councils. Just like with subdivisions, one allow you to just submit an application for the removal or modification of a covenant they actually want to see.
The town planning application, with it showing what it is that you’re proposing, just like with the subdivision they want to see what it is. So in this case, this particular Council didn’t ask for it, so that was another reason we were quite confident that we have a good chance of getting it through. We were informed by our solicitor that if Councils that do wanna see both applications at the same time that you may be better off going straight to the Supreme Court. So in that case you just had the single dwelling covenant lifted,
Justin – 0:23:45
so the land was basically unburdened.
John – 0:23:48
Absolutely, yeah. So it was a complete removal. That’s correct. It wasn’t a modification. A complete removal. So basically now you had a block that was 2200 I think with two, four D 08 so. It’s a.
Increase the value of the property part significantly.
Justin – 0:24:11
Alright, so tick for that one. Successful covenant removal. You did the project. It all went really well and then you decided you’d try it again so that tell us about the next.
John – 0:24:26
Block that had a covenant on it. Well, once that much about deciding to do it again, it’s just that we came across another sites and then we thought, like how we’ve gotta got somewhat of an experience with covenant removals. This one happened to have it. It was a smaller site. However. Again, it was in a DDR wait a month or so.
Of course, when you’re tackling covenant removals, you was at the factory. In the worst case scenario, so the extra time and the extra money and the extra headaches and then risk reward workout if it’s all still based on your feet, so worth the effort. So with this one we came across was summer main Rd. At once, well in Covenant there is. Quite enough examples and precedences on the street to make it seem like it was a straightforward no brainer to remove, so we thought this is an easy one.
We had our neighbour next door on one side that had recently had theirs modified. We had a couple of other examples further down the street. We had our neighbor on the other side that was looking at removing theirs or modifying this also. So we thought it’s all happening here. This is an easy one.
However, before we started the process or before we committed to the site, we were also aware that there was. Uhm? A serial objector in the area that was challenging for Covenance anybody trying to remove the modified covenant? Uh, so we cautiously started the process. We’ve got enough information on everything and start now.
In the case of this one we were misinformed. There’s a few things that went a little pear shaped at the start, which meant it extended the whole process. So initially land surveyor didn’t clearly identify all of the beneficiaries. So the covenant. So when then Council when Council advertised they just did a blanket advertising to everybody, which they’ve got the right to but probably shouldn’t have happened.
We should have informed them more clearly. Of all the beneficiaries without having left any out. So sorry, just sorry to interrupt.
Justin – 0:26:53
What do you mean council? Did a blanket advertising?
John – 0:26:59
Uh, OK, something. I think there’s there’s rules around if Council ban have enough information about something that they can just advertise to everybody in the vicinity so that every
Justin – 0:27:11
household or every block of land within a certain distance from.
John – 0:27:16
The subject site. Yep. Potentially sweeping up a whole bunch of people that have no interest or aren’t considered beneficiaries. Right, so we started getting objections from people that actually worked beneficiaries. And there was also confusion around who was and who wasn’t just based on the information we had at the time. So we have to go through the process of couple of times as far as advertising. Because we weren’t getting much clarity, it seems like. It. It seems like it’s quite simple to just.
You know, get a legal team to go to titles, office, dig up all the information on all the benefit issues, but it just isn’t that simple. It is quite complex because. You know blocks of land gets subdivided into smaller blocks, then those subsequently get divided into smaller blocks and so you gotta follow the trail of when these subdivisions were done. The dates which one proceeds, which one the beneficiaries of each. Then it gets quite. Details.
So our mistake was probably that we should have used a legal expert rather than just a land surveyor. Uh, so that was part of that issue so. And then the the person that the local. Serial objector, he got wind of this and he approached council and. Started having a go at Council.
He went there quite a few times, challenging some of the stuff that wasn’t done. Rights and things like this, so he started getting wind of all this stuff. And yeah, he’s just started making it difficult for us. Uhm? So I think they will go well from the start.
As I said, we received. Objections from people that won’t beneficiarii some that would know whether they were or not. So Council had to then referred to their legal team to get a little more clarity over the whole matter and towards the end, yeah. The whole process. A breakdown by simply due to the fact that initially we were informed that there weren’t that many beneficiaries.
I think it was a total of 13, and most of those were three four blocks away. In the in the dead end streets in a little section of the suburb, and so that was part of the reason we decided to go through the town planning process as opposed to straight to the Supreme Court, which probably would have been. In hindsight, the best option based on knowing that. We’re going to get challenges just based on the fact that once it was revealed there was many more dozens more beneficiaries than what we were initially informed by this date. We had already started the town planning process, so I was a little late, so we thought, let’s just see it through and see how it goes.
Justin – 0:30:27
So how many beneficiaries roughly were there in the end?
John – 0:30:34
I think there was. I think there was 30 or 40 beneficiaries and they were all around us. So initially we were told that there was none. There was no beneficiaries to the covenants in the immediate vicinity and then it was revealed that all our neighbors front side back forward beneficiaries to the covenants are now became a completely different matter, knowing that. They had a right. They had more rights than someone that was. 2-3 blocks away, which sounded odd from the start, but that’s that. Was the information that we had at hand at the time, and we believed. Uh, the person that.
Had revealed this information for us, so we have a let down, but yeah, it was all part of the process I guess so. We got towards the end and obviously having a beneficiarii object that just meant the Council were no longer part of the process that now became a legal process and therefore it would have to then go to supreme for.
Justin – 0:31:41
And so, roughly how long did that take and how much did it cost?
John – 0:31:47
This is another reason a lot of people when they first get an understanding of the processes to removing covenants, choose to go through the planning process. It’s much cheaper 2 to $3000.00 an. Bob takes between four and six months. However, if things don’t work out the way you expect them to, you can then add another six or nine months to that ’cause you’re going to then have to go to the Supreme Court to resolve the matter so. Many legal experts will say that it’s always best, even if you know you’re going to end up at the Supreme Court to go through the town plant to go through the town planning process first, or the planning process becauses it will reveal.
Everybody, it will reveal who’s who and that makes the supreme courts process a little easier and faster. As you’ve already got that information. So when you have your first hearing, they’re already aware of who’s who and who’s top and who’s got more rights than who to object. Based on who’s been more affected by what you’re proposing.
Justin – 0:33:01
Alright, so you get your rejection letter from the Council, then what?
John – 0:33:08
Attack, so then it’s just a matter of finding. Uhm, comment removal expert. In our case we used. Eastern Consulting, I’m thinking is there well known. They’re probably one of the biggest and best known in Melbourne. Robert Easton so we poached him and then he started.
Digging up all the information it could to start the process. And then. So that’s his job. And then you’ve also then you’ve got a legal team who have the barristers who represent you in court and the best number one of the biggest is auditons. So we implore Dessa, this is also so.
They put a case together and we went to the Supreme Court. So hello, and what did that cost? What? What happens? OK, so. We usually factor in if we now with weaselly factoring worst case scenarios when it comes to removing covenants, so we always start doing the fact that we’re going to end up at the Supreme Court.
As you would when you buy any site, you always factor in the worst case scenarios and if your number still reasonably good then you know that that’s the worst that’s gonna happen. So we usually factor in 25 to 30,000 knowing that if we end up at the Supreme Court, that’s roughly what it’s going to cost us. In this case, we went to the Supreme Court with our neighbor, who was in the same position as us. He was looking at. Modifying the covenant.
And then either developing or putting his site on the market. So what was revealed about the neighboring properties that had the covenants modified or initially thought removed? But what we realized was they had their modified to 4 units so. It would be a no brainer to know that if you tried to challenge beyond four dwellings that you’d be in serious trouble. The Supreme Court, so we knew this from the onset, so we’ve already done our numbers on best case scenario.
Getting 4 units on the site, factoring 30,000 for the Supreme Court. We did end up saving some because we went jointly with our neighbors, so I think it ended up costing 44,000 in total, so cost us save 22 each. So there’s a bit of a saving there. So when I sorry John, when you feel process is made up of a few hearings. The first hearing is usually about how.
The court gives directions on how the. Beneficiaries will be notified or how the advertising will come about. So whether it’s putting a sign on the property, making sure that all beneficiaries notified, making sure that you have the correct addresses for all the beneficiaries, ’cause obviously some of these. Uhm, properties, uh, tenants are there so you actually have to know the actual addresses of all the beneficiaries. How you gonna go about it.
Advertising in local papers. On sites. So that’s really the crux of the first hearing and. Uhm? In some cases, the objectors roll up just to hear what’s going on, but I don’t recall where the objectors had much to do with the first hearing.
Based on that, it goes to advertising. And then based on the objections that you get, then, then then you have the next hearing, which then is based on the court hearing. Uhm, what the objectives have to say, who they are and what they have to say and how they believe they are being affected.
Justin – 0:37:31
Scott, just wanted to jump in and ask a question about removal and modifying, so when you went through the town planning process originally, were you trying to remove the covenant or just modify it?
John – 0:37:46
No I. I believe we tried to. Modify it so we already had the understanding from the start of the fact that. That was all we could do, and so. Uh, in relation to going through the town planning process, it’s always best to let him know as much information as you can because anything. Uhm, anything that. Wasn’t if worked if they weren’t informed off at the time, could impact later, just with the Supreme Court so.
We submitted for the modification before. OK.
Justin – 0:38:34
Alright, so you had your first hearing.
John – 0:38:37
You went to advertising. What happens then? Think we had interesting Lee. Interesting Lee, the one of the objectives had previously. Bing to the Supreme Court challenging. Another property nearby on the removal of the Covenant. Uh, so he was known to the courts.
Usually. I, an objector, is the courts happy to hear the objectives and however when it comes to someone that has already been through that process, the courts are bit more weary of him, an. In the second hearing, I think it was the courts made him aware that he was very that they knew that he was very knowledgeable of the whole process because he started playing the game, installing the time he was giving reasons that not all the beneficiaries were up to speed on what was going on and he was paying visits to him. So he was basically trying to get someone to represent him, because if. If things lead up to a further court case.
It would mean that he would have to pay costs up to that usually on usually in the comment removal process through Supreme Court. The costs of the costs for the beneficiaries being there usually comes out of. Well, it’s something that you have to pay. If the courts have found that that someone has already that a beneficiary has already challenged the same covenant in the same area, they make them aware that they’re going to have to pay their own costs. That usually scares them from taking it to the next step.
So we found in this case that. He dragged other people in there that didn’t really seem like they want to be there. There was elderly ladies there that didn’t really want to do much and you can see that they just didn’t want to be there, so. His purpose was to make it difficult for us to hit our hip pocket and cost this time because he knew that there was already enough precedence in the street. That this was going to go through, however, he just made that little bit harder, caused us caused us to go to a further hearing because the judge.
Wanted to get a better understanding of the area and so decided to adjourn that second hearing. An organizer trip to the location and do a walk around just to get an understanding because one of the properties that was used as a case reference was actually in a service Rd. So they viewed that one differently or the impact of that one definitely to ours. We were right on the main road. This other one was set back from the main road, so they just wanted to get a clear understanding and so that led to who wanted to go for walk around, get a good understanding, and then we had the third hearing.
OK, what happens at the third hearing? Yeah, it was interesting that hearing ’cause all this time we thought everything looked like it was going to plan, however. We notice that the judge started paying a bit more attention to. To what the beneficiaries have to say or what the benefits you have to say and so. Move sitting there in the back thinking this doesn’t look like it’s.
Gonna go away something that looks so straightforward having that many precedences already on the street and the judge questioning. Obese, so there was a time in the case where it felt like this could actually go either way. And so we were quite puzzled by that an but. In hindsight, talking to us listen to him after the hearing. That’s when again he made us aware that the difficulties of covenant removal, so they’re not straightforward. As I said, you might think this is quite simple.
You buy a piece of land to covenant. Oh yeah, apply here or apply. There gets removed bingo. No, they’re very complex, and many solicitors or legals will advise you that. Unless you really need to bother block lead or if the blocker land doesn’t have any value at all whatsoever to you with the covenant, then you’re better off looking for something else because the fact is that although most do go through successfully to Supreme Court.
Just never know some cases of costs you know up to 500,000 for the removal. Others have lasted up to two years through the system, so you can really get bogged down. And so this is going back to the naviti of the first one. We did, thinking, well, this is easy. So lock down to see now and winning your first hand.
This is too easy to double up.
Justin – 0:44:11
So what happened after the third hearing?
John – 0:44:13
Was there another hearing or you just get your decision? Yeah, so there was a third an then at that hearing. How cold was at the end of the second hearing? Or is it the third hearing that the court then wanted to know if any of the beneficiaries wanted to take it to the next? Up to the next level, so I become a defendant and no one was interested in doing that, and so that the court then made a decision based on all the evidence that they had now. A caucus necessarily have to have beneficiaries there too for the process to be any simpler.
If no beneficiary is roll up, which in a lot of cases is what happens, the court will still look at everything in its own merits, so that the fact that there’s no beneficiaries there to put their case forward does not mean that the court still not going to look at that. Not gonna look at all information with a magnifying glass and. Get a good understanding of it and make their own decision on whether they believe it should be removed or not so. You might think Oh no beneficials have turned up. This is good sound. Looks like no ones interested.
Well that’s not how the courts look at it. They will still. Unlike other. Other forms. Other cases where you may say OK.
They haven’t. They haven’t rolled up and so therefore there’s no care factor that there’s no care factor there. So it was quite a relief. The whole process took. 7-6 months I think it was so if you add.
If you add together the fact that we first went through the planning process and then the Supreme Court probably close to. 19 months I think the whole process. OK, like what you see,
Justin – 0:46:20
you get a written decision from the judge, did you?
John – 0:46:24
Yeah with decision and then again once you have that it’s registered on title and modified. In this case modified to four. So then we knew the time. So that was the new status of that block.
Justin – 0:46:43
And who handles that modification? So who handles the modification to the covenant?
John – 0:46:52
When you say who handles it, yeah, who actually does the? Is it your solicitor that makes an application into the table? Yep, Yep, that’s why this listener does all the documentation and submits it to Tyler’s office.
Justin – 0:47:08
OK. So.
John – 0:47:13
So what are the literal it towards the end? So what are the lessons learned out of all this,
Justin – 0:47:18
John?
John – 0:47:21
Powell as I said from. From a legal perspective, they will tell you that. It’s a serious matter, and so and the Supreme Court will treat it that way. So I guess the lessons learned one. Uh, when you come across the property with the covenant? Yes, it’s probably worth if your numbers look good, it’s probably worth.
Digging up the funding as much information as you can and then based on that information, determine whether it’s worth moving forward. And obviously you have advice from your representative where maybe or your land survey your town planner, your solicitor, whoever you’ve engaged to. Final information through. But as I said earlier, you have to factor in the worst worst case scenario so. Yeah, I think in most cases just gotta factor in going for the Supreme Court, but that’s what’s more important is the probabilities of winning rather than the probabilities of ending up the Supreme Court.
Justin – 0:48:35
Uh. Well, I think getting those reports on who the beneficiaries might be on a cover is actually not that expensive. I think it’s sort of 400 bucks for 500 bucks.
John – 0:48:48
Yeah, kinda cold, but it wasn’t that much but. It’s probably the most important part of the step that it’s done correctly. Hell neighbor at the time. Had quite a bit of understanding because he was always fascinated by covenant removal, so he knew quite a bit about. All that so he was sort of part of the reason that it was revealed that council. I haven’t done the job correctly.
And so he was having conversations with council in relation to how it should have been done, or the fact that they didn’t do this. They do that so. You need to make sure that you have someone that’s going to reveal all the information because of supreme courts, you know that they can easily dismiss the matter based on the fact that you were ill informed or they weren’t. I told the whole story so and they will challenge. They will challenge your soliciting for in relation to.
Questions around all this, so you need to make sure that your representative. As I said, you’d need it. You’d need an expert to represent you in court as far as finding information on. On the beneficiaries again. You might just get your land survival starts an if it feels like.
If it feels like there still could be potential of going ahead with the purchase, then it may pay to then get someone like Robert Eastern involved. Who is the expert and you’ll be able to dig all the information out. And then it’s the matter of assessing at all an. Based on beneficiaries Precedences already said in the streets, you never want to be the first as we know. Based on all that, you’ll get a probability.
From your legal team and based on that you make the decision. But as we know the cat hearing Supreme Court hearings you just never know. And that’s that’s what scares most people off. That’s true, well, you’ve had a vicat loss,
Justin – 0:51:09
and now you’ve had a Supreme Court win, so I don’t know whether that makes you even or out in front.
John – 0:51:16
But from our perspective that the experience we had on the removal of both hers or the modification of 1 removable one. I. It seemed that the first one we did, everything worked out much easier. We expected, and we probably. As I say, it would probably be naive on that one, but how it worked and then having that understanding and that confidence going into the second one where we then thought this was just too easy. There’s already three or four precedences on the streets where not pushing it beyond what they’ve done that is modification to for this is the straightforward no brainer and yet. Three hearings later, and $44,000 and nine months or 10 months, we come to the conclusion that was it all worth it.
That would also be based on the fact of you have an understanding of where you believe the markets gonna be in 12 months time. So. I guess it’s important to get along settlement when it comes to. Some properties with. Covenance and also if you can sneak in. A clause to say that I’m. If you’re not successful that you pull out a deal, but again, it’s I think you’re pretty lucky to get that one across the line with the vendor.
Yeah, particularly in hot market. Yeah alright, well worth looking at sites for people that. In a hot market again, sometimes all that’s on the market, a problem site, so it’s always worth doing a little inquisitive and finding out what the problem is and you may be able to resolve with and knowing that if you do, you just armed with more and more information each time so. Next time you come across a similar site that you know most people want to keep away from and you believe that you.
Uh, you’ve got the experience now to take it through then yeah, it’s always. It’s all about knowledge, isn’t it?
Justin – 0:53:32
Yes, well, we really appreciate you coming on today and sharing that knowledge with us and your lessons learned. It’s been pretty interesting hearing your experiences of getting covenants removed. I know it’s summer, a bit of an area that people have an interest in. It scares off a lot of people, but thanks very much for sharing your experience with covenant removal,
John – 0:53:54
John, we really appreciate it. Yeah, I appreciate your time and I think it’s good for people just get some sort of small understanding in the insights to how it works and maybe might spur some to do. It might scare some off, but I think in the end it’s always worth inquiring further about.
Justin – 0:54:14
Well, thanks for being on the Property Developer Podcast for the third time.
John – 0:54:18
John, always good to talk to you and will catch around. Yeah, absolutely put shaping on there, Justin. You’ve been listening to the Property Developer Podcast tune in next time for more tips, ideas and inspiration to take your developing to the next level. For more developing love, make sure to visit www.propertydeveloperpodcast.com
