What is a covenant? How does it impact me when it comes to buying a house and land package? Why do they exist? All these questions (you may or may not realise you had) and more will be answered in our latest handy hint blog!!
To put it simply, the covenant (some estates call it “design guidelines”) is the minimum requirements for the house that you intend to build on your brand new block of land. Not all blocks of land have a covenant – particularly stand alone resale blocks. It is always important when buying stand alone blocks to ask about any covenants, particularly in a relatively newly developed area. In older areas where no covenant exists, the building just needs to comply with the local council requirements.
Now, not all covenants are created equal. Typically, the more “exclusive” the development, the more detailed/strict the covenant is. Covenants can provide requirements on a number of items. The most common elements are things like minimum house size and minimum quality of building materials, but some of the more strict estates have minimum “design elements” and very strict landscaping requirements. Some covenants even have additional energy efficiency requirements for environmental sustainability, or unconventional architectural requirements. Ill expand on some of these term below.
When I say “design elements”, it mostly related to the facade. Typically, an estate may require 4 as a minimum. This could include things such as a raised entry portico, a wider front door, architectural windows, a front balcony, a stone or brick feature column, a mixture of brick/render/cladding and things like that.
Unconventional architectural requirements might refer to mandatory two story designs, a larger than normal minimum house size (typically 130m2 minimum might increase to 250m2 minimum), a minimum house width (75% of the width of the lot for example) or even a requirement to use specific architecture from a certain era – there is a development in Brisbane where all the houses have historical architecture with unconventional roof lines and all face brick and paved driveways (see photo)
Now you are probably saying “yeah this is interesting but why are you telling us this?” Well, I am telling you this because the reality is that it is not uncommon for builders to provide packages to clients that do not comply with all covenants – particularly the extra strict ones.
Depending on the requirement, it can potential add thousands of dollars in unexpected costs to the price of the build, so it is very important to ask the builder if the design and package you have chosen complies with the covenant. I wouldn’t stop there though, I would go to whoever is selling you the block of land and clarify it with them for an unbiased opinion.
Even something like the fencing may be mentioned in the covenant. A “good neighbour” fence can be 30% more than a standard fence – up to $1000. A raised portico (which is a requirement of the block I just bought) is about $2200 on top of the standard design. You can see how the seemingly cheap price for the house can start to add up with 3 or 4 extras that aren’t included in your builders base specifications.
So if it is so expensive, why do developers have covenants? Well, the shortest version of it is that it protects the value of the area. If you let people just build whatever they want it decreases the overall quality of the development. A well designed building covenant can really make an estate stand out from the crowd which makes people want to live there.
Good street appeal and a nice looking development sells land, there is no two ways about it. For existing owners, people buying land and paying full price for that land drives the value of their properties up. Smart property investors pick land in good developments by good developers in the first few stages, and watch their properties value soar as the development progresses through the stages to completion.
If you have any questions about covenants or want more information about the building process, contact Equity Build Homes.
Also now accepting suggestions for blog posts.
*Photo attached to blog is not the property of Equity Build Homes and the home was not built by Equity Build Homes. It is attached for illustrative purposes only.