Restrictive Covenant Solicitors​

A restrictive covenant is a clause in a contract, agreement or other legal documents — such as the title deeds to a property — which controls or restricts the actions of an individual or group of people.

Whether you intend to include a restrictive covenant in a business agreement or enforce an existing restrictive covenant, it is essential to take specialist legal advice.

You should also consult with restrictive covenant solicitors before agreeing to a restrictive covenant or challenging its enforceability.

It is not unusual for an employment contract to contain a covenant which imposes post-termination restrictions on a departing employee.

Often, the intention is to act as a brake to stop employees from “poaching” customers from the previous employer to a new one; these are usually called non-poaching covenants. A restrictive covenant in an employment contract could also involve protecting confidential or sensitive information — such as a non-disclosure agreement (NDA).

Restrictive covenants in employment contracts are more rigorously scrutinised than those in business agreements where the parties are deemed to have equal bargaining power. In employment law, there is an assumed inequality between employer and employee.

Restrictive covenants can affect land boundaries. They control and limit what happens to a piece of land or property or prohibit specific actions.

Restrictive property covenants are independent of and unrelated to planning permission requirements. Accordingly, planning permission does not override or negate them.

Boundary disputes between neighbours are commonplace. Restrictive covenants can help regulate possible contentious issues between two parties whose properties adjoin.

Property or land deeds can contain restrictive covenants and have their existence recorded at the Land Registry. New-build homes or commercial property developments often have restrictive covenants imposed by the original developer.

Restrictive covenants can be imposed by a business wishing to protect their company or partnership when an employee leaves, particularly if they are moving to a direct competitor.

Restrictive covenants may be tested in court to determine whether they are enforceable by the employer or avoidable by the former employee.

There are other commercial reasons why a contract should include carefully drafted restrictive covenants. If you are purchasing a business, it is relatively routine to include a restrictive covenant to prevent the seller from setting up a new business in direct competition within a defined radius.

The creation of partnership agreements, joint venture agreements, sale and distribution agreements, agency agreements and exclusive supply and purchase contracts are just some examples where a restrictive covenant (and indeed often should) arise.

It is sensible to take expert advice when considering any commercial agreement in which a restrictive covenant would be beneficial, if not essential, to protect business interests.

Restrictive covenants are only enforceable if the clause does not extend beyond what is necessary to protect a legitimate business interest. Hence the need for expert consideration of both the restrictive covenant’s scope and exact wording.

Agreeing to a restrictive covenant needs strategic advice and may require expert negotiation.