If you have ever looked into subdividing your land or purchasing a potential development site and hit a roadblock in the form of a covenant, you are far from alone. For many landowners and infill developers, a single covenant has been enough to shelve a project, often after being told the risk was simply too high, time consuming or expensive.

First, the basics. A restrictive covenant is a condition written into a property's title that limits what can be done with the land. It might restrict the number of dwellings, the building materials, the height of a home, or even fencing and landscaping. It usually shows up on the title as an ‘encumbrance’, which is simply a formal word for something that limits how a property can be used. Covenants are common, and many landowners do not know one exists until they start planning a project.

That advice to walk away has, until now, been sound, because of how the system has worked.

Why covenants have been such a hard stop

Under current processes and wording in the Planning and Environment Act 1987, a council assessing an application to vary or remove a covenant has to wait to see whether a beneficiary objects.

A beneficiary is usually a neighbouring landowner, or another parcel of land which was created as part of the original subdivision, that benefit from the covenant. Under the current wording of section 60 of the Act, a single objection from one beneficiary was enough to stop a covenant planning application. If someone objected to the removal or variation, the council had to refuse the application and the broader planning merits were never considered.

For covenants created before 1991, which make up most of what we deal with, the bar was higher still. A beneficiary could object on the grounds of ‘any detriment of any kind, including any perceived detriment’. In practice, that tied councils' hands: an objection could rest on almost anything and still hold

This is why so many sound subdivision ideas have quietly ended up in the bottom drawer.

What is changing for restrictive covenants in Victoria

From late 2027, Victorian councils will no longer refuse a covenant variation just because one beneficiary objects. Instead, objections will be weighed against broader planning policy – including the state’s push for more housing – through reforms under the Better Decisions Made Faster changes to the Planning and Environment Act 1987.

These changes are expected to take full effect by 29 October 2027, following the reforms passing in February 2026.

The reforms also introduce a new structure for planning permit applications, sorting them into 3 types based on risk and complexity:

• Type 1: low-risk applications with no public notice and deemed approval if they are not decided within the set timeframe. This replaces the current VicSmart pathway.
• Type 2: code-compliant proposals, such as some townhouse developments, with no public notice unless the scheme specifically requires it.
• Type 3: the more complex, default pathway, which keeps public notice and referral, much like today's system.

Applications to vary a covenant are expected to sit within the Type 2 and Type 3 pathways. The finer detail is still being written into the planning regulations, which have not yet been released.

The most significant change planned for covenant applications is how objections will be weighed. Rather than a single objection ending the matter, objections from beneficiaries will now be assessed at the same time as the broader planning criteria, including the objectives of planning in Victoria and any relevant state, regional or local planning policy.

In plain terms: the planning policies that actively encourage new housing and development will now sit on the scales alongside any objection, rather than being shut out of the conversation. It does not remove a covenant's protection, but it does end the ‘one objection and the whole application falls over’ approach.