Restrictive Covenant reform unlocks tens of thousands of homes across Melbourne
As part of the Better Decisions Made Faster Act, the Victorian Government Victoria ended the ability of century-old private agreements to block housing where the planning scheme supports it.
The Problem
Across Melbourne, tens of thousands of properties carry restrictive covenants—private agreements registered on titles, often dating back to early twentieth-century subdivisions, that place limits on what can be built. Reservoir alone has over 3,000 lots bound by single-dwelling covenants from a 1919 subdivision, and similar restrictions cover suburbs from Prahran to Bayside and through much of Melbourne’s east.
Since 2000, Victoria’s planning law gave these private agreements extraordinary power. Section 61(4) of the Planning and Environment Act prohibited councils from granting any planning permit that would breach a restrictive covenant—even where the planning scheme explicitly zoned the land for medium-density housing.
For covenants registered before 25 June 1991, a “grandfather” provision set an even higher bar: removal required proving the benefiting landowner would suffer no detriment “of any kind, including any perceived detriment”. Legal practitioners described this threshold as near-insurmountable.
The only effective way to get a covenant annulled was by application to the Supreme Court—costing $30,000 or more for straightforward cases and potentially hundreds of thousands for contested ones. This meant that a private agreement made between a subdivider and purchaser a century ago could override the democratic will of the Victorian Parliament as expressed through the planning scheme. Land that the government had zoned for townhouses or apartments remained locked into single-dwelling use because of a restriction to which no living person had agreed.
The Outcome
The Planning Amendment (Better Decisions Made Faster) Act 2026, which passed both houses on 4 February 2026, fundamentally reforms how restrictive covenants interact with Victoria’s planning system. The covenant provisions are expected to commence by 29 October 2027.
The Act makes three transformative changes. First, it removes the blanket prohibition on councils granting permits that would breach a covenant — meaning development can proceed where planning policy supports it, even if a private covenant says otherwise. Responsible authorities and VCAT will not be liable for losses arising from such a breach. Second, it abolishes the grandfather provisions that gave pre-1991 covenants near-absolute protection, replacing them with a single standardised assessment framework for all covenants regardless of age. The extremely low threshold of “perceived detriment” is gone. Third, it introduces a new decision-making framework that requires consideration of state planning strategy and the objectives of planning in Victoria, while expressly excluding financial loss as a relevant consideration.
In practical terms, this means that where a planning scheme zones land for medium-density housing—as it now does across Activity Centre catchments and the Housing Choice and Transport Zone—a single-dwelling covenant can no longer automatically prevent that housing from being built. The reform brings Victoria into line with the approach that New South Wales has taken for decades, and which YIMBY Melbourne has explicitly advocated for since our founding.
Our Research & Advocacy
Restrictive covenant reform has been a core YIMBY Melbourne policy position from the start. Our Heritage & Historical Restrictions on Land Use policy pillar called restrictive covenants “byzantine historical restrictions on land use” and demanded the government “legislate the nullification of restrictive covenants”, following the NSW model. This was not a tentative suggestion — it was a clear, public call for legislative action on an issue that many in the planning profession considered too politically difficult to touch.
When the Better Decisions Made Faster Bill was introduced in October 2025, we identified covenant reform as one of its most significant pro-housing provisions. Our press release noted the Bill would “make it easier to override outdated restrictive covenants that prevent housing density in established suburbs, a major barrier to medium-density housing”. We engaged extensively with crossbench MPs throughout the Bill’s passage, building on the relationships we had established through our appearance before the Legislative Council Select Committee and our sustained advocacy on planning reform over three years.
The passage of the covenant provisions is the culmination of a long campaign. It is a victory for everyone who believes that the future of our city should be decided by democratic planning policy, not by restrictions that predate the existence of most of the suburbs they now constrain.