Three Tenants, One Old Covenant, and a Neighbour Who Could Afford to Wait

The situation

What kept Fiona up at night was not the letter itself but the arithmetic behind it. If the neighbour's lawyer was right, two of the three units in the Exeter property she and Alfred owned would have to be emptied. That meant two tenants given notice, two leases broken, and a mortgage sized for triple rental income suddenly serviced by one unit's worth of rent. The property, bought two years earlier for a little over a million dollars, had been converted to three legal units before their purchase, with permits Fiona had confirmed at the time. None of that history mattered if a court ordered the units closed, because a private covenant does not care what the municipality has approved.

The letter came from a lawyer acting for Nasrin, who owned a single-family home two doors down in the same original subdivision, developed decades earlier under a set of covenants registered against every lot at the time. Those covenants, the letter said, restricted each lot to one dwelling, and Fiona's triplex breached that restriction regardless of what the municipality had permitted since. The letter framed the situation as though the outcome were already settled, listing the relief Nasrin intended to seek: an order requiring the property to be restored to single-family use, plus her legal costs.

Fiona is an actuary by training, comfortable with probability but not with litigation, and Alfred manages construction projects for a living, which meant he understood exactly how expensive it would be to physically reverse a conversion if it came to that, tearing out kitchens and separate entrances that had taken months to build in the first place. What alarmed them most was a line near the end of the letter noting that Nasrin was prepared to pursue the matter 'as long as it takes' and had already retained counsel on a retainer basis. Fiona and Alfred did not have that kind of runway, and the letter seemed to know it. Their combined savings were tied up in the down payment on the triplex and a second, smaller rental property they had been slowly renovating.

They came to our office not sure whether they had a real legal problem or a wealthy neighbour's attempt to make one out of nothing, and the difference mattered enormously to what they should do next. Fiona's first question was not about strategy at all: how quickly might they actually have to give tenants notice if the worst version of the letter turned out to be accurate, since two families were living in those units and she did not want to alarm them prematurely.

What the other side was relying on

A building scheme is a set of mutual covenants imposed across a subdivision when it was first laid out, intended to bind every lot to the same restrictions, such as single-family use, for the mutual benefit of every owner within the scheme. Unlike an ordinary covenant between two neighbouring lots, a properly established building scheme can be enforced by any owner in the scheme against any other, not just by the original developer, which is what let Nasrin bring a claim in her own name rather than needing the original subdivider to act.

On paper, that gave her a real hook. The covenant existed, it was registered against title decades earlier, and it had never been formally discharged. Her lawyer's letter leaned heavily on that registration, describing it as though its presence on title settled the matter, and quoting the restriction's original wording almost verbatim without acknowledging that decades had passed since anyone had tried to rely on it.

What the letter did not address, and what her financial position let her avoid addressing up front, was whether the scheme still met the legal requirements to function as a true building scheme rather than a dead-letter covenant. Courts have generally required a common intention among the original lot owners that the restrictions be mutually enforceable, a clearly defined area covered by the scheme, and consistent application across that area. A covenant that has been ignored, waived, or unevenly enforced for years can lose its practical force even if it is still sitting on title, because the whole premise of a mutual scheme is that everyone within it is playing by the same rules at the same time.

Nasrin's real leverage was not the strength of that legal position but the cost of testing it. A claim like this can run into the tens of thousands of dollars in legal fees before a court ever rules on whether the scheme still applies, and she had made clear she could absorb that cost more easily than Fiona and Alfred could. The letter was, in effect, betting that the threat of a long, expensive fight would produce a settlement regardless of who was right on the law, a common enough strategy in property disputes between parties of unequal means.

There was also a personal thread underneath the legal one. Nasrin had lived on her street for close to twenty years and had, by her own lawyer's account, watched several rental conversions happen nearby without objecting to any of them. Why this property became the one she chose to challenge was never explained, and it was not a question our response needed to answer. What mattered legally was the pattern of tolerance itself, not her private reasons for finally acting on it.

What we did

1. Pulled the full title history for both properties back to the original subdivision plan, because the strength of a building scheme claim depends entirely on documents most homeowners never look at. This confirmed the covenant's exact wording and the date it was registered, which turned out to be narrower than the demand letter suggested. Establishing that gap early gave us a factual foothold before Nasrin's lawyer had committed to a specific legal theory in a filed claim.
2. Surveyed the rest of the subdivision for other non-conforming uses, since a scheme's enforceability weakens when it has been tolerated elsewhere. We found three other properties within the same original plan that had been converted to multi-unit use over the prior fifteen years, none of them challenged by any neighbour, including Nasrin. That pattern of tolerance became the single strongest fact in the file, because it went directly to whether the scheme still functioned as a mutual arrangement at all.
3. Reviewed the municipal permit history for Fiona and Alfred's property, establishing that the conversion had gone through a formal approval process years before their purchase, which spoke to reasonable reliance even if the private covenant technically still applied. Confirming this record mattered because it meant Fiona and Alfred had not knowingly ignored a restriction; they had relied on the municipality's own approval before ever buying the building.
4. Assessed whether the scheme still met the legal test for mutual enforceability, given the pattern of unchallenged conversions nearby. Uneven enforcement across a subdivision is one of the clearest signs a scheme has lost its practical effect, and that pattern became the core of our response. Framing the analysis this way let us argue the scheme's own history undermined it, rather than debating the covenant's original wording on its own.
5. Drafted a detailed response to Nasrin's lawyer laying out the title history, the other conversions, and the permit record, rather than simply asserting the covenant did not apply. Showing the evidence, not just disputing the claim, is what makes an opposing lawyer recalculate the odds of success, since a bare denial invites a fight while a documented one invites a second look at whether the claim is worth pursuing at all.
6. Set out the litigation exposure on both sides plainly in that same letter, noting that pursuing an inconsistently enforced scheme carried real risk of an adverse costs award against Nasrin if a court found the scheme no longer operative. This reframed the cost imbalance she had been counting on, since her financial advantage only mattered if she was confident of winning, and the letter gave her a concrete reason to doubt that.
7. Left the door open to a limited written acknowledgment rather than demanding Nasrin formally abandon her position, since a face-saving off-ramp was more likely to end the matter quietly than an all-or-nothing confrontation. Pushing for a total concession risked provoking exactly the prolonged fight Fiona and Alfred could not afford, so preserving Nasrin's ability to step back without public defeat was itself a deliberate part of the strategy.
8. Advised Fiona and Alfred against giving tenants early notice while the matter was still under negotiation, since no claim had actually been filed and premature notice would have caused real harm to their tenants over a threat that might never materialize. This was as much a client-management step as a legal one, aimed at stopping a worst-case fear from driving decisions before it was warranted.
9. Set a short response deadline in our letter to Nasrin's lawyer, rather than leaving the timeline open-ended, so that Fiona and Alfred were not left waiting indefinitely to learn whether the threat would proceed. A defined deadline also signalled that we were treating the matter as seriously prepared, not as a delay tactic, and it gave Fiona and Alfred a concrete date to plan around instead of an open-ended state of worry.
10. Briefed Fiona and Alfred on realistic litigation costs if Nasrin proceeded despite our response, giving them concrete figures to weigh rather than an open-ended fear. Knowing the actual range, and how it compared to what they stood to lose if the units were closed, let them make an informed decision about how firmly to hold their position, rather than negotiating from a place of anxiety about an unknown worst case.

The outcome

Nasrin's lawyer did not file a claim. Three weeks after our response, he wrote back confirming she would not pursue the matter further, without a formal concession that the covenant was unenforceable, which was consistent with the face-saving approach we had built into our letter. No court ever ruled on the scheme's status, and none of it needed to for Fiona and Alfred's tenants to stay housed and their rental income to keep flowing.

The underlying covenant is still registered on title. Nobody discharged it, and another neighbour could in theory raise it again, though the same weaknesses would apply just as strongly next time. Fiona and Alfred chose not to pursue a court application to have it formally removed, judging the cost of that proceeding not worth it against a threat that had already been defused. Alfred, thinking like the project manager he is, framed it as leaving a known, manageable risk in place rather than paying to eliminate a small one entirely.

What this case avoided was the real harm: two tenants losing their homes, a mortgage suddenly underwater on rental income, and tens of thousands of dollars spent finding out in court what became clear on paper in a few weeks. Nasrin's financial advantage only worked as leverage against a claim nobody had tested. Once it was tested on paper, the imbalance stopped mattering.

Fiona and Alfred's total legal spend on the matter came in well under what even a single motion in a formal court proceeding would likely have cost, precisely because the dispute never left the correspondence stage. Their tenants were never told there had been a threat to their tenancies at all, which was possible only because the matter was resolved before any filing forced a public record of it. A year later, both units are still occupied, and Fiona says the letter rarely crosses her mind, though she keeps a copy of our response filed with the property's other closing documents in case anyone ever raises the covenant again.

What you can learn from this