What is NEGATIVE COVENANT?

1. Constraining provision in a debt agreement, like an adhesion contract type. Limits the borrower on stated points, like a ceiling on the executives’ salaries, or prohibition on debt acquisition, or tight control on dividend payout. 2. Constraining provision in a deed that limits the land buyer on stated points, like building density per unit of area, size, style, or building price range, or business types allowed. Also known as negative pledge or restrictive covenant.

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