Legal Definitions - negative covenant

A negative covenant is a type of covenant that requires a party to refrain from doing something. For example, in a real estate financing transaction, the borrower may promise the lender not to encumber or transfer the real estate as long as the loan remains unpaid.

Another example of a negative covenant is a noncompetition covenant, which is a promise not to engage in the same type of business for a stated time in the same market as the buyer, partner, or employer. These covenants are generally disfavored as restraints of trade, but they may be valid to protect business goodwill in the sale of a company.

Overall, a negative covenant is a promise not to do something, and it can be used in various contexts to restrict certain actions or behaviors.