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Bad landlord
I'm sorry but that's a bad landlord. The covenant is in place for a reason, but one they appear to know this other person who conducted the deal and two, you don't ban people for a first offence like that. Ban lines are a pain but they're not the end of the world. If people persistently ignore rules like that then yes, you can reclaim land but money should still be refunded.
Are there any redeeming features here, was a refund forthcoming?