Wednesday, 13 April 2011
Beware of restrictive covenants
Planning lawyers naturally tend to concentrate on issues of planning law and practice, and are inclined to leave it to colleagues in their firm who specialise in commercial property to deal with issues of property law. But planning lawyers would be well advised to keep at least one eye on property law issues when advising clients.
One of the points I always insist on checking before getting down to work on a development proposal is whether there might be a restrictive covenant which could prevent or interfere with the implementation of a planning permission. My clients would not be best pleased if we had spent a considerable amount of time and money getting planning permission, only to find that the development cannot in fact be carried out.
Of course, if you find that there is a restrictive covenant which might be a problem, there are several ways of tackling it. If there is no-one who could in practice enforce the covenant, an indemnity policy may be all that is required. If it is still enforceable, it might be argued that the covenant is obsolete due to changes in the character of the property or the neighbourhood, that its discharge or modification would not injure the persons benefiting from it, or that it prevents the use of the land for public or private purposes and does not secure any practical benefit of substantial value to those befitting from it. In such a case an application can be made to the Lands Tribunal [the Upper Tribunal (Lands Chamber)] under s.84 of the Law of Property Act 1925 to modify or discharge the restrictive covenant.
However, as several developers have found to their cost, the Lands Tribunal is no pushover. A recent example was the case of George Wimpey Bristol Ltd and Gloucestershire Housing Association Ltd  UKUT 91 (LC), in which the developer applied to modify a restrictive covenant affecting land at Mill Lane, Prestbury, so as to permit residential development. The restriction was imposed by a 1936 conveyance by which the purchaser of the land covenanted “for the benefit of the adjoining land of the vendor on the West and South sides of the land hereby conveyed that no building shall be erected on the piece of land to the west of the line drawn on the said plan between the points marked ‘A’ and ‘B’…” (The line A-B is the eastern boundary of the land affected by the covenant.)
Detailed planning permission for residential development on a large site which included the land affected by the covenant was granted on 30 October 2006, authorising the erection of 124 dwellings and the provision of public open space, nature conservation area and associated access. The approved details included the construction on the land affected by the covenant of 17 dwellings, one triple garage and 6 double garages, comprising 7 detached houses, 3 townhouses, 4 affordable terraced houses, one affordable flat above a garage and 2 affordable flats, one above the other.
The effect of building these particular houses would be to change the immediate neighbourhood to one of a largely suburban character, with a resultant loss of views, privacy and overall amenity, resulting in substantial loss of value of the neighbouring properties benefitting from the covenant. (Note that whilst alleged loss of value of neighbouring properties is irrelevant as a planning consideration, it is highly relevant for the purposes of s.84 of the 1925 Act.) So the Tribunal had no difficulty in finding that the practical benefits of the restriction to the owners of the neighbouring properties are of substantial value and advantage.
Since the developers had not succeeded in establishing the ground relied upon, the Tribunal had no power to modify the restriction. However, even if this ground had been made out, the Tribunal is unlikely to have exercised the discretion to modify the covenant. This is because, on the evidence, the extensive works which Wimpey Homes had carried out on the application site were not an inadvertent action resulting from the discovery of the covenant at a late stage in the development programme; rather, they were the result of a deliberate strategy of forcing through the development on the restricted land in the face of many objections from those entitled to the benefit of the restriction, to the point where they had so changed the appearance and character of the application site that the Tribunal might be persuaded to allow them to continue with the development. The Tribunal made it clear that it is not inclined to reward parties who deliberately flout their legal obligations in this way.
So developers should not assume that inconvenient covenants can easily be removed by applying to the Lands Tribunal. They should ask their lawyers to check out the position before committing themselves to a development. No doubt my colleagues in our commercial property team would do this as a matter of course, even before letting their developer clients exchange contracts for the purchase of a site, but in any event I would not start work on a planning application before I had satisfied myself as to the position regarding restrictive covenants and any other potential constraints on the title to the land which might affect its successful development.
© MARTIN H GOODALL