Restrictive Covenants on Land- Perils of Ignoring them!

Feb 20, 2020

Generally the question of what to do about restrictive covenants requires a certain amount of tactical consideration.

If it is a very old covenant, can I get a specialised Insurance policy to cover any costs or damages that may be payable if the person who has the benefit of the covenant pops up later?

Such policies are not uncommon where the breach has already occurred and no one has objected. The classic example is a house built on garden land which is in breach of a covenant and which is about to be sold. No one has raised any complaint. The buyer’s solicitor will be a bit nervous about the breach and wish to protect their Client. A policy for a relatively small cost can do the trick. However it is highly unlikely a policy be issued if you have already made contact with the party who has the benefit of the covenant thereby alerting them to the breach; or covenant queries were mentioned by objectors when you obtained your planning consent.

If it is not a covenant that you can get Insurance for – the next port of call will be to see if you can agree with the party holding the benefit to agree to a modification to enable you to build in accordance with your planning consent. Whether you speak to them before or after you apply for planning is again a strategic decision. If you can get a modification agreement by tweaking the application you are about to file with the Planning Department you may have a better chance of resolving the covenant problem than getting the Permission and then discovering it is not to the other party’s liking.

A payment for a modification is another consideration as the Court or the Upper Tribunal (Lands Chamber) will permit modifications if the “damage” caused can be reasonably dealt with by a payment to the objector.

What should not be done is to ignore the problem get your planning permission and charge ahead regardless.

Alexander Devine Children’s Cancer Trust -v- Millgate Developments Ltd & Others [2018] is a case in point.

In 2013, Millgate acquired land adjacent to that owned by the Trust to add to land it had acquired for the purposes of development. The Trust had been gifted its land for the development of a hospice for terminally ill children. Millgate were aware there was a restrictive covenant dating back to the 1970’s covering the adjacent land that prevented building of any sort. It had made no attempt to identify the party having the benefit of the covenant; sought and secured planning permission for the whole site and then built on the affected land 13 affordable houses. Objections were raised on covenant grounds but dismissed by Millgate. It exchanged contracts for the sale of the affordable housing in 2014 and only then applied to have the covenant modified.

Its position before the Tribunal was that the development was a reasonable use of the land and no harm had been caused to the Hospice. Further that it was in the public interest for the affordable housing to have been built. The Tribunal was persuaded by the public interest argument and allowed a modification and ordered Millgate to pay compensation for the fact the development overlooked the hospice gardens.

The Trust appealed and the Court of Appeal decided in November 2018 that the modification should not have been allowed. It was extremely critical of Millgates behaviour – not helped by the fact Millgate had completed the sale of the affordable units during the period the Trust had to decide to appeal. It regarded Millgate’s actions as having been highly opportunistic; was not at all happy that the houses had been built before any application was made to modify the covenant and took the view that there is public interest in upholding the rule of law and not encouraging breaches of public rights. It also acknowledged that whilst there was an interest in not allowing needed affordable housing to go to waste that was not a sufficient reason for disregarding the other considerations. Millgate should bear the risk that it may have wasted its own resources by building the 13 affordable housing units on the land in question.

The Court of Appeal pointed to the other options that could have been explored by Millgate once it knew the Trust was objecting. It could have gone back to the Local Authority about the placement of the affordable units; e.g. place them in the main development rather than on the “side land”. It could have negotiated with the Trust prior to finalising its planning to change the layout ensuring that the garden was not overlooked etc.

It concluded that Millgate had attempted to present the Court with a fait accompli in that it had constructed buildings without following proper procedure and then effectively dared the Tribunal to make a ruling that might cause the buildings to be taken down.

The Trust was therefore able to enforce the covenant – and that could include removing the buildings completely or at the very least paying substantial damages to the Trust. This is on top of the costs that had been incurred in the Claim to the Tribunal and the Appeal.

Even if Millgate had approached the Trust before building and not been able to agree anything; it certainly should have applied to modify the covenant before it started work on that piece of land. An application to modify made at that point may well have been looked upon more favourably.

It is also important not to be too carried away with the fact a planning permission has been secured. That does not automatically trump restrictive covenants. Having a planning permission can be part of the persuasive factors but it is really no higher than that.

If you are concerned about enforcing a restrictive covenant that benefits your land or whether you can get a covenant burdening your land removed or modified contact Frankie Tierney in our Dispute Resolution team on drteam@herrington-carmichael.com .


Related Article: Restrictive Covenants – What’s the Price of Modification?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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