Fosse Urban Projects Ltd v Whyte and the importance of restrictive covenants

A recent ruling from the Upper Tribunal in the case of Fosse Urban Projects Ltd v Whyte should act as a wake up call for developers when it comes to ensuring that they follow the correct process for dealing with restrictive covenants before developing land and not vice versa.

Although the Tribunal can exercise its discretion to modify or discharge a covenant – and indeed often does so – developers must not assume this is a ‘fait accompli’, as demonstrated recently.

What did the Upper Tribunal find in the case of Fosse Urban Projects Ltd v Whyte?

Developer Fosse Urban Projects Limited obtained planning permission in July 2021 to build a house on land which was subject to a covenant restricting it from being used “other than as garden land”.

Although Fosse did later make an application to the Upper Tribunal to discharge the restrictive covenant, this wasn’t done until October 2022, when the building project was already in progress. By the time of the hearing in September 2023, the project was complete.

The Tribunal can modify or discharge a restrictive covenant, under s84(1) of the Law of Property Act 1925 (LPA). The grounds for doing so include:

• That the covenant is obsolete
• That its continuation would impede the reasonable use of land
• That discharging the covenant would not cause harm to those who benefit from the covenant.

Interestingly, although the Tribunal found that the developer did have grounds to discharge the covenant, it refused to exercise its discretion to do so because of Fosse’s “cynical” conduct.

This included failing to engage with those who had the benefit of the covenant and not producing any evidence as to why it had carried out the project despite having knowledge of the covenant.

What are the implications of this ruling for developers dealing with restrictive covenants in the future?

This case is important on a number of levels. Firstly, it demonstrates that the Tribunal will expect developers to have done their due diligence in terms of restrictive covenants and follow the correct process for applying to discharge them under the LPA – before commencing building work.

Secondly, it shows that just because there are grounds to discharge or modify a covenant, it must not be assumed that this will be the case, and that the behaviour of the developer seeking to have the covenant in question discharged will be just as important as the grounds they are seeking to have it discharged under.

What happens next in this case is unclear. The Tribunal’s power does not extend to ordering demolition, and it is now for the beneficiaries of the original covenant to pursue their case through the courts if they so wish.

If you have any questions about the topic raised in this article then please get in touch.