Restrictive covenants

If you wish to build on burdened land and cannot negotiate a release or variation with the person(s) benefiting from a restrictive covenant or obtain indemnity insurance, the Upper Tribunal has power, wholly or partially, to modify and discharge these.

What does Alexander Devine Children’s Cancer Trust (Respondent) v Housing Solutions Ltd (Appellant) tell us?

In the case of Alexander Devine Children’s Cancer Trust (the “Trust”) v Housing Solutions Ltd, the Trust had the benefit of a restrictive covenant that that prohibited neighbouring land from being used for building or any other purpose other than a car park. Housing Solutions Ltd acquired the burdened land and Millgate Developments Limited (“Millgate”) subsequently built 13 affordable houses on it in breach of the restrictive covenant.

After completing the development, Millgate applied to the Upper Tribunal under Section 84(1) of the Law of Property act 1925 to modify the restrictive covenant on the grounds that the covenant restricted the reasonable use of the burdened land.  The Tribunal granted the application and awarded the Trust £150,000 compensation.

In November 2020, five years after the works had been completed, the Supreme Court overturned the Tribunal’s decision and found in favour of the Trust holding that the development could have been built elsewhere without breaching the restrictive covenant. The land provided practical benefits of substantial value to the Trust and it became clear that it was not in the public interest to allow a party who had flagrantly disregarded a lawful covenant to immediately request the modification of the same in order to redeem themselves.

A warning to developers

The Court’s decision serves as a clear warning to developers that the conduct of the developer will be taken into account in any application to the Upper Tribunal. Deliberately carrying out a development in breach of a restrictive covenant can lead to severe consequences.

It should be noted that upon a true interpretation of the circumstances and facts of a restrictive covenant, such a covenant may not actually be breached by a proposed development depending on the nature of the covenant, the devolution of the land with the benefit of that covenant and any changes to the nature of the land in the vicinity of the supposedly burdened property.  It is therefore important to investigate the terms of each covenant on a case by case basis prior to drawing any conclusion as to its potential enforceability.