Picture this: you’ve just purchased a large piece of land in the Lake District with spectacular views, planning permission has been granted by the council to allow you to build 3 luxurious properties which will sell for £1,500,000 each. Building work commences; life is good. And then…you open a letter addressed to you. It is from solicitors headed “Notice of Injunction: Breach of Restrictive Covenant.” Crumbs! What does this mean? What should I do?
What is a Restrictive Covenant (“RC”)?
Quite simply, a RC is a contract between 2 landowners. One landowner promises to the other not to carry out certain acts on their own land. RCs usually are implemented when somebody selling part of their own land wishes to restrict what the buyer can do with it.
How can a RC affect me?
“I am not a property developer. I will never come across a RC”. You may not be in the business of developing pristine land in the Lake District, but that doesn’t mean you won’t run into a particularly onerous RC. From a property perspective a RC can:
- Restrict whether a property must be residential or commercial in character
- Restrict what type of business can operate from a property
- Prohibit the creation of any new buildings on the land
- Prohibit knocking down buildings on the land
Stop a residential occupier from parking a caravan close to the dwelling
Even when a party has the ability to grant consent to something that would breach the RC, issues can arise: In the recent case of Davies-Gilbert v Goacher and Chester [2022] the Court of Appeal concluded that the person with the burden of the RC (“the covenantee”) could make an “irrelevant consideration” but still reach a reasonable conclusion.
Modification
It is possible to make an application to the Upper Tribunal (Lands Chamber) to modify or wholly discharge a RC. This is usually on the basis that the continued existence of the RC would impede “some reasonable user” (helpfully, as always, not defined) of the land for public or private purposes or, as the case may be, would do so unless modified. If the Tribunal agrees, then the applicant (the person seeking to modify the RC) is likely to be ordered to pay “a sum to make up for any loss or disadvantage suffered” by the person who has the benefit of the RC.
Recent Cases involving a RC and modification
Rugby Union fans may be aware that Bath Rugby Club was in dispute with some of its neighbours, who objected to Bath’s plans to develop land around its ground at The Rec. In the Court of Appeal case of Bath Rugby Limited v Greenwood and others [2020] EWHC 2662 (Ch) the Court concluded that a description of properties in “the neighbourhood” which benefitted from the RC was not enough. A more precise description of the property or relationship between the properties was required. Based on this, the Court of Appeal held that the RC was unenforceable as it was not possible to identify which land (and therefore which property owners) enjoyed the benefit of the RC. Bath can now redevelop its stadium.
In Martin v Lipton and Others [2020] the Tribunal considered Mr. Martin’s desire to modify a RC that stipulated that only one dwelling could be constructed on his land so that he could construct a second dwelling at the back of his property. His application was to modify the covenant (to allow two dwellings), rather than to discharge it. The Tribunal decided to allow the modification because it was not convinced the RC secured any practical benefits of substantial value or advantage that would be significantly prejudiced by the modification.
The key message: talk to a specialist property lawyer as early as possible for professional advice on commercial law services or support for what can be a highly complex issue.
