In light of the case of Fosse Urban Projects Ltd v Whyte & Ors, associate Patrick Kershaw explores restrictive covenants and what not to do. Delving into the intricacies of restrictive covenants and their impact on property development, Patrick sheds light on the crucial role of parties' conduct in applications to modify or remove these covenants, drawing parallels with the landmark Alexander Devine case.
Background on restrictive covenants
Restrictive covenants in the context of land refer to legally binding agreements or conditions that limit the way in which a property can be used or developed. These covenants are usually created when a property owner sells or transfers the land to another party. The purpose of these restrictions is often to maintain a certain standard or to protect the interests of the original landowner or neighbouring properties. Restrictive covenants can be altered or removed by way of an application to the Tribunal of the Lands Chamber if certain criteria are met.
Conduct's impact on covenant modification
In a recent decision the Upper Tribunal have clarified that the conduct of parties is highly relevant as to whether an application to remove or modify a restrictive covenant will be successful. In this case a developer who built a residential property in breach of a restrictive covenant has left itself open to significant legal risk by failing to explain why building work started in breach of a restrictive covenant.
Breach of covenant in residential development
In this case the Tribunal had already determined that the developer’s neighbours had the benefit of a restrictive covenant attached to land being built on. That covenant stated the land was not to be used “other than as garden land in connection with the adjoining property.” The developer had nevertheless started work on a family home. The neighbours argued this breached the covenant which provided to them a practical benefit capable of being valued.
Importance of conduct and legacy of the Alexander Devine case
Someone making an application such as for the removal of a restrictive covenant has to bring evidence in support of their case.
However, although the developer instructed an expert to assess whether the covenant provided the neighbours with a valuable benefit, the expert did not attend the hearing. Consequently neither the Tribunal (which expressed its surprise) nor the neighbours could question the expert on their evidence, which the Tribunal in any event disagreed with at various points.
The Tribunal also took issue with the developer’s failure to provide a witness statement which would have assisted the Tribunal in assessing why they had built in breach, rather than making their application first or seeking the consent of the affected neighbours to remove or modify the covenant.
Without any evidence to the contrary the Tribunal concluded that it was likely that the developer was both aware of the covenant, and had access to legal advisors who could have explained the risks in proceeding with the development in breach of it. The Tribunal also noted that despite making its application for release work continued on the property which was complete and occupied by the time of the final hearing. Without an adequate explanation from the developer the Tribunal felt comfortable in drawing its own conclusions that the developer had taken the ‘cynical’ ‘build first and apply later approach’ which was criticised in the landmark Supreme Court case of Alexander Devine Children's Cancer Trust v Housing Solutions Ltd.
There was no obligation on the neighbours to show that the developer’s conduct was ‘cynical’ rather it was for the developer to demonstrate why its decision not to ‘adhere to an obvious process’ was not egregious or unconscionable.
This case clarifies one of the key points in the Alexander Devine litigation, namely that conduct is highly relevant to the Tribunal’s decision on whether to remove or modify restrictive covenants. Those who commence development work in breach of a restrictive covenant and then offer no explanation why that approach has been taken do so at the risk of the Tribunal drawing its own, possibly highly critical, conclusions.
The Tribunal's decision, while leaving the new house resulting from the covenant breach intact, has made it clear that the neighbours are entitled to seek an injunction to remove it or damages in lieu. As one might expect the Tribunal encouraged both parties to resolve the position by agreement after taking appropriate legal and valuation advice.
Patrick Kershaw is in the property litigation team with expertise in both residential and commercial landlord and tenant disputes and dealing with neighbourly matters such as: boundary disputes, restrictive covenants, nuisance and party wall matters.