Restrictive Covenant – will it stop my development?
Thursday 21st February 2019
Issue
You’ve found a new site that, on the face of it, looks prime for re-development but the land agent mentions, “It’s cheap but subject to a restrictive covenant”.
What is a restrictive covenant?
A restrictive covenant is a contractual obligation attached to land, regulating what the owner can or can’t do to it. Unlike ‘positive’ covenants, the burden of a restrictive covenant is capable of ‘running with the land’, so that successive owners or occupiers are bound by the restriction.
What if I just breach the covenant and worry about it later?
A recent case highlights the dangers of ignoring and deliberately breaching a restrictive covenant without following necessary procedure.
Millgate Developments Ltd (“Millgate”) is a development company which obtained planning permission for, and then built, residential dwellings on a development site. Part of the site was burdened by restrictive covenants that prohibited the land from being used for building or for any purpose other than as a car park. Millgate was aware of the covenants but chose to ignore them and pressed on with the development once planning permission was granted.
Millgate then applied to the Upper Tribunal (Lands Chamber) to modify the covenants, on the grounds that they impeded a reasonable use of the land for public or private purposes.
The Upper Tribunal allowed this modification, on the basis that it was in the public interest to provide affordable housing. Unfortunately for Millgate, the beneficiaries of the covenant, being the trustees of a children’s charity who used the adjoining land as a children’s hospice decided to take their fight to the Court of Appeal to protect what they saw as a carefully planned environment for terminally ill children. The Court of Appeal decided that, because the developer had deliberately acted in breach of the restrictive covenant, it should not be modified.
Millgate may now have to demolish the new houses or to pay substantial damages. We understand that they are seeking permission to appeal to the Supreme Court, so this might not be the end of the saga.
Conclusion
The Millgate case highlights the risk of developing a site in breach of a restrictive covenant, even if the party with the benefit of the covenant did not object to the planning application for the development.
If there is a good case for modification of restrictive covenants, then developers would be well advised to apply to the Upper Tribunal before developing a site, rather than deliberately breaching the covenant and dealing with the consequences later.
Case: The Alexander Devine Children’s Cancer Trust v Millgate Developments Ltd and others [2018] EWCA Civ 2679
If you would like any further information on this case or if you have concerns about restrictive covenants, please contact us.
