Enforcing Restrictive Covenants
Developers who wilfully breach restrictive covenants will struggle to have those covenants modified under S84 of the Law of Property Act 1925, after a strong message was sent out by the Court of Appeal in the case of The Alexander Devine Children’s Cancer Trust v Millgate Developments Ltd.
S84 permits developers to apply to modify covenants that restrict the reasonable user of land or where the proposed development is in the public interest. At the time of its application to modify a covenant, which restricted use of the site to the parking of vehicles and prohibited any building, Millgate had, a year earlier, commenced construction of nine houses and bungalows, forming part of a new development of affordable housing. Whilst the Tribunal accepted that Millgate’s neighbours, a children’s cancer trust, derived substantial benefit from the covenant (privacy) the Upper Land Tribunal ruled the public interest in satisfying a pressing need for affordable housing was sufficient to justify the exercise of the Tribunal’s discretion to modify the covenants to permit the development.
The ruling was overturned by the Court of Appeal. It held that improper weight had been attached to the granting of planning permission for the development. The enforcement of contractual and property rights was also in the public interest. Millgate had deliberately circumvented the proper procedures for testing rights of enforcement provided under S84. Neither had it made any attempt to negotiate a release of the covenant. It had behaved in “an unlawful and precipitate manner” and had acted “with it’s eyes open and completely at its own risk.”
Ouch. An expensive mistake for the developer which is now open to indemnity claims from its purchaser if an injunction seeking the demolition of the buildings is sought. This decision reinforces the earlier decision in Re George Wimpey Bristol Ltd 2011 where it was specifically stated:
“It is appropriate for the Tribunal to make it clear that it is not inclined to reward parties who deliberately flout their legal obligations in this way,”
Developers can now expect little truck from the courts where they ride roughshod over private property rights. It doesn’t have to be like that. GL have an almost 100% record of obtaining modification to restrictive covenants under S84 and so if you find your development inhibited by a restrictive covenant on the land contact Ken McEwan.