Restrictive Covenants Affecting Land: Can They Be Challenged?

(First published on egi.co.uk)

Consider a familiar scenario for many developers: an attractive site has been identified and progress made to agree the key financial terms with the landowner. With everything seemingly on track, an obstacle arises – there is a restrictive covenant that could thwart or adversely affect the proposed scheme. For example, the covenant may seek to restrict the use of the land to non-residential use or limit the number of buildings.

Obtaining indemnity insurance or seeking to modify or discharge the relevant covenant by an application to the Upper Tribunal (Land Chamber) will be among the options considered in such circumstances. However, as a first step, careful consideration should be given as to whether the covenant is indeed enforceable or, in fact, prohibits the proposed development. While not intended to be exhaustive, the following issues are worth considering.

Dominant and servient land

The document (usually a deed) creating the covenant must describe the land with the benefit of the covenant (the dominant land) and the land that is subject to the covenant (the servient land) to make each easily ascertainable with reasonable accuracy.

Ideally, the dominant and servient land would be described by reference to an attached plan but frequently, particularly with older deeds, only a written description is given. While it may have been clear to the draftsman at the time what he meant, for example, by referring to the seller’s “estate”, this may be very difficult to ascertain many years later. Even by relying on extrinsic evidence in relation to the extent of the relevant parcels of land, it may not be possible to overcome this hurdle, with the result that the covenant will not be binding on the purchaser of the servient land. For a recent example of such a lack of precision in the drafting being fatal see Doberman and another v Watson and others [2017] PLSCS 185.

Covenant benefits dominant land

The restrictive covenant must “touch and concern” or relate to the dominant land and not simply be of personal benefit to the original contracting party. If the covenant affects the nature, quality, amenity or value of the land then it will satisfy this requirement.

The courts assume that a covenant is capable of benefiting particular land for which the covenant was imposed unless it can be proved otherwise: Marten v Flight Refuelling (1962) Ch 115. However, if the covenant secures a financial obligation it will not be enforceable as a restrictive covenant. In Cosmichome Ltd v Southampton City Council [2013] EWHC 1378 (Ch); [2014] 1 EGLR 171 it was held that a restriction imposed to keep the BBC in the city’s cultural quarter was not capable of benefiting the council’s land. The covenant was imposed as a lever for extracting an overage payment in the event that the BBC relocated, and planning permission was obtained for a different use.

Consent to works

Sometimes a restrictive covenant will not prohibit alterations to the servient land absolutely but requires the prior consent of a named party, often the “vendor” or “vendor’s surveyor” or equivalent. It will be a matter of construction of the document imposing the covenant as to whether this refers only to the original vendor or their successor in title (see, for example, the different conclusions reached in Mahon v Sims [2005] 3 EGLR 67 and Churchill v Temple [2010] EWHC 3369 (Ch); [2011] 1 EGLR 73). If it is construed to relate to the original vendor, then what is the position if that individual has died or, if it is a company, it has been dissolved? While some earlier cases concluded this made the covenant absolute – meaning the servient landowner was not able to carry out alterations – more recent cases have held that this means the covenant is discharged: see Margerison v Bates [2008] EWHC 1211 (Ch); [2008] 3 EGLR 165.

Limitation on number of houses

Even if the covenant is enforceable, it may be that, as a matter of construction, it will not prevent the proposed development. For example, the residential developer interested in changing a site from a single house to an estate of houses and/or flats will be concerned with a covenant that restricts the use of the site to “a private dwellinghouse”. The issue will be whether the indefinite article “a” limits the number or manner of use of buildings on the land. In Martin v David Wilson Homes Ltd [2004] EWCA Civ 1027; [2004] 3 EGLR 77 it was held that such a covenant did not limit the number of dwellinghouses but the opposite view was taken in Crest Nicholson Residential (South) Ltd v McAllister [2004] EWCA Civ 410; [2004] 2 EGLR 79. It will be important to consider the relevant deed in its entirety and the surrounding factual circumstances to reach a view as to whether there is a limitation on the density of development.

Registration

While the purported imposition of a restrictive covenant on the servient land may be evident from a prior deed, for the purchaser to be bound by it will also depend on whether it has been properly registered. In a case where the servient land is unregistered, a restrictive covenant made after 1925 should be registered as a D(ii) land charge against the name of the original covenanting party. Failure to register such a charge is not uncommon and will mean the developer will take free from it. If the servient land is registered at the Land Registry, the covenant to be binding on a successor in title must be noted on the charges register. Again, sometimes such registration gets overlooked, for example, on first registration of a title.

Declaration

If a party does want to seek clarity as to whether a restrictive covenant is enforceable or as to the true meaning of the restriction, they can consider making an application to the High Court for a declaration under section 84(2) of the Law of Property Act 1925. Given that such an application can be made by “any person interested”, which includes those with a legal or equitable estate or interest in the servient land, a developer under an uncompleted conditional contract could make an application. This, therefore, provides the developer with the opportunity to clear off a restrictive covenant from the title before he completes.

Contact our specialist land development and restrictive covenants solicitors today

To discuss your commercial and land development dispute please contact a member of our team on 03456 381381. Alternatively please send an email with your name, contact information and brief details of your property dispute to propertydisputes@ibblaw.co.uk and one of our team will be able to help you.