With no discernible reduction in the amount of development land being sought, both farmers and developers should consider whether restrictive covenants which bind land, are truly the barrier to development they are often perceived to be.
We are increasingly being asked to advise on whether the restrictive covenant stands up to scrutiny and whether any options are available to the developer to mitigate the restrictive covenant's effect.
Why are restrictive covenants used?
Restrictive covenants allow landowners to retain some degree of control over the land they have sold. They were very common prior to the introduction of the Town and Country planning legislation which is now used by local authorities to restrain development. Restrictive covenants have been commonly used to stop buildings being added to on the same piece of land, stop amenity land from being developed, or stop significant alterations to an existing building. They do not affect obtaining planning permission but it is often the granting of permission which triggers the discovery that the plot is subject to a restrictive covenant – often followed by a campaign to lift it.
Judges take common sense approach to covenants
An example of the pragmatic approach to the lifting of covenants taken by courts was demonstrated by a recent case in which a developer went ahead and built social housing on land in deliberate breach of a restrictive covenant to which it was subject. The beneficiary of the covenant, registered against the adjoining land, was a charity intending to build a hospice for children. The case went to court and the judge ruled that, while acknowledging that the covenant was important to ensure the security and privacy for the hospice, the public interest "outweighs all other factors in this case. It would be an unconscionable waste of resources for those houses to continue to remain empty". In compensation for the lifting of the covenant, the trustees of the hospice were awarded £150,000 to plant trees to protect its privacy and for its loss of amenity. Although this case is not intended to condone breaches of restrictive covenants, it does indicate that courts will take a common sense view, particularly where the public interest is concerned. However, we might not have heard the end of this story as the decision may be appealed.
Forewarned is forearmed
Any landowner with the benefit of a covenant, and who has a sniff that development may be a possibility, should consider taking legal advice on the enforceability of the covenant, as to be forewarned is to be forearmed. This means that if a developer comes knocking in an attempt to broker a deal, the landowner will know the strength of their bargaining position. Likewise a developer should not rule out land as unsuitable for development simply because they believe a restrictive covenant will restrict development: those covenants may be unenforceable and, due to the nature of the intended planning application, there may be ways to mitigate the effect of the covenant.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
