Restrictive Covenants

Simon Waterfield

What does the term restrictive covenants mean?

Restrictive covenants are contractual provisions that impose constraints or restrictions on one or more parties involved in a variety of different contracts. This article relates to restrictive covenants found in property transactions when one property owner seeks to rely on a restrictive covenant preventing or restricting another property owner from building on their land.

Section 84 application: deliberate breach

A developer’s “build first, apply later” method leads to an Upper Tribunal rejecting to exercise its discretion to extinguish covenants.

Fosse Urban Projects Ltd v Whyte

Case background

In the above case, the developer applied to the Upper Tribunal on the grounds of Section 84 of the Law of Property Act 1925 for the extinguishment of a restrictive covenant. By the time the developer applied the house had been built and it was already in breach of the covenant.

The land which was burdened by the covenant, was owned by Fosse Urban Projects and is located in Norfolk. The covenant was imposed in 1996, at a time when the site was undeveloped. The covenant restricted the land’s use exclusively to “garden land in connection with the adjoining property.”

The Whytes property which had the benefit of the covenant was situated on the other side of the road from Fosse Urban Projects’ newly built property.

Fosse Urban Projects sought the discharge or amendment of the restrictive covenant under the grounds (a), (aa), and (c) of Section 84 of the Law of Property Act 1925.

  • Ground (a): “that by reason of changes in the character of the property of the neighbourhood or other circumstances of the case which the Upper Tribunal may deem material, the restriction out to be deemed obsolete; or
  • Ground (aa): that in a case falling within subsection (1A) below the continued existence therof would impede some reasonable user of the land for public or private purposes or, as the case may be, would unless modified so impede user; or
  • Ground (c): that the proposed discharge or modification will not injure the persons entitled to the benefit of the restriction.”

The Tribunal’s decision

The Tribunal dismissed the Fosse Urban Projects application. This is because Fosse Urban Projects failed to offer any evidence or rationale for the delay in submitting its application. This omission prevented the Tribunal from assessing Fosse Urban Projects’ intentions. Consequently, the Tribunal inferred that Fosse Urban Projects was aware of the covenant and its enforceability but gambled on the assumption that the Whytes would not seek an injunction or contest a discharge application once development had commenced. As a result, the Tribunal chose not to exercise its discretionary powers in favour of Fosse Urban Projects.

Comment

This case is a good reminder that if your property is subject to a restrictive covenant then you should not just ignore it. The Tribunal does have powers to remove or vary a restrictive covenant but as this case demonstrates the Tribunal will have little sympathy with anyone who builds without first applying for the discharge of the covenant.

The law surrounding restrictive covenants is highly complex and before any application is made to the Tribunal consideration needs to be given as to whether the restrictive covenant is enforceable at all.

How can we help?Restrictive Covenants Property Transactions

Simon Waterfield is a Partner in our expert Dispute Resolution team, specialising in property disputesrights of way claimslandlord and tenant disputes and commercial disputes.

For more information on the subjects discussed in this article, get in touch with Simon or another member of the team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online enquiry form.

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