- Developer falls foul of restrictive covenant
Developer falls foul of restrictive covenant
Developer falls foul of restrictive covenant5th January 2021 - Published by Kuits property development team
The Supreme Court’s recent ruling in ‘Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd’ confirms that a developer will not be allowed to deliberately breach a restrictive covenant to create the necessary public interest ground for modification of that restrictive covenant.
What is a restrictive covenant?
A restrictive covenant over land is an agreement between two parties, where one party agrees to restrict their usage of the land to the benefit of the other party’s land. Under Land Property Act 1925 Section 84, a restrictive covenant can be modified or discharged upon application to the Upper Tribunal.
The facts of this case
Part of the land purchased by Housing Solutions Ltd in September 2015 had restrictive covenants which prevented use of the land for anything other than car parking and provided that no building structure should be erected on the land.
Housing Solutions had purchased the land from Millgate Developments Ltd. Millgate knew about the restrictive covenants, but before applying to the Upper Tribunal to modify or discharge the covenants, they secured planning permission and had already built 13 houses on the land. The Upper Tribunal granted Millgate’s application. However, this decision was overturned by the Court of Appeal on appeal by the Cancer Trust. Following its purchase of the land in September 2015, Housing Solutions Ltd appealed to the Supreme Court.
Whilst there were four grounds of appeal to the Supreme Court, the key issue was the extent to which Millgate’s conduct should be considered when deciding whether or not the covenant should be modified on the ground that it was “contrary to public interest”. Millgate was only able to satisfy the public interest test in Section 84 because it already had planning permission and had built 13 social housing units on the land before making the application to the Upper Tribunal.
The Supreme Court held that Millgate’s conduct had fundamentally affected the position in relation to public interest and that it would be wrong to accept a modification of a covenant because of actions that the developer had undertaken by its own deliberate and cynical breach.
The decision on this ground of appeal alone was held to be sufficient for the dismissal of the appeal.
This case highlights the importance of developers taking legal advice in relation to restrictive covenants, before an application for planning consent is made. The Supreme Court has sent a clear message that a developer will not be allowed to engineer the environment to support modification of a covenant.