Restrictive Covenants – a new approach to an old problem?

The best laid plans of developers, landowners and homeowners can all easily fall foul of an unknown restrictive covenant that can either severely limit or even completely derail the implementation of a major or relatively minor project. A recent legal development (the “Derreb decision”) has however indicated that a more purposeful approach that could assist development may now be on the horizon.

Even the most sophisticated and experienced of developers can sometimes focus on the project in hand, spending time and money on buying land, obtaining planning permission and employing contractors before discovering that a covenant imposed over 100 years ago can mean that they can only construct one house rather than the planned twenty. Likewise a homeowner who has lived in their house for a number of years and has started to extend it could find that the works comes to a juddering halt when a neighbour turns up with an old deed and tells them the work has to stop.

So what are they? Restrictive covenants are legally enforceable provisions that can enable the owner of one property from preventing the owner of a second from using it in a certain way, including building on it or building on more than a set part of it, or increasing the height etc.  The enforcement of a covenant can often seem capricious or even vindictive so what can be done?

Like many issues prior knowledge is often the key. The existence of restrictive covenants should be identified as part of the legal due diligence process before a property is purchased and often their presence will mean the buyer chooses not to go ahead.  There are however other options available the most common of these being:

• Express release: where the owner of the land subject to the restriction directly negotiates with the party benefitting from the covenant to obtain its release. This often involves a payment and there is the risk that if no agreement is reached the restriction remains.
• Indemnity insurance: this is perhaps the most common particularly with older covenants where it is not clear who benefits from them. There are a number of insurers who will provide policies with the premium based on the value of any proposed development and / or value of the land.
• Application to the Lands Tribunal: whereby a request is made to discharge or modify a covenant. The Tribunal has the authority to do this where for example the covenant is obsolete (e.g. relating to some outdated use), it would prevent a reasonable use of the land and there is no loss to the beneficiaries of the covenant. The Tribunal has however traditionally been reluctant to enforce its powers, which makes the recent “Derreb” case all the more noteworthy.

In September 2017, the developer Derreb Ltd, secured the modification of a restrictive covenant which had hindered plans for a residential development at a private estate in Blackheath where the land had previously been a sports club known as the Huntsman.

A deed from 1956 imposed a covenant on the Huntsman whereby it could only be used as a sports ground. The developer took what was rather a brave approach by applying to the Lands Tribunal to have covenant discharged or modified.

The Tribunal took the view that without the discharge of the covenant the Huntsman was likely to remain derelict and undeveloped which would be contrary to public interest.

This decision has been welcomed by developers and may herald a new public policy approach in addressing historic covenants that bar development where it is in the public interest. As noted above the key however is finding out about any covenants that affect land before a purchase is made.

For further advice please contact Rob Pettigrew, Commercial Property Director on 0345 20 73 72 8 or e-mail rpettigrew@thursfields.co.uk