Truly Restrictive Covenants?

Common examples of restrictive covenants include placing restrictions on a landowner’s ability to develop the land or restricting what it can be used for.

In order to be legally binding, a restrictive covenant must:

1. Be negative in nature;
2. Touch and concern the land;
3. Be contained in a correctly executed deed; and
4. In the case of registered land, be registered against the burdened land or in the case of unregistered land, be registered as a land charge at the Land Charges Register.

A legally binding restrictive covenant will not fall away when the land is sold. Instead, the benefit and burden will run with the land and future successors in title to that land must comply with it. A party’s failure to comply may result in damages or an injunction being awarded against them.

Where a party has proposals for land that would be in breach of a restrictive covenant, this can be dealt with in the following ways:

1. Altering the proposals so that they do not constitute a breach of the restrictive covenant;
2. Negotiating the express release of the covenant with the beneficiary where the beneficiary can be identified (which will often involve payment of consideration to release the same); or
3. By making an application to the Upper Tribunal (Lands Chamber) for its modification or discharge under section 84 Law of Property Act 1925.

A restrictive covenant may be modified or discharged under section 84 provided that the Upper Tribunal is satisfied that:

1. The restrictive covenant does not secure any practical benefit or substantial value or advantage to its beneficiary; or
2. The restriction is contrary to the public interest.

In addition, money must be adequate compensation to any party that suffers loss or disadvantage from the discharge or modification of the restriction.

In Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd, a developer built multiple housing units on land that was incumbered by a restrictive covenant prohibiting use of it for anything other than a car park. One of the beneficiaries of the covenant objected to the works and requested an undertaking from the developer that the works would be stopped. 

The developer continued with the works and later made an application to the Upper Land Tribunal seeking modification of the restrictive covenants to allow the housing units to be occupied. The application was successful, however one of the beneficiaries of the restrictive covenant appealed the decision.

The Supreme Court exercised its power to set aside the decision of the Upper Land Tribunal by refusing the developer’s application. The Supreme Court held that it was wrong to allow the modification of a restrictive covenant where the covenant was deliberately breached with a view to making a profit.

Lord Burrows further commented that it was open to the beneficiary of the covenant to make an application for a prohibitory injunction to prevent the housing units from being occupied, or for a mandatory restorative injunction ordering the removal of the housing units.

The decision in Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd highlights the risks associated with deliberately acting in breach of a restrictive covenant.

For more information on this article please contact Ria Hattam in Ashfords' Real Estate team.