Legal notes Allyson Colby reviews the latest case disputing basement developments
Key points
• Basement developments provide additional space in crowded cities, but may be controversial
• Restrictive covenants are being deployed in battles to prevent unwanted subterranean development
Subterranean development has become popular in London. However, the noise and disturbance caused by construction work and concerns about the effect on the structural stability of buildings nearby have caused controversy. Campaigners have suggested new laws to control basement developments and some authorities are introducing stricter planning policies in areas where subterranean development is most prevalent. Meanwhile, neighbouring landowners are attacking basement developments however they can.
Restrictive covenants often feature prominently in battles to prevent unwanted development and do so again in Hicks v 89 Holland Park (Management) Ltd [2014] EWHC 2962 (Ch); [2014] PLSCS 252. The proceedings were sparked by proposals for deep basement development on a small, but valuable, plot of land in London.
The building plot adjoined a Victorian property, which had been sub-divided into six flats. It had the benefit of covenants that prohibited the owner of the building plot from making planning applications, except in accordance with approved plans, drawings and specifications, and from commencing work until such plans were approved. The building plot has never been built on, but is now at the centre of a fierce battle over plans for its development.
Initial skirmish
The parties both scored points in their first legal encounter: [2013] EWHC 391 (Ch); [2013] PLSCS 66. The owner of the building plot tried to persuade the court that the prohibition on applying for planning permission without approval was not a restrictive covenant because it did not affect what was done on the land, or its status or physicality. However, the judge disagreed on the ground that the restriction on applications for planning permission acted, in effect, as a constraint on the types of development that could take place on the land.
The judge agreed that the benefit of the covenant was annexed to the land belonging to the covenantee and was, as a result, enforceable by his successors. However, he also ruled that the covenant was subject to an implied term that approval should not be unreasonably withheld. The covenantee sold the land as a building plot, which undermined the notion that the parties had intended there to be an unfettered veto over development on it.
Application for consent
The owner of the building plot asked the management company, which owns the freehold of the land that benefits from the covenants, to approve plans for a glass, cube–like construction above ground, with two further levels, including a swimming pool, below ground. The company had several objections. It complained that the house would cover most of the building plot and was concerned about the potential for structural damage to its own property and to the amenity provided by nearby trees. It argued that, in addition to being out of keeping with the architecture and design of its property, the development would be an undesirable addition to the area. The owner of the building plot responded by issuing proceedings for declarations that the company was being unreasonable and that she was entitled to apply for planning permission without breaching the restrictive covenant.
Meanwhile, the planning authority announced its intention to introduce new controls on the scale, form and extent of basement structures. The owner of the building plot was concerned that her planning application might be refused if the new controls were to be adopted before her application was heard. Consequently, she wanted to submit her planning application at once – but the company sought an interlocutory injunction to prevent this.
Interlocutory injunction
American Cyanamid Co (No 1) v Ethicon Ltd [1975] UKHL 1 sets out the tests that the court must apply in such cases. It must conclude that there is a serious issue to be tried, without prejudging the final outcome, and must weigh the damage that would be caused by the grant or refusal of an injunction and decide whether an award of damages could properly compensate the recipient of such damages for any injustice caused by its decision to award or withhold an injunction.
The company claimed that the covenant had been imposed to save the covenantee and its successors from becoming embroiled in contested planning applications and that the refusal of an injunction would negate the covenant. It was also concerned that the existence of a planning application would lead to an unquantifiable and irremediable diminution in the value of its property and that any subsequent valuations or sales of the flats would be affected by the proposals.
The court accepted that the company might suffer some financial detriment if it were to be forced to object to the planning application. However, the company had already spent time and money on experts’ reports in order to respond to the application for approval that it had received and, although it might incur some extra costs were it to object to the planning application, the judge thought that they would be easy to quantify and recover in damages.
There was no evidence that the tenants were proposing to sell their flats, or that the company wanted to dispose of its reversion, and the sellers would have to disclose the existence of the dispute to potential purchasers in replies to pre-contract enquiries even if no planning application were made. The building plot had been sold for development and the owner was prepared to undertake not to implement any planning consent acquired before the outcome of the proceedings between the parties was known, or to take advantage of it at all if the company’s refusal to approve the plans for the project were to be upheld. She also promised not to part with the land without obtaining a similar undertaking from the new owner.
The court accepted that the undertaking would reduce the likelihood of unquantifiable damage to the company and that there was a real risk that the adoption of new planning controls would be detrimental to the owner of the building plot. It also judged that the owner of the building plot was at greater risk of suffering substantial losses that could not be easily quantified, and for which, therefore, she might be not be fully compensated, if her planning application were to be refused following the introduction of the new policies. Consequently, the balance of convenience pointed firmly against an injunction.
Lawyers will follow the dispute with interest. The judgments provide us with answers to questions that could have appeared in an examination on the law of restrictive covenants and, intriguingly, there could still be more to come.
Allyson Colby is a property law consultant
