Bryant Homes and others v Stein Management and others 2016 EWHC 2435 examined whether to interpret a restrictive covenant (RC) solely on its terms, or in the light of a related agreement. On sale of part of his land (Plot A) a farmer imposed a RC on Bryant, restricting use of Plot A to agriculture. The farmer retained Plot B. The RC expressly benefited Plot B (shown on a plan) but did not state whether that benefit was attached to the whole and all parts of Plot B.
In a separate contract Bryant promised to promote Plot A for development. If acceptable planning consent was granted, Bryant would pay overage, and the farmer would release the RC. The RC was noted on Plot A’s registered title, but not the agreement. The farmer sold off parts of Plot B without the benefit of the RC. He sold the remainder of Plot B to NAB with the benefit of the full RC. NAB used the land (but not the benefit of the RC) as security for a loan. NAB went into liquidation, defaulted on the loan and Plot B was sold by the mortgagee to Stein without assignment of the benefit of the RC.
To try to kill off the RC and the overage obligation, Bryant obtained their express release from NAB’s liquidator. Stein argued that as owner of part of Plot B they could still insist on agricultural use of Plot A.
Looking at the documents as a whole, Bryant argued the RC was designed to secure payment of the overage, not benefit Plot B. This failed the test that a RC must “touch and concern” the benefited land so successors in title (eg Stein) could not enforce the benefit. Bryant pointed to Cosmichome v Southhampton CC [2013] EWHC 1378 where a RC prohibiting use by anyone other than the BBC failed the same test, because its purpose was to keep the BBC on the land or force it to pay for consent to sell, not to benefit the Council’s land. Bryant failed. The judge said a reasonable person would base their view on the title information. They might not know about the separate agreement. The RC was in conventional form and made sense as it stood, since Plot B might benefit from restricted use of Plot A. It was also wrong to argue that, because the release arrangement was personal, the related RC must be too.
Alternatively Bryant argued that the RC only benefitted Plot B as a whole, not its various parts, so Stein could not enforce it as owner of part only. Bryant pointed to the separate agreement as displacing the strong presumption that the benefit of an RC is annexed to the whole and each part of the benefited land (Federated Homes v Mill Lodge Properties [1981] 1 WLR 594). The judge disagreed.
This was only the preliminary hearing. Another round will examine whether Stein’s part of Plot B could actually benefit from the RC. The moral of all this might be to find a better way to secure overage.
Sue Highmore is a property law consultant
