The Cotswold Water Park provides a wonderful backdrop for luxury lakeside holiday homes. Wild Duck Ltd v Smith [2017] EWHC 1252 (Ch) concerned a development of up to 40 such properties. The landowner had engaged a developer to market the plots and enter into building contracts with buyers – and, when the development was complete, undertook to transfer the common parts to a management company owned and run by the owners of the holiday homes.
Just over half way through the project, the developer went into liquidation, leaving the common parts unfinished and holiday homes that had been completed without a permanent sewage disposal system. The leases of the properties provided that the management company became liable to complete any outstanding work in such circumstances – and, if the management company did not do so, the landowner could step in and carry out the work at the cost of the management company.
The company had purchased 999-year leases of five plots. It was aggrieved by the time taken to complete the outstanding work and claimed that the landowner (who had eventually stepped in) had prevented the management company from complying with its obligations under the leases. It also complained that the presence of two partially-built properties, which appeared to be derelict, constituted a breach of a covenant not to cause a nuisance or annoyance.
The court dismissed the claim. The judge accepted that there was an implied term in the leases obliging the landowner not to do anything to prevent the management company from performing its obligations to the owners of the holiday homes – but rejected the company’s claim that the landowner had done so. The landowner had allowed more than two years to elapse after the developer became insolvent before intervening, and any subsequent delays were the natural consequence of the negotiations that followed. It was also relevant that the management company had never disputed the landowner’s right to complete the work or complained that it had been prevented from complying with its contractual obligations.
Did the leases contain implied terms obliging the landowner to co-operate with the management company to enable it to perform its obligations under the leases? The judge decided that there was no need to imply a provision like this to ensure that the leases had commercial or practical coherence: see Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72; [2016] EGLR 8.
Finally, was the landowner in breach of a covenant not to cause a nuisance or annoyance, due to the state of the units that remained unfinished and under his control? The judge accepted that there was a “letting scheme”, which applied to the properties that remained unsold: see Williams v Kiley [2002] EWCA Civ 1645; [2003] 1 EGLR 46 and Mackenzie v Childers [1889] 43 ChD 265. Furthermore, the term “annoyance” has a wider meaning than the term “nuisance”. However, common sense dictated that the unfinished units were neither a nuisance or an annoyance. They had not blocked any views (as in Dennis v Davies [2009] EWCA Civ 1081; [2010] 1 EGLR 81) and had not prevented the owners of the properties from occupying or letting them for holidays.
Allyson Colby is a property law consultant
