Subterranean development has become very popular in London. The litigation in Hicks v 89 Holland Park (Management) Ltd [2019] EWHC 1301 (Ch); [2019] PLSCS 132 concerned proposals for development on a long, thin strip of land, which was sold by auction in 2011. The buyer was an architect, who designed an “uncompromisingly” modern home consisting of a single-storey glass cube providing access to living accommodation, courtyard gardens and a swimming pool situated on two floors below street level.
However, the land was subject to restrictive covenants imposed in 1965 when it was first sold for development. The covenants prohibited the buyer from making planning applications without approved plans, drawings and specifications and from carrying out any work before definitive plans, drawings and specifications had also been approved. Various planning permissions were subsequently sought and obtained, but not implemented, and the land was left undeveloped.
Objections
The adjoining property, 89 Holland Park, was a large Victorian villa that contained five flats let on long leases. The owners wanted to acquire the land themselves to create a communal garden. But their offer, in the sum of £600,000, was refused and the land was sold at auction, even though the management company, which the leaseholders owned and ran, notified the seller’s solicitors that it had the benefit of the covenants and could, and would, put an “absolute stop” to any development and attached a sign to railings beside the site, advising prospective purchasers that the land was subject to covenants that would be strictly enforced.
The management company’s subsequent dealings with the buyer led to the litigation in 89 Holland Park (Management) Ltd v Hicks [2013] EWHC 391 (Ch); [2019] PLSCS 66. Both parties scored points. The court confirmed the company enjoyed the benefit of the covenants but implied a term that the requisite approvals should not be unreasonably withheld.
The buyer’s original intention to construct a two-storey house above street level, with three floors below ground, came to nothing. So she asked the company to approve her glass cube design, but it objected on aesthetic grounds. It also expressed concerns about the impact the development would have on surrounding trees and the loss of amenity that would be suffered during the construction work, and raised various issues about the construction itself. The buyer asked the company to reconsider and, when it refused, sought a declaration that the company had unreasonably refused approval pursuant to both covenants.
Law
Iqbal v Thakrar [2004] EWCA Civ 592; [2004] 3 EGLR 21 confirms the sole purpose of a covenant requiring approval is to protect the property interests of the covenantee. So, if what is proposed would have no impact on the covenantee’s property interests, it will not usually be entitled to refuse consent.
The covenants in this case were imposed while 89 Holland Park was occupied by short-term tenants. The long leasehold interests in the flats were created many years later – and the management company, which owned the structural elements of the building, the common parts, and the freehold reversion, was incorporated after that. So the court held that the covenantee had imposed the covenants for his own protection and, in accordance with Cryer v Scott Brothers (Sunbury) Ltd [1988] 55 P&CR 183, ruled that the management company was not obliged, or indeed entitled, to take the flat owners’ interests into account (although they could object to the buyer’s planning application and could enforce the covenants if the buyer did not secure the approvals needed from the company).
Considerations
The buyer claimed her application was refused because the owners of the flats were still implacably opposed to any and all development on the land. But it was up to the buyer to prove her case and the judge was not satisfied the flat owners’ initial approach had survived the litigation in 2013.
Victory Place Management Company Ltd v Kuehn [2018] EWHC 132 (Ch); [2018] PLSCS 17 established that there must be both a reasonable process and a rational outcome when considering applications for approval, and No 1 West India Quay (Residential) Ltd v East Tower Apartments Ltd [2018] EWCA Civ 250; [2018] EGLR 16 was also relevant. It confirmed that the court will not allow a bad reason to vitiate a refusal if there is another valid, freestanding reason for the decision, which is not simply “a makeweight”.
The company’s property interest in the building did not entitle it to object to the buyer’s plans on aesthetic grounds, or to the transient disruption that would be caused by construction, because there was no evidence the structure or value of its building would be adversely affected. And the possibility of damage to or destruction of trees was relevant only if there was an appreciable risk of heave that would cause structural damage to the building.
However, the company had also expressed concerns about the accumulation of groundwater, piling and the possibility of movement and subsidence caused by excavation and construction in such close proximity. These issues were not material to the approval of the plans for the purposes of the planning application because the company had not been advised that they could not be resolved by detailed engineering design and management at a later stage, and the buyer still had to obtain planning permission and probably a party wall agreement or award, as well as the company’s approval of her plans for construction. However, the issues provided justification for refusing to approve the plans for construction purposes and construction could not begin until all the relevant plans, drawings and specifications had been approved.
Key points
- A landowner with the benefit of restrictive covenants had unreasonably refused to approve plans for use in connection with a planning application
- But, at this stage of the project, there were justifications for refusing to approve the plans so that construction work could actually begin
Allyson Colby is a property law consultant
