A property developer faces the prospect of having to tear down a social housing development it built after the Court of Appeal refused to allow it to modify a set of restrictive covenants.
The ruling — which may well get appealed to the Supreme Court — is a “strong message” to developers to respect the rights of other private landowners, according to property lawyer Emma Humphries, a partner at Charles Russell Speechlys.
The developer at the centre of this case, Millgate Developments Limited, finished building a 23-unit residential site on land near Maidenhead in 2015.
The site was next to a plot that belonged to the Alexander Devine Children’s Cancer Trust charity, which had planned to build a hospice on the site.
The Millgate plot, however, had a restrictive covenant on it dating from the 1970s that stated that no buildings could be built on it. Millgate ignored the covenant, built the development and then applied to the Upper Tribunal to have the covenants overridden “thereby presenting the Upper Tribunal with a fait accompli,” according to today’s ruling.
The Upper Tribunal ruled that the covenants could be overridden because they were against the public interest as they impeded “the continued existence” of much-needed social housing.
But in a ruling today, a three-judge panel at the Court of Appeal in London reversed the decision following a legal challenge from the trust. The Court of Appeal found that the Upper Tribunal had misapplied the public interest test.
“This is a very bold ruling by the Court of Appeal,” Humphries, who didn’t advise on the case, said in a telephone interview.
“It is a strong message to developers that you can’t just do what you want and present a fait accompli to the courts.”
“The position that the developer is left in is that they are in breach of covenant,” she said.
The charity was able to invoke the covenants on the developer’s land because it holds land that touches the plot, and is therefore directly affected. If the charity now sought a court order forcing the developer to tear down the buildings, they would probably be granted it, she said.
In situations such as these, parties often come to a “commercial arrangement” but, if the charity decides it doesn’t want its gardens overlooked by a housing estate, “that may not be possible,” she said. As a result, they may try to appeal the ruling.
In making their ruling, the judges balanced the public interest in providing affordable housing with the public interest of the proper application of property law, and sided with the law, Humphries said.
“It is in the public interest that contracts should be honoured and not breached and that property rights should be upheld and protected,” Lord Justice Sales wrote in the judgment.
“A property developer who knows of a restrictive covenant which impedes its development of land has a fair opportunity before building either to negotiate a release of the covenant or make an application under section 84 to see if it can be modified or discharged,” Sales wrote. “That is how a developer ought to proceed.”
“Put another way, it is contrary to the public interest for the usual protections for a person with the benefit of a restrictive covenant to be circumvented by a developer seeking to obtain an advantage for itself by presenting the tribunal with a fait accompli in terms of having constructed the building on affected land without following the proper procedure, and then in effect daring the tribunal to make a ruling which might have the result that the buildings have to be taken down.”
The Alexander Devine Children’s Cancer Trust and Millgate Developments Limited; Housing Solutions Limited
Court of Appeal (Underhill LJ, Sales LJ, Moylan LJ) 28 November 2018
