Restrictive covenants between landowners restrict the way in which land may be developed and used. They operate as an effective form of private planning control in circumstances where the planning system would not operate as a barrier to development.
Consequently, it is important for practitioners to be able to distinguish between restrictive covenants that have been imposed for the benefit of a named landowner, and restrictive covenants whose benefit is annexed to, and is intended to pass with, the land. Unfortunately, the distinction is not always easy to draw. This can result in expensive and protracted litigation to ascertain the legal position.
City Inn (Jersey) Ltd v Ten Trinity Square Ltd [2007] EWHC 1829 (Ch); [2007] 26 EG 162 (CS) concerned restrictive covenants that had been imposed by the Port of London Authority, which no longer owned the property that benefited from the covenants. The covenants restricted development that did not have the approval of the estate officer of the transferor. The parties asked the court to decide whether this meant the authority (which had consented to the proposed development), or whether the covenants were enforceable by the new owner of part of the land for which the benefit of the covenants was taken.
The judge took the view that there may be commercial reasons for imposing restrictive covenants for the benefit of a named individual or company, and no one else. This would be especially pertinent if the landowner planned to sell part of the land that benefited from the covenants and did not want any one else to be able to obstruct its freedom to do as it chose – and it was important to the factual matrix in this case that the covenants benefited two separate pieces of land.
A distinction was made between private sales of individual properties and development schemes. In the case of a sale of a single property, it was unlikely that the parties would want a party that retained no interest in the land to be able to control development, and to override the interests of those who did have a proprietary interest to protect. On the sale of development sites, it was conceivable that a common seller might wish to retain control. Another important consideration was that the authority was a statutory body, which was unlikely to disappear from the scene, and would therefore be available to deal with applications for consents for the foreseeable future.
The purchaser of the land that was bought from the authority argued that it would be inconsistent with the concept of restrictive covenants to conclude that consent was required from a former landowner, which no longer held any of the land that benefited from the covenant. The judge disagreed and suggested that, if the benefit of restrictive covenants is vested solely in a seller, it is always open to a buyer to bargain with the seller for a covenant that the seller will not act without the buyer’s consent. Food for thought indeed.
Allyson Colby is a property law consultant
