What should developers do where restrictive covenants impede development? It may be tempting to try to steamroller the development through, despite objections, in the hope that objectors will take the path of least resistance. However, recent decisions suggest that this would be unwise.
In Re George Wimpey Bristol Ltd and another’s application [2011] UKUT 91 (LC); [2011] PLSCS 146, the developer obtained planning permission for residential development. Some of the houses were to be constructed on land that was subject to a restrictive covenant preventing development, but the developer ignored complaints from landowners with the benefit of the covenant and did not stop work on the land affected by the covenant until they commenced proceedings for an injunction.
The proceedings were suspended to enable the developer to apply to the Lands Chamber of the Upper Tribunal for the covenant to be modified. The developer argued that the covenant impeded a reasonable use of the land, conferred no practical benefits of substantial value or advantage, or was contrary to public interest, and that any loss could be adequately compensated in money: section 84(1) of the Law of Property Act 1925. The tribunal accepted that the local authority had granted planning permission for development and that the proposed use was a reasonable one, but decided that the covenant did confer a practical benefit of substantial value on four adjoining properties. Consequently, it rejected the application for modification of the covenant.
Developers would be well-advised to take careful note of the tribunal’s comments. It disapproved of the developer’s actions, which were not inadvertent and did not result from the discovery of the covenant at a late stage in the development programme. The developer had adopted the deliberate strategy of continuing with the development despite objections, in the hope that, when it did stop work, the appearance and character of the land would have changed so much that the tribunal would allow the development to proceed. However, the tribunal made it clear that it would probably have refused to modify the covenant, had there been grounds to do so, because it was not inclined to reward parties who deliberately flout legal obligations in this way.
The decision follows soon after the judgment in HXRUK II (CHC) Ltd v Heaney [2010] EWHC 2245 (Ch); [2010] 3 EGLR 15; [2010] 44 EG 126, where the court granted a mandatory injunction requiring a developer to pull down parts of an office building that was partly let because it interfered with rights of light enjoyed by a neighbouring building. The decision set legal tongues wagging and it had been hoped that the Court of Appeal would have an opportunity to consider the case. Many believed that it would have rescinded the injunction and ordered the developer to pay damages instead, but the parties settled their dispute through mediation before the appeal was heard.
Practitioners will watch this case with interest to see whether the objectors pursue their application for an injunction and, if so, whether the court will require the developer to remove the offending work, or pay damages instead. The adjoining landowners will hope that the tide continues to run in favour of protecting property rights.
Allyson Colby is a property law consultant
