Appellant exercising right to buy – Council conveying property subject to covenant to use property as single private dwelling – Appellant seeking release from covenant in order to sell part of land for development – Council agreeing but requiring payment from profits – Whether council’s decision unlawful – Housing Act 1985 – Application for judicial review of council’s decision dismissed – Appeal allowed
The appellant and his father were tenants of a house at 7 Sages End Road, Helions Bumpstead, Essex. In August 1988 they acquired the property from the respondent local council pursuant to the provisions of Part V of the Housing Act 1985. The conveyance included a standard form covenant, which it was the council’s practice to include in all sales of council property pursuant to the 1985 Act, “To use the property as a singe private dwellinghouse only and not to carry out or permit to be carried out on the property any trade or business of any description…”.
Some years later, the appellant’s father died and the appellant became the sole owner of the property. In July 1995 he obtained planning permission for the erection of a bungalow in part of the garden of the property. He then wrote to the council asking for permission to sell the relevant part of the garden as a building plot. In January 1998 the council replied stating that they would be prepared to release the appellant from his covenant on payment to them of 90% of the open market value of the building plot.
The appellant sought judicial review of the council’s decision and a declaration: (i) that the covenant was illegal and void; (ii) that the demand by the council for a sum of money in consideration of their agreeing to release, waive or vary the said covenant was illegal, irrational or unreasonable; and (iii) alternatively, that the requirement of 90% of the open value of the building plot in consideration of such agreement was irrational or unreasonable. At the hearing, the relief sought in para (i) was abandoned by the appellant.
The judge held that the covenant was valid and that the appellant was, therefore, prohibited by contract from selling off part of his garden for redevelopment. He found that the council’s offer to permit development in return for part of the profit realised was not contrary to the provisions of the Housing Act 1985. The fact that the council’s motive was simply commercial, namely a desire to share in the development gain, could not convert a lawful demand for payment into one that was unlawful. Accordingly, he held that the council’s decision had not been illegal, irrational or unreasonable: [1999] PLCS 173. The appellant appealed and reinstated para (i) of the relief sought.
Held: The appeal was allowed.
The real question was whether the council had acted unlawfully in imposing a covenant for improper purposes and whether it was, accordingly, unlawful for them to rely on it to demand money for release. That question was answered by considering the decision-makers’ purposes in imposing the covenant and whether they were calculated to promote the policy and objectives of the right-to-buy legislation. The purpose of the covenant had clearly been to realise any future development value. The policy and objectives of the legislation, however, had been to enable a tenant to exercise his right to buy and to enjoy the fruits of home ownership, including any rise in value and any planning permission obtained. The 1985 Act identified the circumstances in which purchasers were required to make payments, either when acquiring the property or subsequently. If it had been intended that councils were to be entitled to impose covenants to realise any future development value, that would have been plainly reflected in the statute. The council were, in fact, trying to exact a price for a property in two stages, the first being fixed in the conveyance itself and the second being a further price payable if the value of the property were to be enhanced through development. That was entirely outside the scope of the Act and the position taken by the council was clearly unlawful. Accordingly, the appellant was entitled to the declaration sought.
Andrew Arden QC and Andrew Gore (instructed by Stevens, of Haverhill) appeared for the appellant. Rabinder Singh (instructed by Holmes & Hills, of Braintree) appeared for the respondent council.
Thomas Elliott, barrister
