Developer Englewood Properties has won a High Court dispute over the existing lease conditions on several Essex properties, which it had sold by auction in December 2003.
The court has ordered the purchaser of a £1.32m Woolworths store situated in a parade of shops in Dagenham that were sold by Englewood at the auction to pay full price even though Englewood had not inserted a restrictive covenant in Woolworths’ benefit in the contracts of sale for the surrounding shops.
Purchaser Cornberry Ltd claimed that Englewood had been required to insert the covenant, which prevented the leasing of adjacent shops for use as “fixed-price stores” in competition with Woolworths, when auctioning the properties.
It alleged that it was at an “unquantifiable risk” of a damages claim from Woolworths in the event that a fixed-price store opened in one of the other properties.
Based upon a valuation by consultant Chesterton, it offered to pay a reduced sum of £800,000 to reflect the defect in title for the Woolworths store, situated in Heathway.
However, Lawrence Collins J held that Englewood, as the vendor, had been under no duty to require the purchasers of the surrounding lots to comply with the covenant, which had been added to a 99-year underlease of the store in October 1939.
He said that the duties imposed in equity upon the vendor “to take reasonable care to preserve the property, and not to damage the property or to prejudice the purchaser’s interest” did not extend to a lessor’s duty to impose covenants on the purchasers of adjoining properties.
The judge also said that agent Shailesh Patel, who had purchased the Woolworths store and ancillary accommodation on Cornberry’s behalf, would be personally liable in the event that the company failed to complete the purchase.
Englewood Properties Ltd v Patel and another Chancery Division (Lawrence Collins J) 16 February 2005.
Mark Warwick (instructed by Jeffrey Green Russell) appeared for the appellant; David Hodge QC (instructed by Russell Cooke) appeared for the respondent.
References: EGi Legal News 16/02/05
