Agreement for sale of land – Planning permission existing for holiday cottages on land – Sale conditional upon purchaser obtaining planning permission for permanent residential units – Purchaser agreeing to pay overage to defendant vendors if permission obtained for “residential flats” – Planning permission granted for holiday apartments – Claimant seeking declaration that overage not payable – Claim allowed
The defendants entered into an agreement to sell a hotel in Padstow to O Ltd for £1.01m. The hotel benefited from planning permission to construct five holiday cottages to the rear. However, O Ltd wanted to develop the land for permanent residential purposes. Accordingly, the agreement was conditional upon the satisfaction of a planning condition, namely that O Ltd obtained planning permission for “not less than 16 three-bedroom units of permanent residential occupation throughout the year” by a longstop date in January 2004 or such later date as the defendants might approve, such approval not to be unreasonably withheld or delayed.
O Ltd submitted various planning applications for the demolition of the hotel and the construction of flats; permission was refused for a development of 18 flats and for an alternative scheme that comprised five flats for permanent residential use and 13 flats with holiday restrictions. The longstop date was passed while appeals against those refusals were pending, and the defendants decided that the agreement was no longer binding. O Ltd brought proceedings on that issue, which were compromised by a consent order. The order provided for the sale agreement to be amended to O Ltd further time in which to obtain planning permission while entitling the defendants, in the event that O Ltd obtained planning permission for a development of “residential flats”, to receive an overage payment for each flat sold. The defendants later agreed to waive the planning condition entirely and completed the transfer of the property to O Ltd.
Although O Ltd’s planning appeals were dismissed, it eventually obtained planning permission for a development of 17 apartments, subject to a condition that they be used “for holiday accommodation only”. The defendants maintained that they were entitled to receive an overage payment. By that time, the claimant had stepped into the shoes of O Ltd for the purpose of enforcing the agreement. He applied for a declaration that no payment was due since the flats were not “residential flats” within the meaning of that agreement.
Held: The claim was allowed.
Construing the compromise agreement objectively, the term “residential flats” did not include holiday apartments of the character for which O Ltd had obtained planning permission, but was limited to flats that could be sold for use as permanent residences. Given its natural meaning, the term “residential flats” meant flats that the occupier would regard as his or her residence, which would not be a natural description of a holiday apartment. In referring to “residential flats”, not merely “flats”, the parties were clearly intending to limit the type of flats that would be covered by the overage provision and to confine the application of that provision to those flats that were available for full-time residential occupation. That construction was supported by the background to the agreement: the terms of the original planning condition indicated that O Ltd’s principal commercial interest was to develop the property by building units that were not limited to holiday use, and, at the time of the consent order, two planning appeals had been on foot, each of which contained an element of full-time residential accommodation. Moreover, the commercial context suggested that the parties were concerned to provide for a payment of overage in relation to a development containing a different type of unit from those for which planning permission already existed. Consequently, the defendants were not entitled to any overage payment.
Mark Wonnacott (instructed by Ashfords) appeared for the claimant; Nicholas Bard (instructed by Wolferstans, of Plymouth) appeared for the defendants.
Sally Dobson, barrister
