Building plots on residential estate sold to different purchasers – Restrictive covenants – First defendant seeking to develop two properties – Breach of certain covenants – Claimants seeking to enforce covenants against defendants – Whether building scheme existing under mutually enforceable covenants – Whether covenants annexed to land – Judge finding scheme existing and covenants annexed to land – Appeal allowed in part
The claimants were the owners of 55 properties on a developed estate. The first defendant was a property developer, that had an option over two residential properties, 14 and 16 Ruffetts Close. The second, third and fourth defendants were the respective owners, at the relevant time, of 14 and 16 Ruffetts Close. Both the claimants and defendants derived title from a common owner (the developer), which had developed the estate in the 1920s. The developer had sold 14 and 16 Ruffetts Close by conveyances, made in 1932, that contained restrictive covenants.
The defendants proposed to develop 14 and 16 Ruffetts Close in a manner that would breach some of those covenants. The claimants brought an action, seeking to enforce the covenants against the defendants. It was submitted that a building scheme existed, under which similar restrictive covenants were imposed upon a number of properties in a defined area and were mutually and reciprocally enforceable as between the respective owners, for the time being, of those properties. Consequently, the claimants submitted that all such owners were entitled to enforce the restrictive covenants. Alternatively, they contended that the owners of those properties that were sold off by the developer following the sales of 14 and 16 Ruffetts Close were entitled to enforce the covenants on the ground that the benefit of the covenants was “annexed” to their properties. The claimants submitted that, as the covenants related to the land retained by the developer when each plot was sold off, annexation was effected by virtue of section 78 of the Law of Property Act 1925.
On the question of annexation, the judge applied Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 EGLR 113, and found that the benefit of the covenant ran with each part of the land retained by the developer when the covenants were taken. In respect of the building scheme, the judge found that there was “no effective scheme enforceable against the properties that were sold in the southern or central part of the estate”. However, he found that the developer and the various purchasers of properties in the triangular site in the northern part of the estate, including nos 14 and 16 (the site), had entered into their conveyances on the basis that there was a scheme extending to the whole estate. He concluded that “the fact that in relation to a substantial part of the estate… the scheme may be unenforceable, does not mean that the court should conclude that there is no scheme”. Accordingly, he found in favour of the claimants on both issues. The first and second defendants appealed.
Held: The appeal was allowed in part.
The judge had been right to find that a building scheme did not exist in relation to the whole estate. But it could not be said that a scheme nevertheless operated as between the properties situated within the site. Applying Reid v Bickerstaff [1909] 2 Ch 305, the essential characteristics of a building scheme were that “there must be a ‘defined area’ within which the scheme is operative. Reciprocity is the foundation of the idea of a scheme. A purchaser… must know the extent of his burden and the extent of his benefit.” The evidence provided no answer as to what was the “defined area” within which the scheme was intended to operate. Nor was it clear how a purchaser of a plot within the site could know which plots on the estate fell within the scheme and which did not. Therefore, the evidence fell far short of establishing a scheme affecting the site. The appeal was allowed against that part of the judge’s decision.
However, the judge had been correct on the issue of annexation. The land to be benefited was sufficiently identified, and there was no doubt that the covenants both touched and concerned the retained land. The appeal was dismissed in that respect.
William Henderson (instructed by Dawson & Co) appeared for the claimants; Jonathan Clay (instructed by Gowen & Stevens, of Croydon) appeared for the defendants.
Sarah Addenbrooke, barrister
