Summary and implications
Where a property is sold subject to a covenant stating that the buyer must obtain consent from the seller for any proposed development, but there is no express provision that consent cannot be unreasonably withheld, it is likely that the court will imply such a provision, as it did in a recent High Court case*.
Developers will welcome the decision. Provisions for consent in freehold covenants are often silent as to whether consent can be unreasonably withheld. The inference that consent cannot be unreasonably withheld may provide a bargaining position.
The claimants all had interests in 89 Holland Park
The claimants comprised the freehold owner of 89 Holland Park and six of the long leasehold owners of the flats in the building. The defendant was the owner of the adjoining land.
The claimants wanted to enforce restrictive covenants
The claimants were seeking to enforce the benefit of certain covenants contained in a 1968 deed (the Deed) (see the box below) which related to the development of the adjoining property.
The covenants required the claimants' approval of any plans, drawings and specifications before the defendant made a planning application and additionally before the defendant carried out any building work. The Deed was entered into by predecessors in title of both parties.
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The 1968 Deed Clause 2 (b) provides: "The Building Owner [i.e. the owner of the defendant's land] shall make no applications to the appropriate Planning Authority nor apply for any other necessary permissions from the local or any other Body or Authority in respect of any plans drawings and specifications which have not been previously approved by the Adjoining Owner [i.e. the owner of the claimants' land] PROVIDED ALWAYS that if the Adjoining Owner shall approve the same but the Building Owner shall be required to modify or amend the same by the Planning Authority or any other Authority or if the Building Owner shall herself desire to amend the same then no further application shall be made by her to any such Authority unless the revised or amended drawings and specifications have been first approved by the Adjoining Owner". Clause 3 provides: "No work shall be commenced upon the building site before the definitive plans drawings and specifications of the said buildings have been first approved by the Adjoining Owner or his surveyor". |
The defendant argued that the covenants were not binding
The defendant argued that the covenants were not binding for the following reasons:
- The covenants were personal and did not bind successors in title.
- The covenants did not touch and concern the claimants' land and were not in the nature of a restrictive covenant.
- The court should imply a qualification that consent for planning or development was not to be unreasonably withheld.
The judge held that the covenants were binding but consent could not be unreasonably withheld
The judge found that:
- the covenants were binding on successors in title, applying section 78 of the Law of Property Act 1925 (see the box below);
- the wording used in the Deed was not sufficient to show a contrary intention, such that section 78 did not apply. Because section 78 applied, this also meant the long leasehold owners had the benefit of the covenants, as section 78 applies to persons deriving title under the covenantee and to owners and occupiers of the land intended to be benefited, who fell within the definition of successors in title;
- the covenants were restrictive covenants. The covenants touched and concerned the claimants' land as they allowed the claimants to control the use of the adjoining land; and
- consent could not be unreasonably withheld. It would be pointless for the Deed to provide for such an approvals process if the claimants could refuse consent for any reason.
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Section 78(1) of the Law of Property Act 1925 A covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and his successors in title and the persons deriving title under him or them, and shall have effect as if such successors and other persons were expressed. For the purposes of this subsection in connexion with covenants restrictive of the user of land "successors in title" shall be deemed to include the owners and occupiers for the time being of the land of the covenantee intended to be benefited. |
Footnote
* 89 Holland Park (Management) Ltd and others v Hicks [2013] EWHC 391 (Ch)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.