This blog was written by Kate Taylor (Paralegal)

A recent decision on restrictive covenants surprisingly saw the court award in favour of a developer who had already built a social housing development in breach of a restrictive covenant.

FACTS

A developer, Millgate, built 23 properties for the purpose of social housing on land near Maidenhead. 13 of these properties stood on land which Millgate knew was burdened by a restrictive covenant.

The covenant prevented building on the land and use of the land for anything other than a car park. The land benefitting from the covenant lay adjacent to the development and had been donated to the Alexander Devine Children's Cancer Trust for use as a children's hospice.

After completing the development, Millgate applied to the Upper Tribunal (UT) to have the restrictive covenant modified. Under section 84(1)(aa) of the Law of Property Act 1925, the UT has the discretion to discharge or modify a restrictive covenant if:

  • the restrictive covenant does not secure any practical benefit of substantial value or is contrary to the public interest; and
  • money would be adequate compensation to the benefitting landowner.

DECISION

Firstly, the court recognised that the restrictive covenant provided privacy and seclusion for hospital patients, which was a practical benefit to the trustees and had substantial value. However, the court also noted that the covenant prevented use of the land for social housing, which was of significant public interest.

The court decided that the public interest of social housing outweighed the private rights of the trustees. The court took into account the fact that many incoming residents of the new houses had been waiting for accommodation for a long time and that it would be a waste of resources for the properties to be left empty.

Secondly, the court found that money would be adequate compensation for the loss of privacy to the hospital. The developer was directed to pay £150,000 to the trust which would cover the cost of planting a boundary between the development and the hospice.

The UT emphasised that although they had decided in this case to modify the covenant, such modification was not an automatic right. Even if one of the grounds under section 84 applies, the UT has discretion to decide whether or not to modify the covenant.

CONCLUSION

The decision appears to encourage developers to build even when they know their plans are in opposition to a restrictive covenant. Consequently, landowners may be concerned that they cannot rely on the restrictive covenants benefitting their land when the burdened land has potential for development.

Whilst this decision was very specific to the facts of the case, developers and landowners should remember the importance the court placed on the land being used for social housing. Developers must also be prepared to pay significant compensation to the benefitting landowner should the court decide to modify the covenant in question.

Millgate Developments Limited and another v Smith and another, Re: Exchange House, Woodlands Park Avenue, Maidenhead [2016] UKUT 515 (LC),

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