UK: Restrictive Covenants – The Price Of Modification

Last Updated: 20 September 2019
Article by Frankie Tierney
Most Read Contributor in UK, September 2019

Whether you are a private landowner looking to sell your land to a developer for housing or wishing to take advantage of that large garden plot to build an extra house on the land, restrictive covenants create problems that need to be thought through at a very early stage.

Having identified that your land is burdened by a restrictive covenant and for the purposes of this article the covenant in question will be that only one residential building can be erected on the land. What do you do next?

Only the owner of the land that has the benefit of the covenant can enforce the covenant. This is further complicated by the "Building Scheme". Effectively, when developers buy land and then sell off the houses they have built on them, they generally do not want to be left owning a small piece of the original land or having to deal with subsequent owners of the plots complaining that other owners are breaching covenants.

To avoid that problem, they will often ensure that in the Transfers of each plot, each owner not only has the burden of covenants which will be identical for all the plots, but each can enforce that covenant against any of the others. This effectively "closes the loop" and allows the developer to move on to the next site.

The Property Chamber can decide that a Building Scheme exits if all the required criteria apply even if the Transfers do not expressly give each owner both the benefit and the burden of the covenants. This has enabled older housing "estates" to legitimately protect the intentions of the original covenants. It is not a panacea for all covenant problems on what seem to be housing developments. How you deal with that is a story for another day.

Assuming you can identify the owner of the land who has the benefit of the covenant and assuming you are not reckless enough to disregard the covenant and hope they don't notice; [any conveyancing solicitor worth their salt will definitely ask some difficult questions when you come to sell the house you have just had built]; you have two options if you want to progress:

  1. Negotiate with the owner of the benefiting land to agree to modify the covenant burdening your land to enable you to build on it. This will generally require a payment of money which will often be based on the profit likely to be achieved once you have built and sold. The first consideration will be – if I have to pay this extra sum – will the project still be worth it and/or will the developer I had lined up to buy the land from me – still be prepared to pay what I had hoped to get?
  2. Assuming a deal cannot be reached with the benefiting land owner; you can make an application to the Property Chamber requesting a modification of the covenant. Such an application adds to the costs of the project and delays its implementation since you will have to await the outcome.

Even if you are allowed a modification against the wishes of the benefiting land owner – the Chamber can award a lump sum in compensation and you cannot assume you will recover some or all of your costs if you are successful. Those costs plus the delay plus the amount of compensation may collectively make the project uncommercial.

By way of example of how this can get tricky consider the Application made by Mrs Geall which was determined by the Upper Tribunal (Lands Chamber) in April 2018.

Facts:

In 1987 Mr & Mrs Geall had bought a semi detached cottage called Solitude complete with a long thin plot of land and a barn at the far end; from the then owners of a "country landed estate" known as Cowden Hall and Cowden Hall Farm (CHF).

The covenants imposed by the owners of CHF included preventing any further building on the land sold to Mr & Mrs Geall.

In 1993 Mr Hammond bought CHF consisting of some 90 acres and with it the benefit of the covenant.

In July 2015 Mrs Geall obtained planning permission to convert the redundant barn to a residential property. This of course clashed with the covenant she and her husband had entered into 28 years previously.

Mr Hammond refused to allow a modification of the covenant so in September 2017 Mrs Geall made an application to the Tribunal to allow her to implement her planning permission and Mr Hammond (who had offered to buy the barn from her at £45,000) objected.

The full Hearing took place on 18 April 2018 (some six months after the start of the process).

Mrs Gealls position was that the covenant impeded her reasonable use of the land; did not secure any practical benefit of substantial value or advantage to Mr Hammond and that money would be adequate compensation for any loss Mr Hammond might suffer if the modification was granted.

The Experts appointed by the parties agreed that the value of the remaining land owned by Mr Hammond would be reduced if the barn was converted into a house with an access road to it. The value of CHF was put at £2.6 million.

The Tribunal decided that the impact of the barn conversion when considering noise and an increase in through traffic was not significant enough to uphold Mr Hammond's objections. So Mrs Geall got her modification.

However the Tribunal also decided that CHF suffered a 2.5% reduction in value which amounted to £65,000. It concluded that although it was a significant sum of money it was not substantial in the context of the overall value of CHF.

The Tribunal ordered Mrs Geall to pay Mr Hammond £65,000 within three months and once it was paid she could build the barn conversion strictly in accordance with her planning permission.

Of course Mrs Geall still had the option of not building, in which case she did not have to pay £65,000 – but she would then have wasted the money spent getting the planning permission and the costs of the Tribunal application.

You have to wonder whether Mrs Geall came to regard this as somewhat of a Pyric victory.

Published: Sep 3, 2018

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions