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Restrictive Covenants Need Not Rob Developers of Profit

The Analyst

A recent legal case proves such restrictions on land are not necessarily an obstacle to development

Restrictive covenants on land can rob it of development value, burdening a potential site with limits on use and effectively handing control to a band of objectors. In a recent case (with something of a Robin Hood flavour) the ability to discharge or modify such covenants under section 84 of the Law of Property Act 1925 was again put to the test, yielding useful up-to-date guidance on obsolescence, practical benefit and compensation.

In the late 1920s the trustees of the deceased Colonel Lionel Gisborne (presumably no relation to Robin Hood’s adversary Sir Guy of Gisbourne, but who knows?) began to sell off his estate, then on the outskirts of Derby (well, it’s nearly Nottingham), dividing what were fields into large plots ostensibly for the development of substantial detached homes. In respect of the site in question, a 1928 conveyance included a covenant prohibiting more than three houses on the land; three houses had since been built. In 1929, the owner of another part of the field acquired an additional parcel of land running to the boundary of the land sold in the 1928 conveyance. The 1929 conveyance included a covenant preventing any buildings on the affected land “except those for use in connection with [a specified adjoining property] unless the southern boundary of the said piece of land should have a frontage to a public road”. In 1932 that land was divided and the area closest to the boundary was sold to the owner of the 1928 land. 

Gradually, over the succeeding years, development took place in the surrounding area. A few more houses here, a larger housing estate there, as the city of Derby expanded. In 2012 the applicants, who now owned a potential site including the 1928 land and the additional 1929 land sold in 1932, obtained planning permission to build a number of houses. Some would be on the land subject to the 1928 covenant, one would be on the land subject to the 1929 covenant. Many of the owners of neighbouring properties who had the benefit of the covenants objected, including Mr and Mrs Sherwood (there’s that Robin Hood reference again). 

The applicant developer, for whom I acted, argued that both covenants were either obsolete within the Law of Property Act 1925 section 84(1)(a) or of no substantial practical benefit to the persons with the benefit of them under section 84(1)(aa) or indeed of any benefit at all. 

With regard to obsolescence, interestingly the Upper Tribunal held that the 1929 covenant was obsolete but the 1928 covenant was not. The tribunal accepted that changes in the locality had significantly eroded the protection that the 1929 covenant was intended to achieve. In particular, other development on the affected land itself, undertaken in breach of the covenant, had disturbed the principle that any development should have access without the need for an additional road outside the boundaries of the land itself. However, by contrast, the land subject to the 1928 covenant was itself still only subject to low-density development. Thus, although substantial changes in the area had occurred, the 1928 restriction was held still to be of utility to the owners of the benefited land.






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