Developers: ignore restrictive covenants at your peril

It is not unusual for an investigation of title to land intended for development to disclose restrictive covenants of one type or another. What should a developer do if the restriction appears to stop the proposed development in its tracks?

In Alexander Devine Children’s Cancer Trust v Millgate Developments Ltd and another [2018] EWCA Civ 2679 the Court of Appeal confirmed in no uncertain terms that the last thing that the developer should do is to carry on regardless.

The developer in this case was aware of restrictive covenants over its land in favour of adjoining owners which prevented residential development. However, having obtained planning permission for social housing, it turned a blind eye and proceeded to build nine 2-storey houses and four bungalows on the site. Having done so the developer then applied to the Upper Tribunal for the discharge of the covenants under section 84 Law of Property Act 1925, which grants power to discharge or modify restrictive covenants affecting land on certain limited grounds. The ground relied upon by the developer was that the covenant impeded the reasonable use of the land for social housing, which was contrary to the public interest. The adjoining owners objected.

The Court of Appeal took exception to the “deliberately unlawful and opportunistic” conduct of the developer and the fact that it presented the Upper Tribunal with a “fait accompli” in an attempt to force its hand. What is more, the developer had not tried to identify those with the benefit of the restrictive covenants in order to negotiate with them but rode roughshod over their property rights, nor had it explored alternative ways of achieving the development which would not have resulted in breach.

In short, the developer “… acted with its eyes open and…as a result it is appropriate and in conformity with the public interest that it should bear the risk that it may have wasted its own resources in building the 13 housing units on the ... land”.

Given these unequivocal words it will come as no surprise that the developer’s application to discharge the restrictive covenants was refused. It remains to be seen whether an injunction will be granted for the removal of the buildings.

We think the lesson is clear ...