Restrictive covenants work to prevent or restrict use of land and are agreements between landowners preventing a specific use of the land, for the benefit of another. They can become a problem if the land you are seeking to purchase or use for development is subject to a covenant as it can prevent development and the fact you have planning permission does not mean covenants can be disregarded.
Along with the cost associated with trying to get them removed many covenants require consent from a landowner who may need to be traced causing delays and transactions to slow down. The nature of the restrictive covenant may have been useful for the land when put in place but often with time they can become obsolete and bind the land even if circumstances have changed years later. Restrictive covenants are not to be confused with ‘positive covenants’ which may require a developer to do something on the land.
Restrictive covenants are typically imposed when someone sells off part of a larger site and wants to make sure that the part sold will not be used in a way that interferes with their enjoyment of the part they are retaining.
Examples of typical restrictive covenants include:
- not building on certain areas of a site;
- not building more than a specific number of houses on a site;
- not building above a specified height; or
- not using the land for a specific trade or business or in a way that may cause a nuisance to others
Restrictive covenants will sometimes require the consent of the landowner to be released. Often with age, it can become difficult to identify who has the benefit of the covenant, and this becomes more difficult when the land is sold in parts. There are various ways of dealing with a restrictive covenant on title and these include applying to the court to have it removed, negotiation with the landowner to release it usually in the form of payment and getting indemnity insurance to cover any costs and losses incurred.
The penalties for breaching a restrictive covenant and continuing to carry on with a development are subject to risk. A landowner could be granted a court injunction requiring the development work be stopped altogether and, in some cases, may even be required to demolish a completed building. Other penalties include imposing damages but where it is judged that a developer deliberately has ignored a restriction without trying to take the proper legal steps to resolve these damages may not be sufficient.
The recent case of Fosse Urban Projects Ltd v Whyte is an example of where the courts chose not to allow a developer’s application to discharge a restrictive covenant since the developer had already completed development works in breach of that covenant. The land in question had a prohibition of not to be used other than for garden land which had been imposed in 1996. Over time the landscape and character of the local area had evolved so Fosse Urban Projects Ltd made a court application to have this covenant discharged on the basis:
- the change in the development area in question had dramatically changed rendering the covenant out of date;
- the covenant made it difficult to adhere to and affected the reasonable use of the land; and
- the removal of the covenant would cause no harm to the neighbours, who had the benefit of the covenant.
The courts took the view that Fosse had been aware of the restrictions and decided to carry out the works regardless which amounted to a deliberate breach and highlights how the courts take a restrictive approach in deciding whether covenants are to be released.
The case also strikes a warning to developers of how important it is when acquiring new land to make sure proper care and due diligence is taken in relation to understanding any impediments on a site.
If you are developing and want an expert development lawyer to support you please contact Nick Attwell at nick.attwell@attwells.com or call him on 01473 229200.
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