Strategies for Restrictive Covenants

Restrictive covenants can be a headache for developers who have otherwise found the perfect piece of land on which to carry out their dream development. Everything else is perfectly aligned – the ideal architect for the scheme, a team of other consultants poised in readiness to start work, sources of funding lined up and the appraisal suitably fine-tuned.

But what to do about the restrictive covenant that threatens to derail the whole project?

Check whether enforceable
The first thing to establish is whether the covenant is actually enforceable and fortunately we are well versed in the rules to enable us to give clients a definitive answer on that question, which is not always what they were expecting.

Even in the worst case, namely that the covenant is binding, we can provide a range of options.

Range of options
Title indemnity insurance is the most obvious answer. However, we are often asked to advise clients on the modification of restrictive covenants where, for one reason or another, title indemnity insurance is not an option, and we have successfully taken modification applications to the Upper Tribunal on behalf of developer clients. The application is usually made on the grounds that the restriction impedes a reasonable use of the land and confers no practical benefit of substantial value or advantage on the party with the benefit of the covenant.

Sometimes additional useful points come out of the Upper Tribunal’s decisions.

In a recent case, Mr & Mrs O’Byrne owned a house in Oxfordshire that was subject to a covenant to use it only as a single dwelling house. They obtained planning permission to convert and link two outbuildings to create a second dwelling house. They then applied to the Upper Tribunal for a modification of the covenant.

It was clear that the covenant impeded reasonable use of the Property. However, the party with the benefit of the covenant, Magdalen College, alleged that even if the covenant was modified, there remained a second barrier to the development as the right of way benefitting the O’Byrne’s property was over land retained by the College and was to be used only in connection with the use and enjoyment of the Property as a single dwelling house.

Magdalen argued that, even if the covenant was modified, the access to the new dwelling would not be possible because of the restriction on use in the easement.

The Upper Tribunal disagreed. Its interpretation of the right of way was that it permitted access for the purposes permitted by the restrictive covenant as modified from time to time. Therefore, the O’Byrne’s were entitled to develop the second dwelling house and access it over the College owned right of way.

So additional title points can be thrown up for consideration by the existence of a restrictive covenant.

The Barr Ellison Property Team will always provide a preliminary Report on Title to cover covenant and associated issues at an early stage before offers are made to purchase development land.

For more information please contact Elizabeth Deyong (email: e.deyong@barrellison.co.uk) (telephone: 01223 417 267).

Disclaimer: While we do all that is possible in terms of ensuring its accuracy, this blog contains general information only. Nothing in these pages constitutes legal advice. You need to consult a suitably qualified lawyer from the firm on any specific legal problem or matter.