In a recent case, a property developer wilfully ignored restrictive covenants in the hope of just dealing with them later on. Here, Kirsty Ellis, a Solicitor in our Commercial Property team, summarises the case – and explains why that approach didn’t work.
Property developers often breach or ignore restrictive covenants – like only using a land for a certain purpose – when working on a development, thinking that they can get them modified or scrapped retrospectively. But, a recent case – Alexander Devine Children’s Cancer Trust v Millgate Developments – has sent a strong message that this isn’t the case, and that developers ignoring restrictive covenants won’t be tolerated.
Millgate (the developer) applied to the Upper Tribunal, under section 84 of the Law of Property Act 1925, to try to modify restrictive covenants which affected its development site in Maidenhead. The covenants prohibited use of the land for building, or for anything else apart from parking vehicles.
Millgate applied for the modification after it had already and knowingly breached the covenants – when it built nine houses and four bungalows, as affordable housing, on the land.
One of the owners of the neighbouring land, who benefitted from the restrictive covenant was The Alexander Devine Children’s Cancer Trust. The Trust used the land as a children’s hospice, with private and secluded outdoor amenities and objected to Millgate’s development.
At the initial Tribunal stage, it was found that although the covenant was important to the Trust and gave it a benefit of substantial value, the public interest and need for affordable housing was enough of a reason for Millgate’s development. The Tribunal modified the covenants to permit the development.
What happened at the Court of Appeal?
On appeal, the Court of Appeal overturned the Tribunal’s decision. It disagreed with the Tribunal’s assessment that the public interest in affordable housing was reason enough for the development to go ahead, despite the covenants.
It said that enforcing contractual and property rights was also in the public interest – and that the Tribunal should assess whether the developer had made ‘fair use’ of opportunities to modify the covenants before it had started to build. In other words, had it asked for permission or taken appropriate steps before simply going ahead?
It had not and, because Millgate had deliberately circumvented the proper procedures and willingly breached the restrictive covenant over the land, it had acted in an ‘unlawful’ manner, with its eyes open and completely at its own risk’.
What does this mean for developers?
This case shows that the courts will not look kindly on developers who wilfully breach restrictive covenants and that before starting a development, developers must make every effort to release, modify, or discharge any restrictions affecting the land.
Proper due diligence at the start of a process, along with timely expert advice, will avoid unnecessary delays and costs for your project in the long run. So – to avoid being on the wrong side of a similar judgement- you should make sure that you engage property lawyers early on. They’ll be able to tell you of any restrictions and advise you on the steps you’ll need to take to tackle them.
If you’d like any more information, please get in touch.