Developers, don’t ignore the law!
In the recent case of Millgate Developments Limited and another v Smith and another, Re: Exchange House, Woodlands Park Avenue, Maidenhead [2016] UKUT 515 (LC), the Upper Tribunal (Lands Chamber) ("UT") considered whether to modify restrictive covenants which prohibited development of land.
The UT has the power to discharge or modify a restrictive covenant if it is satisfied that it prevents the reasonable use of land and in doing so it is contrary to public interest and monetary payment would be adequate compensation to anyone disadvantaged by the decision.
Facts of the case
A developer ("A") successfully obtained planning permission to build 23 social housing properties (along with 47 properties on another site for sale on the open market). 13 of the social housing properties were built on land which was subject to restrictive covenants preventing the land being used for any purpose other than as a car park. A was aware of these restrictive covenants before work started on building the social housing properties.
The owners of the land with the benefit of the restrictive covenants ("B") started to erect a building on their neighbouring land which was to be used as a children's hospice. Despite calls from B for A to stop building work, A carried on with its development. After the social housing properties were built, some of the upper floors overlooked B's land; however, the houses remained unoccupied and A made an application to the UT for the restrictive covenants to be modified to allow the properties to be occupied.
Decision made by the UT
In what seems on the face of it, a surprising decision, the UT modified the restrictive covenants and ordered that A compensate B in the sum of £150,000.00. The UT gave weight to the intended use of the properties as social housing and that leaving such housing unoccupied was not in the public interest. The UT made it clear that it would not be quick to reward those who deliberately breach their legal obligations, however in many ways is difficult to see how the decision fits with these comments.
In essence, this decision does little to assist developers or owners of land with the benefit of restrictive covenants. For developers, it may be reassuring that the UT is prepared to modify or discharge restrictive covenants, however it seems clear that the fact the properties were for social housing played a big part in the UT's decision and it seems unlikely that there will be a one size fits all approach on future cases. This decision will no doubt be a concern for land owners with the benefit of restrictive covenants, who may feel more vulnerable to these being modified or even discharged and monetary compensation may not (in their opinion) be adequate redress . However, regardless of whether you are a developer or own land which benefits from restrictive covenants, just remember you will not be rewarded for disregarding your legal obligations…perhaps!
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.