Removing restrictive covenants: Why conduct matters

This story was first published on 17th June 2011 on www.shoosmiths.co.uk and was written by Aisha Abdallah, who has kindly given us permission to republish it here:
In George Wimpey Bristol Ltd v Gloucestershire Housing Association Ltd, Wimpey was the freehold owner of 1.8 acres of open land near Cheltenham.
Part of the land was subject to a covenant, imposed in 1936, which prevented building within a defined area. Wimpey built 107 houses on the land which was free from the restriction and proposed to build another 17 on the affected land.
In October 2006 Wimpey obtained planning permission to build the homes, despite strong objections. In May 2007 adjacent land owners wrote to Wimpey drawing its attention to the restrictive covenant and asking it to stop preparatory works.
Wimpey continued and in November 2007 it started building. The objectors issued proceedings in January 2008 for an injunction to stop building on the land affected by the covenant. Wimpey applied to the Lands Tribunal to modify the restrictive covenant in order to allow the development.
In order to get the covenant modified, Wimpey needed to convince the tribunal that the development of the land was a reasonable use of it and that the restriction did not secure any practical benefit or substantial value to the objectors.
Wimpey’s claim was unsuccessful. The Lands Tribunal decided that the development was a reasonable use of the land, but the fact that the covenant impeded that development was of practical benefit to the objectors.
This decision is important because of the comments the Lands Tribunal made about the conduct of Wimpey and the effect this may have had on the outcome of the hearing.
The tribunal made it clear that it would not have modified the covenant even if Wimpey had made out the statutory grounds upon which it might do so.
Wimpey had pursued a deliberate strategy to force through the development in the face of many objections in order to change the appearance and character of the land such that the Tribunal would be persuaded to permit the development to continue. The Tribunal would not reward parties who deliberately flouted their legal obligations.
What does this mean?
The Lands Tribunal’s power to modify or discharge a restrictive covenant is discretionary. The conduct of the applicant is relevant in deciding whether or not to do so.
It is a high risk strategy to proceed with a development in the face of objections and in breach of covenant.
Where planning permission has been granted it is likely that a proposed development will be a reasonable use of the land.
A restrictive covenant is likely to secure practical benefits.
Whether those practical benefits are of substantial value is a question of fact to be determined objectively.
Loss of amenity, privacy and views together with a change in character of the land, increased flooding and avoiding an unwelcome precedent for high density development are all relevant factors to consider in assessing value.
What should you do?
Developers need to identify legal obstacles at an early stage and seek to resolve them.
Even if a developer can make out the statutory grounds for modification or discharge of a restrictive covenant, it is unlikely to succeed at the Lands Tribunal in circumstances where it has deliberately implemented a development in breach of covenant.
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