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A trend in property litigation has been the increase in the number of disputes and queries concerning restrictive covenants, mainly coming from developers looking to understand or challenge possible limits on their rights.
Disputes could occur, for example, where a landowner is looking to enforce a restrictive covenant against an owner of neighbouring land (who nowadays is often a developer) both of whom are successors in title to the original vendor and purchaser who agreed the restrictive covenant.
As the number of these queries and disputes has grown, two key points of challenge have emerged – intention to benefit and actual benefit.
One of the key criteria for successfully enforcing a restrictive covenant is that there must have been an intention for the covenant to benefit the land. A new landowner does not simply inherit a covenant when they become a successor in title but there must actually have been an intention for the covenant to travel with the land to a new owner.
The covenant may state this (an ‘express annexation’) but this is not always the case. If there is no express statement then section 78 of the Law of Property Act 1925 (‘LPA’) ensures that the covenant is deemed also to be made with successors in title, as well as the original parties.
However, there are limits to the assistance the LPA can provide and case law is not entirely clear – for example, in Crest Nicholson Residential (South) Ltd v McAllister it was found that the land in question must be identified as benefitting from the covenant for section 78 to apply. Although this doesn’t require an express statement to that effect (which would actually be express annexation anyway), it is not enough just to name the land in the conveyance, there must also be indication that it refers to the covenant.
However, the court in Mohammad Zadeh v Joseph essentially found that this was not necessary. As this conflict proves, each case will be different and express annexation is always preferable.
Another key element for the application of section 78 is whether the covenant actually benefits the land. This is usually obvious but where it is not, the courts will often assume it was, seeing as it was agreed by the original parties to the covenant. However, recent case law has thrown some doubt on this – for example, Cosmichrome v Southampton City Council and 89 Holland Park (Management) Ltd v Hicks in which developers essentially challenged whether restrictive covenants actually benefitted neighbouring properties at all in order to remove their effect and enable development.
It is therefore crucial now for landowners to be able to provide evidence that a covenant really does benefit their land in order to retain its effect.
As land usage in the UK continues to change and developers become more astute with respect to challenging restrictions on their business, it’s important for landowners to be aware of how to protect the restrictive covenants attached to their land.
Other areas for landlords/developers to consider are challenges under the competition act, tribunal applications and availability of indemnity insurance.
For more information or advice on this topic please call our commercial property lawyers on 01616 966 229 for a free, no obligation initial chat with one of our legal advisors, or complete our online enquiry form and we will contact you directly.
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