Quantum (Barrowsfield) Ltd v Bell and others – when a restrictive covenant offers a substantial value to everyone but the developer

The Facts

In this case, the developer, Quantum (Borrowsfield) Ltd, sought modification to multiple restrictive covenants to allow works to begin on the building of a block of flats for which planning consent had been granted by Croydon Council.  

 

The planning allowed for:

“Demolition of existing buildings and erection of 4/5 storey building comprising 33 self-contained flats (5 x one bed, 15 x two bed, 13 x three bed), vehicular access on Limpsfield Road, 26 carparking spaces (including two disabled carparking spaces), integral cycle storage for 64 cycles, integral bin storage, hard and soft landscaping, boundary treatment and communal amenity space at roof level.” 

However, despite the above, the respective titles contained various restrictive covenants affecting specific properties within the proposed development which prohibit certain work to be carried out. These included:

 

•  NO buildings shall be erected on the said land other than a single private dwellinghouse with or without the usual garage or other outbuildings appurtenant thereto
•  NO buildings shall at any time be erected on the said land unless the plans and specifications shall previously have been approved by the said Gordon Brian Humphreys and Patricia Margaret Humphreys or their successors in title the owners for the time being of the said plot immediately to the North West of the said land hereby transferred which consent shall not be unreasonably withheld.’
•  Not to use the Property for any trade or business and that the Property shall be used for the occupation of one household only.’

 

The Submissions

The developers suggested that they had given suitable consideration to the impact to the neighbours who are the beneficiaries of the covenant with the erection of fences and planting of mature trees with would significantly reduce any sort of impact to the neighbours.  The beneficiaries of the covenant could be compensated for any further inconvenience with a nominal figure of compensation.

The objectors in response said that amongst other impact, the proposed development ‘would dominate and detract from its surroundings, causing damage to the character of the area and harm to neighbouring properties from overlooking of the gardens and intrusion on the quiet seclusion and privacy currently enjoyed.’

 

The Findings

The application made by the developer was for a modification of the covenants to be made under s.84(1)(aa) Law of Property Act 1925. When relying on this ground, the Tribunal only has discretion to modify the covenants if the intended use is reasonable but also only once they can be satisfied that those covenants which have been impeded do not contain ‘practical benefits of substantial value or advantage.’

Given that there was no dispute that the proposed development was reasonable nor that the covenants impede this planned use, the practical benefits of substantial value was the key element for the Tribunal to consider.

In the judges sitting in the Upper Tribunal determined that the balconies overlooking one of the houses in particular impacted the covenants which were designed to protect the residents of House 1A from the constant threat of overlooking from the whole new block. This was a practical benefit that this beneficiary had the right to and that in the case, this benefit was viewed by the Tribunal to be sufficiently substantial.  As such due to the overlooking of this particular property, the Tribunal did not have discretion to modify the covenants.

In addition, the tribunal was not satisfied with the position put forward by the developers that the beneficiaries would not be impacted by the sight of the new block of flats because they would most likely be facing the other way and so would only see it the block in their peripheral vision. The Tribunal found again that the covenants in preventing this interference, are conferring a practical benefit of substantial advantage. The same could be said of the second property, House 1B, considering that the new building will be visible from inside the house, as well as from the garden.

 

Conclusion

In light of the above developers would be well advised to be particularly cautious when restrictive covenants are highlighted in their initial enquiries. Planning permission and reasonable use of the space are not enough in and of itself to have a restrictive covenant removed or sufficiently altered. 

Title indemnity insurance is often seen as a solution to problems with covenants but developers need to be aware that in some cases insurance is not available, particularly if the site has a previous history of contested planning applications or where there has been prior engagement with people claiming the benefit of the covenants.

 

Call to action

Boyes Turner’s Development & House Building Team acts for developers, house builders, promoters, land traders landowners and investors involved in all type and size of residential, commercial and mixed use schemes. We also advise a range development and property funding partners including traditional high street banks, specialist development financiers and mezzanine funders in respect of lending for development projects.

Our Team includes one of the Thames Valley's few specialist Plot sales teams, enabling us to offer an end-to-end service throughout the life cycle of a development project.

We also have one of the largest commercial litigation teams in the region. We offer deep sector specialism, with 100% of our lawyers’ time spent dealing with contentious property issues, for businesses of all types and sizes, to anticipate, prevent and resolve a wide range of disputes.

Get in touch with the Development & House building or Dispute Resolution team today.