Restrictive covenants: don’t build first, apply later

Development land can be subject to covenants that limit or restrict their future use. Common sense therefore dictates that you should try to reduce the risk of covenant breach before you start development, or before you buy a property.

Restrictive covenants after 1926 should be in the property’s title at the Land Registry, so there’s no excuse.

Recently the Upper Land Tribunal in Fosse Urban Projects Ltd v Whyte & Ors [2023] UKUT 286 (LC) denied developer Fosse’s application to remove a restrictive covenant where Fosse had already completed development work in breach of covenant. This could prove expensive for Fosse.

Fosse facts

Fosse owned land in Norfolk on which it intended to build a house. On the land’s title was a 1996 restrictive covenant prohibiting the land from being used "other than as garden land" in connection with an "adjoining property". Over the years there was so much development that Fosse’s land became physically separated from the "adjoining property". Fosse applied to the Upper Tribunal under Section 84 of the Law of Property Act 1925 for discharge of the restrictive covenant because:

• The development of the area since 1996 made the covenant obsolete
• The covenant prevented the reasonable use of the land
• The discharge would cause no harm to those who had the benefit of the covenant.

Fosse then started, and completed, the building works before the Tribunal made its decision. The Tribunal did not look kindly upon Fosse’s "build first, apply later" approach.

Section 84 applications are at the Tribunal’s discretion and, although the first two grounds of Fosse’s application were satisfied, the application would be denied due to Fosse’s "cynical" approach. Fosse had been aware of the restrictive covenant before it started works and just gambled on no one objecting, despite those works being in clear and deliberate breach of covenant. This case followed the Supreme Court decision in Alexander Devine Children’s Trust v Housing Solutions Ltd (2020), where a housing developer also unsuccessfully applied to modify a restrictive covenant only after commencing works in breach of it.

The outcome for Fosse, then, is that the 1996 covenant is still valid and enforceable and may well be enforced against Fosse in further action by anyone with the right to so enforce. Fosse will now be “looking over its shoulder” and might even have to pull down what it has built.

What is the motto?

Do your title due diligence before you start development. Restrictive covenants are valid indefinitely, even those several hundred years old. There is no excuse for any post-1926 covenant not being addressed as it should be revealed in a registered title.

Commencing works in breach of covenant exposes you to enforcement action by anyone with the benefit of the covenant, including a company whose name may have changed but which still exists. Fosse is a salutary warning to developers of the problems that can arise where title risk is not dealt with before spending money.

If you are a developer, or buying or selling a property that is, or might be, subject to restrictive covenants, please talk to our expert property team. Contact Ross Siviter on 01935 846 092 or email him at ross.siviter@battens.co.uk.