What is a covenant?

A ‘covenant’ is a binding promise to do something. In the context of Property Law a ‘restrictive covenant’ is a binding promise not to do something relating to a specified piece of land: not, for example, to build more than one building on a plot of land or not to use a given premises for the sale of alcohol. (For Property Law purposes ‘land’ includes a building or buildings on the land.)

In each restrictive covenant there will be an area of land having the benefit of the covenant (referred to as ‘the Dominant Tenement’) and an area on which the burden of the covenant is imposed (referred to as ‘the Servient Tenement’). Under English Law it is well established that the burden of a restrictive covenant is capable of passing to the new owner when the Servient Tenement is sold.

Similarly a new owner of the Dominant Tenement can retain the benefit of the restrictive covenant. This applies even if the Dominant Tenement is divided up into numerous pieces and sold to new owners.

Where the Dominant Tenement is divided up and sold, subject to conditions being satisfied and to statute (see below), the new owners of each and every piece of what used to be the Dominant Tenement will have the benefit of the covenant and will therefore be entitled to enforce it.

This can lead to difficulty where, for example, a developer has built an estate, imposing restrictive covenants saying what the owners of the property can and cannot do to their properties moving forward. There is a conflict between the principle of owners being free (planning requirements aside) to do as they wish with their property and the Law’s willingness to uphold these restrictions.

Some time ago statute provided some assistance to frustrated owners in the form of s.84 Law of Property Act 1925 (‘LPA 1925’). This provides, in so far as is relevant:

(1) The Upper Tribunal shall …have power from time to time, on the application of any person interested in any freehold land affected by any restriction arising under covenant or otherwise as to the user thereof or the building thereon, by order wholly or partially to discharge or modify any such restriction on being satisfied-

…

(aa) that (in a case falling within subsection (1A) below) the continued existence thereof would impede some reasonable user of the land for public or private purposes or, as the case may be, would unless modified so impede such user; or

…(c) that the proposed discharge or modification will not injure the persons entitled to the benefit of the restriction; and an order discharging or modifying a restriction under this subsection may direct the applicant to pay to any person entitled to the benefit of the restriction such sum by way of consideration as the Tribunal may think it just to award under one, but not both, of the following heads, that is to say, either—

(i) a sum to make up for any loss or disadvantage suffered by that person in consequence of the discharge or modification; or

(ii) a sum to make up for any effect which the restriction had, at the time when it was imposed, in reducing the consideration then received for the land affected by it.

(1A) Subsection (1)(aa) above authorises the discharge or modification of a restriction by reference to its impeding some reasonable user of the land in any case in which the Upper Tribunal is satisfied that the restriction, in impeding that user, either —

(a) does not secure to persons entitled to the benefit of it any practical benefits of substantial value or advantage to them; or

(b) is contrary to the public interest; and that money will be an adequate compensation for the loss or disadvantage (if any) which any such person will suffer from the discharge or modification.

Which brings me on to today’s story:

Restrictive covenant case study

Coach House Lane is a mews development made up of terraced and semi-detached houses in London N5 – managed by the Respondent, Coach House Mews (Highbury) Ltd. Whilst somewhat more modern and crowded than the leafy idyll which the judgment would make it seem, it is (very) close to the Emirates Stadium and no doubt has property values to match.

In late February 2018 the Applicants (Mr & Mrs Cook) moved in to 20 Coach House Lane which no doubt at the time seemed adequate for their needs. In the course of time they started a family and the need to reconfigure the house became, to quote the judgment, ‘pressing.’

Mr & Mrs Cook planned a relatively modest extension to the side of the property (which would allow reconfiguration of the interior). In July 2020 the Planning Officer recommended consent be given and permission for the planned extension was granted.

As you all know (or should know) however the story did not end there. As Mr & Mrs Cook were advised (or should have been advised) prior to their purchase, the property (20 Coach House Lane) was subject to a restrictive covenant, imposed by the developers who first built the property.

The terms of the covenant were as follows:

”For the benefit and protection of the land comprised in the Estate (other than the Property) and each and every part thereof so as to bind the Property into whosesoever hands the same may come the Purchaser HEREBY COVENANTS with the Vendor and the Company and as a separate covenant with every other person claiming under the Vendor as purchasers of any part or parts of the Estate that the Purchaser and the persons deriving title under him will at all times hereafter observe and perform the covenants conditions and other matters on his part set out in Schedule 4.

Schedule 4:

3 New Buildings:

(a) Not at any time to erect or suffer to be erected any buildings walls fences or other structures on the Property (save for any future replacements of existing buildings screen walls or fences and save further for the construction of a wall between the points marked “A” and “B” on the Estate Plan in material and to a specification previously approved).

(b) Without prejudice to paragraph 3(a) of this Schedule not to make or suffer to be made any material alteration or addition to the external appearance of the buildings walls fences railings and other structures now on the Property or to alter or suffer to be altered the external decorative scheme of the Property and such buildings walls fences railings and other structures thereon from that which exist at the date hereof.”

The benefit of the covenant had passed to the owners of other properties in the Lane – some of whom objected to the plan - and to the management company (the Respondent) which also objected.

Mr & Mrs Cross therefore applied to the Lands Tribunal under s84 LPA 1925 (see above).

In an entertaining judgment, Mr Mark Higgins FRICS (a Surveyor) sitting in the Upper Tribunal Lands Chamber, weaves between the various requirements of s84, setting out each successive paragraph like a poker player slowly laying down the cards from a winning hand and the reader never quite knowing, until the very end, which way the decision is going to go.

Referring (at para 48) to Carnwarth LJ having noted (in his judgment in Shephard v Turner [2006] EWCA Civ 8) the Privy Council having adopted (in McMorris v Brown [1999] AC 142,151) a statement made by Judge Bernard Marder KC (sitting as President of the Lands Tribunal in Re Snaith and Doldings Application [1995] 71 P&CR 104):

“The position of the Tribunal is clear. Any application under section 84(1) must be determined upon the facts and merits of the particular case, and the Tribunal is unable to bind itself to a particular course of action in the future in a case which is not before it…”

He then switches track going on, at para 54, to conclude:

“My conclusion,…., is that modification of the covenant to allow the extension would encourage others to seek to extend their properties and increase the prospects of them being successful. A significant loss of amenity is a likely risk. The covenant in its existing form removes the element of uncertainty about what might be permitted in the future and provides assurance to owners that the form of the Estate will not be disturbed….. I therefore have no jurisdiction to grant the modification.”

So Mr & Mrs Cross were unable to build their extension.

The judgment goes on, in the concluding paragraph, to detail rights of appeal. Having searched however, I am not aware of any appeal having been made.

The moral of the story is that restrictive covenants are best approached with caution. It should not be assumed, just because of the existence of s84 LPA 1925, that it will be possible to get around them.

On most occasions owners would be well advised not to adopt the head on approach taken by Mr & Mrs Cross (although there may have been reasons why it was appropriate in this instance). Generally it will be best to consult a Property Solicitor as soon as possible.

Often (particularly in relation to development plots and/or older covenants) there will be an insurance-based solution. The trick here however is that there is every risk that insurance will not be available if, prior to arranging insurance, contact has been made with people benefitting from (or thought to benefit from) the covenant.

And always check the advice you were given at the time the property was purchased.

Written by Martin Reynolds, a commercial property solicitor at Parfitt Cresswell.