Restrictive convenants - how not to impress the lands tribunal

George Wimpey Bristol Ltd and Gloucestershire Housing Association Ltd [2011] UKUT 91 (LC).  

Summary

• The Lands Tribunal has recently handed down a decision which all developers ought to bear in mind should they be tempted to start a development on land which is affected by restrictive covenants; the case is George Wimpey Bristol Ltd and Gloucestershire Housing Association Ltd.

The Developer were aware that part of its site, on which it intended to build some 17 dwellings, was burdened by a 1935 covenant preventing the erection of any building. Nevertheless, it obtained planning permission and started the building works. It was met by an application for an injunction preventing those works by the owners of the benefitting land. Those proceedings were stayed pending the decision of the Lands Tribunal to an application which the Developer then made for an order to modify or discharge the covenant under section 84(1)(aa) of the Law of Property Act 1925 (LPA 1925).

It would be normal in such cases not to start the building works until such time as the Lands Tribunal had resolved the application. However, it appears in this case that the Developer’s deliberate strategy was to carry out substantial work on the land so as to put the Lands Tribunal under pressure to issue a favourable decision.   The application was rejected because the grounds in Section 84(1)(aa) were not made out but the significant part of the judgment was that  the Tribunal made it clear that they would not have exercised their discretion to modify the restrictive covenant even if the Developer had made out those grounds.

The Tribunal took a dim view of the Developer’s conduct, saying that “the extensive works carried out on the application land were not an inadvertent action resulting from the discovery of the covenant at a late stage in the development programme.” The works had been carried out in the face of much opposition and “…it is appropriate to make it clear that it is not inclined to reward parties who deliberately flout their legal obligations in this way”  

Facts of the Case

Wimpey Homes and the Gloucestershire Housing Association applied to the Tribunal for the modification of a restrictive covenant preventing residential development on land in Prestbury, to be modified under section 84(1)(aa), LPA 1925.

The covenant stated that:

"...for the benefit of the adjoining land of the vendor on the west and south sides of the land conveyed, that no building shall be erected on the [land]..."

Detailed planning permission was granted In October 2006 for residential development; this was for the erection of 124 dwellings, 17 of which were to be built in the land affected by the covenant. The Developer  began preparing to build on the land. In May 2007, the solicitor acting for a number of people claiming the benefit of the covenant wrote to the Developer advising them of the covenant and asking them to stop preparatory works on the land. The Developer ignored the letter and started building on the land in November 2007.

In 2008 proceedings were commenced against the Developer and the Housing Association by the objectors, seeking an injunction to prevent the development.

The objectors objected to the development on the following grounds:

• The proposed user of the land was not reasonable even though the development had planning permission. -      Loss of value in their properties.
• Loss of natural habitat for wildlife.
• Loss of privacy, views, openness and overall amenity.
• Risk of flooding.
• Setting a precedent for further modification of the covenant.

The Developer claimed that the practical benefits to the objectors of the covenant were not of “substantial value or advantage” and that money would be an adequate compensation for the loss and disadvantage suffered by the objectors whose property values would be reduced by the development. To suppor this argument the Developer claimed that the character of the area would not change as a result of the development.  

Decision

The Tribunal held that the Developer had failed to make out the grounds in section 84(1)(aa), LPA 1925 and therefore the LT had no power to modify the covenant. In reaching its decision, the LT adopted the usual approach set out in Re: Bass Ltd's Application and considered the following questions:

• Is the proposed use of the land reasonable?
  
  The Tribunal said that it would be difficult to say that the proposed use was not reasonable given that planning permission had been issued. Indeed, the only counter argument appeared to be that the number of dwellings slightly exceed the numbers suggested in the relevant Local Plan. This was not, in the Tribunal’s view, sufficient to demonstrate that the proposed use was unreasonable.
• Does the covenant impede the proposed use?
  
  It was agreed that the covenant did impede the development.
• Does impeding the proposed development provide practical benefits to the objectors?
  
  It was agreed that preventing the development on the land would be of practical benefit to the objectors.
• Is the benefit to the objectors of substantial value or advantage?

The Tribunal found that the practical benefits to the objectors were of substantial value and advantage and that the Developer had therefore failed to make out ground 84(1)(aa) of the LPA 1925. The properties of the objectors were currently overlooked only to a limited extent by adjoining houses. They otherwise enjoyed a semi-rural location with outstanding views over open land to hills in the distance. If the development on the land were to go ahead, these properties would become suburban in character with the accompanying loss of views, privacy and overall amenity.

Other Issues

The Tribunal  also agreed that:

• The Developer had failed to produce expert evidence to show that the increased flooding to the  objectors' properties was not due to other development being carried out by the Developer in the vicinity of the land. As such, it was reasonable for the objectors' to have concerns over flooding.
• The objectors were also justified in opposing the proposed modification to the covenant on the grounds that it would provide a precedent for further modification to the covenant and allow even more buildings to be erected on the land.

Conclusions

Developers should be aware that the Lands Tribunal’s powers to vary a covenant are discretionary and that it can, and will, take the Developer’s conduct into account when reaching its decision. It is risky in the extreme to start building works where restrictive covenant issues have not been fully resolved.

The risk is even greater where the existence of vociferous and well organised objectors is known, as in the current case.