Restrictive Covenants

Alternatively, you may simply be considering changing the use of your land and/or buildings. Either way, you should consider at an early stage whether there are restrictive covenants on your title which could be problematic. This will avoid later delay or wasted costs

Even if there are restrictive covenants then there may be various options available to you to enable you to proceed:

1. Firstly take legal advice. Is the covenant enforceable? Does the covenant actually benefit land owned by the party seeking to rely on it? Has it been correctly protected?
2. Would an indemnity insurance policy be available or would it be cost-prohibitive? Such policies can sometimes be an effective solution for older covenants although the terms of any policy will need careful consideration;
3. Consider contacting the person(s) with the benefit of the covenant to secure its release or variation. The benefitting party may want some form of consideration for the release. Please note once you contact the benefitting party you are unlikely to be able to obtain the insurance referred to above.
4. Consider the possibility of an application to the Upper Tribunal to modify or discharge the covenant. If successful the Tribunal will normally require the applicant to compensate the person(s) entitled to the benefit of the covenants.

In Millgate Developments Limited v Smith [2016] the land in question was subject to a restrictive covenant not to use as anything other than a car park. Residential housing was built and the developer successfully applied for a modification. Commentators have been quick to note however that one of the key aspects in the Millgate case was that the land was required for social housing.

In the Millgate case, the benefitting party argued they should be paid an amount commensurate with the profit but the tribunal advised that the proper measure of compensation was the objector’s loss, not the applicant’s gain.

In another case, the applicant applied for the discharge of a restrictive covenant restricting the use to agricultural and equestrian use so that housing could be built. In defence, the benefitting party sought to prevent the application or alternatively argued that if the application was successful they should be paid £250,000 compensation. They were ultimately awarded £3,000.

5. Proceed anyway regardless of the covenants. We would not recommend this as there is a strong possibility the benefitting party will seek an injunction!

Each case is different and the appropriate course of action will vary. For further information or advice, please contact Kirsty Barsby or a member of the Agriculture & Landed Estates Team.

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