Restrictive covenants on property create a burden, obligation or restriction on one piece of land for the benefit of another piece of land and its owners. A restrictive covenant is a legally binding promise not to do something and will often be attached to the land so it still exists even if the original owners have sold the land on.
For example, the owner of a property subdivides his garden and sells off a plot for development. By selling the plot he is losing control over what may be built on this plot. One way round this is for the seller of the new plot to create restrictive covenants which attach to the plot and bind the new and future owners of the plot.
Some examples of the type of restrictions you may have are:
Sometimes the individual landowners will enter into personal covenants between themselves and, as these do not attach to the land, the benefit and burden of the covenant will not be passed onto any new owners of the land.
If a restrictive covenant is preventing you from building or taking some other step it may be possible to apply to discharge or modify the covenant but before you consider trying this you will need to check whether there is a valid covenant and whether it is enforceable.
For example:
More often than not the covenant does attach to the land and to confirm this you need to check the Land Registry documents or the title deeds for phrases such as “the covenant binds the successors in title”.
This is not always easy to discover especially with registered land. You may have to look at the neighbouring titles and not just your own.
This is often relevant when it is not clear who has the benefit of the covenant. For example, the covenant might be old, or the land has been sold in several parts and a number of parties have the benefit. Usually insurers require that no contact is made with a likely objector. Therefore, if you think insurance may be a possibility, you should look at this option first and approach the insurers at an early stage and not make contact with anyone you think might have the benefit of the covenant.
The insurers often want you to apply for planning permission, as this will often flush out potential objectors who may have the benefit of a covenant. They will then better understand the level of risk.
This is one of the best ways to avoid the cost and time that may be incurred when dealing with an application to the Tribunal (see below). You should aim to strike a deal with the person with the benefit of the covenant whereby he agrees to discharge or modify the covenant perhaps for a one off payment. That person would then sign a deed of discharge or modification which can be then lodged with the Land Registry showing future buyers how the covenant has been changed.
Assuming that insurance or agreement are not possible and there is a valid enforceable restrictive covenant on your property, the Upper Tribunal (Lands Chamber) has the power to remove or modify a restrictive covenant if the Tribunal is satisfied that you can establish a particular ground.
The most common grounds to rely on are as follows:
With regard to this second ground, the question to ask is whether the proposed development might substantially devalue the property with the benefit of the covenant.
Often the subjective view of the person who has the land with the benefit of the covenant is that any changes to a neighbouring property will devalue his property dramatically. In practice the proposed development may have very little impact on the value of his property.
Ultimately if you took the case to the Upper Tribunal you would need to obtain an expert written opinion from a chartered surveyor as to whether the proposed changes or development would substantially reduce the value of the objector’s property.
The expert would look at various factors which might include the loss of a view, increased noise and light and a reduction in privacy.
There is no set formula but in one Tribunal decision a 5% reduction was not substantial and the application was allowed.
This will assist your application to the Tribunal but does not automatically mean that you will be successful. There are cases where it has been held that, as there is planning permission in place, then the use of the land is reasonable but as the covenant still secured practical benefits of a substantial value for the owners of the neighbouring house the application failed.
If you successfully remove or modify the covenant at the Tribunal, you will usually have to pay compensation plus your own costs. If the objector wins they will receive their costs unless they have acted unreasonably.
It is possible to apply to the court as opposed to the Tribunal for a declaration that a covenant is unenforceable. So this would be appropriate if you thought that the covenant was not valid or enforceable for perhaps technical reasons. There is a distinction between this and covenants which are valid but you wish to overturn in the Tribunal on the grounds that they are obsolete or do not provide any real value.
You must be careful if you do this because you are giving notice to anyone who might have the benefit of the covenant.
Once notice has been given it would be almost impossible to obtain indemnity insurance.
You or previous owners of your property may have unwittingly built in breach of restrictive covenants. If the person with the benefit of the covenant has not taken any action for a very long time for then they have lost their right to enforce the covenant.
Assuming the Upper Tribunal discharges or modifies the covenant it has a wide discretion to award compensation to the person who had the benefit of the covenant. There is no hard and fast formula or discernible pattern in the awards due to this discretion.
The rules do say that compensation should be based on the actual loss (if any) suffered. Therefore the main question to ask is whether the proposed development, if built, would cause a drop in the value to the objector’s property. Even when there has been a drop in value the application can still be successful. For example in one case the Upper Tribunal allowed an application when it was determined that there had been a drop in value of the property of 5%.
In theory the awards should not be high because if they were then the covenant would not be discharged/released in the first place as this would suggest that the objector was able to show that the proposed development would cause a substantial devaluation in his property.
In spite of many people thinking otherwise, the Upper Tribunal does not normally take into account the fact that a developer may make a profit.
The Upper Tribunal may decide that the effect of discharge or modification is not such as to cause any loss to those with the benefit of the covenant in terms of a drop in the value to the land but that the disruption and nuisance caused by the development should attract compensation.
This area attracts compensation only and should not have an effect on assessing whether the covenant should be discharged or modified in the first place. Awards in this area are normally not high. Say about £5,000.
Sometimes a restrictive covenant will state that alterations and building can only take place with the permission of the person with the benefit of the covenant, often the adjoining owner. The covenant may also provide that consent cannot be unreasonably withheld. This type of covenant can be as problematic as an absolute bar to any changes or building works.
Assuming the covenant is binding and valid, the first step is to request permission to carry out the changes. For example, you may have just obtained planning permission, in which case, you present the plans to the neighbours who may have raised the covenants and ask them whether they give their consent to the proposed changes going ahead.
As mentioned above, there can be an express requirement that the neighbour cannot be unreasonable. Even if it is not part of the wording in the covenant, the duty to act reasonably can also be implied in some cases.
If the neighbour does not consent to the proposed works, one remedy would be to seek a declaration in the court that the person with the benefit of the covenant has been unreasonable. The burden is on you to show that any decision to refuse consent is unreasonable.
As a way of the court assessing whether that person has been unreasonable, in withholding consent, a surveyor may have to determine whether there would be a drop in value to the objector’s property, caused by the proposed building, and to provide a loss of amenity value based on the duration of the building works and the temporary disruption they might cause.
The other approach might be to seek a discharge or modification of the covenant to allow the proposed works by applying to the Upper Tribunal.
There is no reason why you cannot commission the surveyor’s report before you contemplate going to the Tribunal or court. You could use this report for the basis of a commercial offer perhaps offering a nominal amount of money based on the suggested drop in value and the loss of amenity as set out in a report. The general rule is that a reasonable fee is chargeable for the consent which will nominally relate to the cost of the person with the benefit of the covenant obtaining legal advice
In terms of tactics it may be better not to make a formal application in the court and instead apply to discharge or modify the covenant in the Tribunal. This application could perhaps be made on the basis that the covenant does not secure to the objector any benefit of substantial value. In other words, the proposed works will not cause any significant diminution in value to the objector’s property. However, in adopting this approach there is a risk that the Tribunal might find that the objector has been reasonable in refusing consent.
If the Tribunal route is successful, the claimant may have to pay some compensation and costs. With regard to costs these can be high, depending on the case, the evidence and the nature of the obligation. Under the Tribunal’s practice directions it is more normal for an applicant to pay his own costs, even if successful however, the respondent’s conduct and other factors can change the application of this rule; e.g. where the respondent acts unreasonably by taking bad points and wasting time with a hearing.
You need to check the deeds or obtain the title documents from the Land Registry to discover whether any restrictive covenants affect your property. Usually, the burden of the covenant is referred to. If you have a copy of the Land Registry title documents (often called the office copy entries) for your property you will see in the “Charges Register” that the wording in the covenant is set out. Sometimes the Charges Register refers to another document, such as a transfer or a conveyance, which might contain the original wording of the covenants and you will need to get hold of this document.
Mr Smith inherited a small plot of land in 1978 near Oxford. The land had no building on it and no planning permission and Mr Smith was aware that the neighbouring property had the benefit of a restrictive covenant which prevented any building on his plot.
Over time, various people had offered to buy the land but Mr Smith wanted to keep the plot as a potential investment. He applied for planning permission on a number of occasions but was turned down. In 2006 Mr Smith had been told that most covenants were not set in stone and it was possible to challenge them. He was encouraged to have another go and reapplied for planning permission. In spite of his neighbours' objections, he obtained permission to build a four bedroomed house based on plans prepared by his architect.
Although the neighbours’ objections did not prevent Mr Smith obtaining planning permission they still had the benefit of a restrictive covenant and their solicitor pointed this out to Mr Smith and reminded him that he was not allowed to build.
Mr Smith then obtained a written legal opinion from a barrister which indicated that the restrictive covenants, although they were binding, could be challenged on the basis that the proposed building would have no or little detrimental effect on the neighbours’ property.
Mr Smith, on the advice of the barrister, then commissioned a surveyor’s report and the surveyor reported that building the property would have no effect or a minimal effect on the value of the neighbours’ property.
Mr Smith then disclosed the surveyor’s report to the neighbours and indicated that he may have to apply to the Upper Tribunal to have the covenant discharged or modified. The neighbours finally agreed to accept a sum of money from Mr Smith in exchange for agreeing to lift the covenant. Mr Smith had a Deed of Discharge drawn up at his own expense which the neighbours then signed and this was lodged with the Land Registry. At the same time Mr Smith paid the neighbour the agreed sum of money.