Land Registry Entries for properties in the UK are littered with restrictions referred to as “restrictive covenants”…
- Know your the servient tenement from your dominant tenement
- How the doctrine of “laches” applies to an injunction in a claim for equitable relief
- Indemnity insurance for prudent property buyers
Examples of restrictive covenants include:
- Limiting the possible uses of the land
- Prohibiting particular trades or businesses;
- Restricting the number or type of dwellings which can be built on the land;
- Requiring that the value or cost of any buildings constructed on the land exceed some figure; or (even)
- Requiring that the number of buildings per a stated area of building frontage not exceed a specified number.
These restrictions have generally arisen as areas of land which have been divided off from an original plot (creating new areas of land referred to as “the servient tenement”). The original owner has sought to retain some degree of control over what happens on the land sold, usually to protect the value of the retained land (referred to as “the dominant tenement”).
Restrictive covenants are frequently imposed through quite old agreements which, in addition to making the “minimum value figures” commonly appear quite dated, leads to problems of interpretation. There have frequently been further sub-divisions of the land since the date of the original obligation and, in addition, reference is frequently made to pre-registration documents and plans, copies of which may be difficult to obtain.
So do conveyancers need to worry about “old” restrictive covenants?
Unfortunately the answer is, “Yes.”
No doubt those of you who have been reading these reports for some time will be familiar with the Limitation Act 1980 (“LA 1980”). LA 1980 imposes time limits on claims in tort and contract (6 years or 12 years depending on whether or not the claim is based on a “specialty” or deed).
However the claim to enforce the burden of a restrictive covenant against the current owner of land is (unless they are the original party who agreed to the restriction) a claim in equity (rather than in Common Law – the difference between the two being the subject for a whole other report in due course). The beneficiary of the covenant will therefore generally be seeking equitable relief – specifically an injunction (with any damages awarded being in lieu of the injunction).
S.36 LA 1980 (with which you may be less familiar) says that time limits established by the Act for actions founded on tort, simple contract or specialty (deed) shall not apply to any claim for specific performance of a contract or for any injunction or other equitable relief.
“But wait,” the brightest among you may say, “Court procedural rules require that any claim for an injunction has to be based on an underlying claim for damages – so if the Claimant cannot issue his claim for damages he will not be able to claim an injunction either.” Clever but not quite clever enough …
LA 1980 does not, in fact, prevent the issue of claims relating to causes of action arising outside the relevant time limits. What it does is provide a defence to any such claim which may be issued.
This means that while LA 1980 may provide a defence to any claim for damages it rarely prevents the issue of such a claim and hence of the claim for an injunction riding “piggy back” on that damages claim. Even if the Common Law claim for damages can be summarily defended this will rarely prevent the claim for an injunction continuing (with the claim for damages being re-introduced “by the back door” – as mentioned above – as an alternative to the injunction).
All is not, however, lost….
As a claim for equitable relief, any claim for an injunction will be subject to the various restrictions to which any equitable claim is subject. In particular the doctrine of “laches” will apply – under which a claimant will not succeed on a claim relating to an alleged wrong which is longstanding, which has been readily apparent and in relation to which (for no good reason) no action has been take for some time.
This, then, should cover the position of the buyer of a property which has been standing on land for some time – although the prudent buyer should insist (as will many lending institutions) on the obtaining of indemnity insurance which should, in the circumstances, be available at a very limited cost.
The situation is more complicated however where the buyer (or an existing owner) intends to make material alterations or, indeed, put up a new building. These may constitute a fresh breach.
The primary way of addressing this is, again, by way of indemnity insurance. Most insurance providers will however insist that planning permission for the intended development has been obtained before they will provide cover.
This, of course, creates a further difficulty.
The planning process is, by its very nature, likely to flush out (and, indeed, provoke) objections to the proposed development – which may include claims to the benefit of the restrictive covenant. These objections will have to be disclosed to the insurer and significant variations in premiums may result (or, indeed, cover may be declined).
It is, of course, possible to make an application to the Upper Tribunal (Lands Chamber) (formerly the Lands Tribunal) for modification or discharge of the covenant. Such applications can however be time consuming and expensive.
The final alternative is of course to seek to agree an express release of the covenant by the person claiming the benefit. The outcome of such negotiations can however not be guaranteed and they should certainly not be attempted until the insurance position has been clarified.
Restrictive covenants (even old ones) are then a problem with which all those contemplating development work on land will have to deal with. If you are in the process of assembling a site for development or contemplating developing a site which you already own, the Property & Commercial Department at Barrett & Co would be happy to help.
I have written a book about business law. To download a free copy of the book go to Martin Reynolds’ Book on Business Law. If you would prefer to meet face to face to discuss your business needs call 0118 958 9711 to fix an appointment.