Developer’s conduct labelled “deliberately unlawful and opportunistic” by Court of Appeal Judge, after building 13 affordable homes in breach of restrictive covenants.
Mr Barty Smith donated land worth £500,000 to a charity to build a children’s hospice, which he hoped would be “a peaceful place for children with terminal cancer to end their days in calm and dignity with access to private country gardens”.
In 2014, Mr Smith became aware that the land next to the proposed hospice was being developed in breach of restrictive covenants, which prevented residential development of the area. Shortly afterwards, Mr Smith notified the developer, Millgate Developments Limited, of the existing covenants and objected to the development, which he said would overlook the hospice’s gardens and turn the area more urban.
The developer denied the restrictive covenants applied to the land and, by July 2015, had completed its construction of the 13 affordable homes, satisfying planning obligations imposed on it in respect of a much bigger and valuable housing development.
Despite being aware of the restrictive covenants and objections, the developer did not make its application to modify the restrictive covenants, in accordance with section 84 Law of Property Act 1925, until after the homes had been built. Its application was brought before the Upper Tribunal of the Lands Chamber in 2016.
This state of affairs was described by the Appeal Judge as “presenting the Upper Tribunal with a fait accompli”.
Upper Tribunal Proceedings
The developer said the solution to the problem posed by conflicting interests, should be to allow the activity to continue, but to compensate the objecting landowner for the loss of amenity and diminished value of his property. A suggestion already aligned with cases involving a private nuisance as in Lawrence v Fen Tigers (2014) and which the Upper Tribunal accepted here.
The developer successfully argued that the restrictive covenants against development of the land, in impeding the continued existence and occupation of the affordable homes, were contrary to the public interest and should be overridden.
The fact that the homes would have to be demolished if the application was refused, it was said, was a decisive factor in the Upper Tribunal judges’ decision to consent to the developer’s application.
The hospice appealed the decision of the Upper Tribunal and in October 2018, the case of The Alexander Devine Children’s Cancer Trust v (1) Millgate Developments Limited (2) Housing Solutions Limited came before the Court of Appeal. By which point, the developer had sold the homes to Housing Solutions, a provider of social housing.
The hospice’s appeal was made on four grounds:
- Following the decision in Fen Tigers was wrong;
- The ‘public interest’ interpretation was incorrectly followed, because it essentially incentivised law breaking and unduly undermined restrictive covenants;
- No regard had been given to a payment made by the developer to the local authority for alternative provision of affordable housing elsewhere should the restrictive covenants remain in place;
- Failure to attach the appropriate weight to the fact that developer had “deliberately and knowingly” breached the restrictive covenants.
Upholding all four grounds, the Court of Appeal said the developer had acted in an unlawful manner by building in breach of the restrictive covenants, acting “with its eyes wide open”, and without proper regard to the rights of the hospice, in an attempt to circumvent the proper consideration of the ‘public interest’ power contained in section 84.
Judgment was given on 28 November 2018.
How we can help
As a developer, being aware of restrictive covenants that may impact on development opportunities is important and ensuring you are live to them at the earliest opportunity, should be at the front of any development process. Knowing what you can do about restrictive covenants and how to get them removed is key to unlocking the development opportunity.
Lucie Barnes is a property litigation specialist at Baines Wilson LLP.
If you would like to discuss any issue regarding restrictive covenants, we would be happy to speak with you. Please contact us on: 01228 552600 or firstname.lastname@example.org