Article / 14 Dec 2020

The enforceability of restrictive covenants on land

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Gateley Legal

Covenants restricting development on land are a perennial thorn in the side for housebuilders. They can either restrict development entirely or restrict its extent. One way that housebuilders can challenge a restrictive covenant is by challenging its enforceability under s.84 of the Law of Property Act 1925.

Rugby fans may be aware that Bath Rugby Club is in dispute with some of its neighbours in respect of plans to develop land around its ground at The Rec in Bath.

The neighbours rely on a restrictive covenant contained in a 1922 conveyance of the land. It provided that “no workshops, warehouse, factories or other buildings for the purpose of any trade or business… shall be hereafter erected on the said land.”.

This restrictive covenant was stated to be for the benefit of “the adjoining premises or the neighbourhood”.

A number of neighbouring property owners claimed that they had the benefit of the restrictive covenant. Bath Rugby Club challenged the enforceability of the covenant under s.84(2) of the Law of Property Act 1925.

Important lessons from this case

Bath Rugby Club did not succeed in its claim. However, housebuilders should be aware of a number of important lessons that can be learnt from the case. These are:

  1. You do not have to be a freeholder of the property in question in order to make a claim under s.84; Bath Rugby Club were a long leaseholder and this was sufficient;
  2. For a restrictive covenant to be enforceable, it must be possible to identify the land which it benefits. This is easy enough when the conveyance clearly identifies the land with a plan. However, things become a lot more complicated where the land is only described generally. This is particularly common in older conveyances. In this case, the benefited land was described as “adjoining land” and “the neighbourhood”. This wording is vague and it was not possible to identify from the conveyance alone what land that was. However, despite this difficulty, the High Court considered that it was still possible to ascertain the benefited land by reference to other documents, such as lists held by the estate which used to own the land. It is commonly thought that the land has to be “easily ascertainable”, a test which would not have been satisfied here. However, the judge found that it was sufficient that the conveyance describes the benefited land in terms which allow it to be identified from other evidence, apart from the conveyance. This is significant because the ability to refer to other evidence makes otherwise unascertainable land become ascertainable, meaning that the covenant is enforceable;
  3. The case also reminds us of another important point in respect of restrictive covenants. Restrictive covenants should protect a property right. However, many restrictive covenants are in fact mechanisms to extract further value from the land, so that they are effectively overages. If the restrictive covenant’s real purpose is to extract a financial benefit, then it is not a restrictive covenant but rather a personal one. This means that only the original contracting party can enforce it, not successors in title.

A declaration was made under s.84

Another interesting aspect of this case is that Bath Rugby Club sought a declaration under s.84 that the restrictive covenant was not enforceable by anyone. Usually, such applications are made against specified people, because there are only a very limited number of people that could benefit from the restrictive covenant. However, here, the land that originally benefited from the restrictive covenant was an estate owned by a large landowner, which was subsequently split off into hundreds of different ownerships. Section 84 allows the applicant to claim for a declaration against anyone that might benefit, however the hoops that the applicant must jump through are numerous. Although an applicant does not have to notify all potential beneficiaries, they must make every effort to contact them. In this case, Bath Rugby Club had to send over one thousand letters to different people, hold several public consultations and meetings and send hundreds of emails.

What should you do if your confronted by a restrictive covenant?

If a housebuilder is confronted by a restrictive covenant preventing or restricting development on land it must look at it very carefully to establish whether it is enforceable. One of the main things to look at is whether the benefited land is capable of being identified. However, apparently relatively vague wording such as “adjoining land” or “the neighbourhood” may make it ascertainable, if other documents help identify that land. Please contact our experts listed below for further information.