For many property developers, restrictive covenants are a major stumbling block in land development. However a restrictive covenant does not always mean the end of your development plans. Nicholas Davies, Director and Commercial Property Solicitor at HRJ Foreman Laws Solicitors looks at some recent cases and highlights where restrictive covenants have been overturned.
A property developer will know that a restrictive covenant is a legally binding condition that is written into the deeds of a property. It states what the owner can or can’t do with the property. Common restrictions include; making certain alterations to a property, converting a house into flats, developing on a particular section of land or specifying that the land must not be for commercial or residential use.
When a developer wishes to construct a building that is currently restricted, there is an option to challenge the restriction in a Tribunal. However, one reason why people have been reluctant to go to the Tribunal in the past is because the chances of success have been perceived to be weak, particularly if planning permission for the proposed use has not yet been obtained to demonstrate that e.g. the restrictive covenant is impeding a reasonable use of the land.
However, in the first recent case, cited below, it is notable that modification was granted even though planning permission had not been granted. The second case shows that modifications to a covenant can have a positive outcome for all parties.
Derreb v Blackheath Cator Estate Residents 
This case concerned a covenant imposed in 1956 which restricted the use of a piece of land to a sports ground. The Landowner wanted to use it for residential development and applied to the Tribunal for modification of the restrictive covenant, on the grounds that the covenant was obsolete because the character of the property had changed (it had not been used for sports since 1999) and it impeded a reasonable use of the land. The Tribunal made an order modifying the restrictive covenant.
Hennessey v Kent 
If the beneficiaries of the covenant are identifiable and have indicated some opposition to the proposed development, it is unlikely that indemnity insurance will be an option. However, the tribunal may be able to provide a way forward. In Hennessey v Kent  the Landowner wanted to replace the existing dwelling – which had already been destroyed – with three new houses. There were restrictive covenants which prohibited the erection of more than one dwelling house and requiring the prior approval of any plans. The Landowner made an application to the tribunal on the basis that the covenants did not secure practical benefits of substantial value and that the parties who have the benefit of the covenants could be adequately compensated financially if the covenants were modified. The Tribunal agreed and made an order modifying the restrictive covenants and awarding damages at 5% of the value of the property, belonging to the neighbour who had objected to the scheme. The Tribunal also ordered both parties to pay their own costs on the basis that both of them had achieved success in the outcome i.e. the Landowner had the restrictive covenants modified and the neighbour had received compensation.
These cases serve as a useful reminder that the Property Tribunal can sometimes provide a way out when a development site appears to be been tied up by restrictive covenants.
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