Develop and Be Damned is Not a Good Strategy
Millgate, a property developer, obtained planning permission for, and then built, houses and flats on a development site. Part of the land was subject to a restrictive covenant that prevented residential development. Millgate was aware of the covenant but chose to ignore it. The houses built in breach of the covenant were subsequently sold to a housing association for social housing use. Millgate then applied for the restrictive covenant to be released under the procedures in section 84 of the Law of Property Act 1925.
Releasing restrictive covenants
Section 84 allows the Upper Tribunal (Lands Chamber) to order the release of restrictive covenants on a number of grounds. These include (in section 84(1A)) that the restrictive covenant confers no practical benefit of substantial value on the person who benefits from the covenant, or that the restriction on use is contrary to the public interest.
In the current case, the Upper Tribunal, presented with a situation where land was now available for social housing pursuant to a planning permission that required its provision, released the restrictive covenant on the ground that it was contrary to the public interest for the covenant to remain. The grant of planning permission, and the provision of social housing pursuant to it, meant that the public interest ground had been satisfied.
The Alexander Devine Children’s Cancer Trust owned the land with the benefit of the restrictive covenant. It wanted to build a hospice on its land. The grounds of that hospice would now abut a residential development reducing the amenity of its facilities. The charity appealed against the order of the Upper Tribunal. The Court of Appeal has allowed the appeal and reinstated the covenants. It is now open for the charity to seek an injunction requiring the houses to be demolished and the land reinstated to be open land. Whether or not the injunction would be granted or damages granted in place of an injunction is a different issue that was not the subject of the appeal proceedings.
The Court of Appeal’s decision
A number of points of interest arise from the Court of Appeal’s decision that provide useful guidance on when the public interest ground for the release of a restrictive covenant will be available. In summary these are:
It is clear that restrictive covenants can be released where planning considerations mean that it is in the public interest to do so. Section 84 specifically provides that the Upper Tribunal must take into account the development plan and any declared or ascertainable pattern for the grant or refusal of planning permission in the relevant areas, as well as the period at which and context in which the restriction was created or imposed and any other material circumstances. However, public policy will not allow developers carte blanche to develop and damn the consequences of ignoring restrictive covenants.
The Alexander Devine Children’s Cancer Trust v Millgate Developments Limited  EWCA Civ 2679
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