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/ 09 Sep 2016

Once more unto the breach: getting around restrictive covenants

With space at a premium in London, many people want to make the most of the land they own, sometimes by building an additional property on a plot next to their home. But what if after doing so you find one or more restrictive covenants buried in the depths of your title deeds stating that you must use your land only ‘as a single private dwelling place’?

Such restrictive covenants are quite common and could render the new building effectively worthless: few, if any, lenders would take a mortgage over a property built in breach of such a clause, so prospective buyers will be thin on the ground.

So what can be done to get around the problem? One possible solution – where there are valid grounds – is to make an application to the Lands Tribunal for an order modifying or discharging the covenant. However, before taking such a step it is important to explore cheaper and simpler options where possible.

Check who has the benefit

In certain cases the original beneficiary of the covenant may no longer be able to enforce it. This could arise where, for example, a local authority has sold off all the surrounding land and no longer has land adjacent to the property. If the benefit of the covenant has passed to an agreeable neighbour, negotiations may be easier than discussions with the original beneficiary (depending, course, on your neighbour!).

Check the wording
In one case it was successfully argued that a covenant to use as ‘a private dwellinghouse’ (Martin v David Wilson Homes Ltd [2004] EWCA Civ 1027) did not limit the number of possible houses. In other words, ‘a’ does not always mean ‘one’. It is therefore important the precise wording is considered carefully.

Look for insurance
Where a restrictive covenant has been breached, a policy indemnifying the owner against enforcement action will be hard to obtain. Nevertheless, if all options are to be considered, this avenue should also be explored.

Change your plans
In certain cases the best solution could be to rectify the breach, by knocking the two properties into one. Although a drastic solution, this may be appropriate where a sale of the properties was intended and if the value of the original property is enhanced by the increased size.

Strike a deal
The most likely resolution will be to reach an agreement with the beneficiary of the covenant. This will effectively mean paying for the beneficiary’s retrospective relaxation of the covenant. A suitable price may be higher than the cost of rectifying the breach (by, say, knocking the new building down) but lower than the market value of the property (if it had not been built in breach of covenant). Most commercially-minded neighbours, housing associations or local authorities will be glad to negotiate on this basis rather than insist on the breach being rectified since they may derive no actual benefit from such insistence.

In summary, while an application to the Lands Tribunal may be a final option, it is likely that one of the solutions above will be more straightforward, more efficient and less expensive in getting round restrictive covenants.
Tim McLeish – Trainee Solicitor, Property Department

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