Take care with covenants

A covenant is a promise to do or not to do something that is capable of binding the owner of the land to which it relates. The party having to perform the covenant takes the burden of it; the party in whose favour the covenant was drafted, takes the benefit of the covenant. Property lawyers are very familiar with covenants and advise their clients on them every day.

Covenants can be particularly important when someone wants to develop or build on a piece of land. A covenant may prevent or prohibit the development or building which can result in significant commercial disadvantage to the landowner. This is relevant to those who want to buy a small garden plot or a large developer who wants to build hundreds of houses. It is possible to apply to the court to modify a covenant but as a recent case demonstrates, no developer should take such an application for granted.

The Supreme Court has recently had to weigh up the competing interests of a covenant against development with the party having the benefit of the covenant. A developer owned a piece of land which was subject to a covenant specifying that it could only be used as a car park. The beneficiary of the covenant was a neighbouring property upon which is built a hospice for terminally ill children. The developer ignored the covenant and built 13 affordable housing units. It was only after the houses had been built that the developer applied to modify the covenant.

It was originally held that the developer could modify the covenant on the basis that the building of social housing was enough public interest to justify ignoring the benefit that it brought to the neighbouring land. The Supreme Court disagreed with this view and held that the rights of the land benefiting from the covenant prevailed. The court took account of the fact that the developer had alternative options available to it and proceeded to build in contravention of the covenant at its own risk.

Whilst it is fair to say that most developers, whether small or large, will not face such a stark choice, it is important to ensure that the risk of any development is always weighed up and that any covenants affecting the land in question, however old, are given proper consideration. This is a risky area upon which specialist advice should be taken.

To discuss this or any other property matter, contact us.

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