In Bath Rugby Ltd v Greenwood & Ors v Bath Recreation Ground, the Court of Appeal considered the conditions which must be met in order to annex the benefit of a restrictive covenant to land. The decision gives important clarification which landowners and developers will need to be mindful of in a complex area of law.
The restrictive covenant in question was created in a pre-1926 conveyance and consequently prior to the coming into force of the Law of Property Act 1925. Section 78(1) of the Law of Property Act 1925—which provides clear direction on annexation—was therefore irrelevant in the Bath Rugby case.
Bath Rugby had a lease of part of the Bath Recreation Ground (“the Rec”) and intended to replace the existing stadium with a new, larger stadium which would contain various retail and commercial outlets. There was, however, a restrictive covenant contained in a 1922 conveyance preventing the use of the Rec in such a way “which may be or grow to be a nuisance and annoyance or disturbance or otherwise prejudicially affect the adjoining premises or the neighbourhood”. The case turned on whether the effect of this conveyance was to annex the benefit of the covenant to identifiable land. Bath Rugby accepted that if this restrictive covenant was enforceable then it was likely to affect, if not prevent, the proposed development of the land.
Therefore, Bath Rugby applied under s.84(2) of the Law of Property Act 1925 for a declaration that the land was free from the covenant. Various local residents objected to this relief and a claim was heard in the High Court by HHJ Paul Matthews. Judge Matthews held that the 1922 conveyance had indeed annexed the benefit of the covenant to land adjoining and near to the Rec. Both Bath Rugby and Bath Recreation Ltd (the freeholder of the Rec) appealed this decision.
The Court of Appeal decision
Allowing the appeal, Nugee LJ (giving the lead judgement) held that annexation requires not only a clear intention to benefit land but also a “sufficient indication” of the land intended to be benefited, either expressly or by necessary implication. In the 1922 conveyance, the land in question was described as “the adjoining land or the neighbourhood”. Nugee LJ considered this description too imprecise: a “sufficient indication” of land requires some conceptual certainty. In principle, therefore, it should be possible to draw a defined list of benefitting properties from the description, as would be the case, for example, in “the vendor’s adjoining and neighbouring land”.
Having allowed the appeal on this basis, Nugee LJ went on to consider whether it was a condition of annexation for the land to be “easily ascertainable”, being another of the tests for annexation of a covenant to land. Nugee LJ agreed with Judge Matthews when he indicated that this test did not differ significantly from the requirement for a “sufficient indication” of land. While his words to this effect are obiter (meaning they do not form part of the binding legal precedent of the judgment), they are noteworthy in the disagreement they provoked in the other Justices. Both Newey and King LLJ were of the opinion that the “easily ascertainable” test should be kept a distinct condition of annexation because it protects the ability of a purchaser of land burdened by a restrictive covenant to determine the benefitting land and therefore pin down who can enforce the covenant.
This case spins on a narrow point of law. Nevertheless, the law concerning annexation is thorny and the clarification the case has provided on the criteria which must be met for annexation is most useful and will be welcomed by developers. The Court’s insistence on precision when it comes to the identification of properties to which the benefit of a covenant is intended to be annexed should be welcomed.
Nevertheless, the disagreement between the Justices on the “easily ascertainable” test bears witness to some continued uncertainty which still exists in this area of law. Developers contending with pre-1926 covenants in particular should proceed with caution.