Land can sometimes be bound by restrictive covenants which can impact a future use or value. The principle in this case was whether the Upper Tribunal would discharge a restrictive covenant after the covenant had been breached. The Upper Tribunal case of Fosse Urban Projects Ltd v Whyte & Others, 2023 puts into practice the 2020 Supreme Court decision of Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd (which we discussed here).
Fosse Urban Projects Limited (“Fosse”) owned land that was bound by a 1996 restrictive covenant not to use the land for any purpose other than as garden land. This covenant was put in place when the area was significantly more rural. Since 1996 the surrounding area had transitioned from rural to over 800 homes.
Fosse had the benefit of a planning permission over its land parcel and applied to the Upper Tribunal to exercise its discretionary powers under Section 84 of the Law of Property Act 1925 to have the restrictive covenant discharged. The three grounds under which Fosse applied were as follows:
- The character of the local area since 1996 had changed so significantly that the covenant was now obsolete.
- The covenant now impeded the reasonable use of the land.
- The discharge of the covenant would not harm any of the neighbours who benefitted from the covenant.
However, before the Upper Tribunal had reached its decision, Fosse proceeded to construct a home on its land (with no action taken during the construction period) and by the time the Upper Tribunal sat to consider the case, the home was fully built and occupied (by a director of Fosse).
In any event, the Tribunal considered the three grounds for discharging the restrictive covenant and the first two grounds were satisfied (the local area had changed significantly and was now a largely residential area). In order for the third test to be met, Fosse needed to show the discharge of the covenant would not negatively impact those who benefited from the restriction. However, it was noted that owners of the surrounding properties objected to the application, citing loss of open space, privacy and property value.
The Upper Tribunal then had to decide whether or not to exercise is discretionary power to discharge the restrictive covenant. The Upper Tribunal’s view was that Fosse had been aware of the restrictive covenant and, unfortunately for Fosse, it was at this stage where Fosse’s application collapsed. Following the previous Supreme Court decision in Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd, the Upper Tribunal concluded there had been a cynical breach by Fosse; despite Fosse (a) being aware of the covenant and (b) awaiting the Upper Tribunal’s decision to discharge it, Fosse proceeded to build the home anyway.
Therefore, the Upper Tribunal denied the application to discharge the covenant and confirmed there had been a breach of a restrictive covenant and the objecting neighbours would have a right to apply to the courts for remedial action, including damages.
So, what does this mean for developers?
If a site is subject to a restrictive covenant, seeking legal advice at an early stage is always the safest route, as the risks of a breach can potentially be mitigated.
The message from the Upper Tribunal (and the Supreme Court) is clear – you cannot deliberately breach a restrictive covenant and then seek to remedy the breach via an application to the Upper Tribunal to discharge the covenant.
Developers and landowners must always act with caution with an application to the Upper Tribunal to discharge a restrictive covenant. It can be a very long and expensive process with no guarantees – it is discretionary power, and the Upper Tribunal will look at all of the circumstances in the round.