Discharge of Restrictive Covenant Requiring Approval of Plans

A case decided last week by the Upper Tribunal (Lands Chamber) is good news for developers looking to develop land subject to a restrictive covenant preventing the erection or alteration of buildings without the original transferor’s approval of plans. 

In this case the developer had applied under Section 84 of the Law of Property Act 1925 to discharge and modify restrictive covenants to enable it to develop property. The restrictive covenants had been imposed in a transfer in 1967 and prevented certain building works and alterations unless plans and specifications were approved in advance by the transferor company under the 1967 transfer. The transferor company had been dissolved in 2000. 

Since the Crest Nicholson case it has been generally accepted that where a restrictive covenant requires the consent of an original transferor to plans, and that transferor no longer exists or has died, that the covenant is discharged. 

Some early cases had found that such covenants became absolute, meaning that any development would be prohibited unless a release was obtained from every party with the benefit. This was the position argued by the objectors to the development in the case of Vee Ltd v Barnard last week. It is good news for developers that this argument was rejected by the Upper Tribunal who looked at the intention of the parties to the original transfer. It decided that the intention was for the original developer to exercise some control over the development of the estate in the early stages, whilst it was still selling off parts of the estate and therefore had an interest in retaining quality control. However, it could not have been the intention that should the developer company cease to exist there would be an absolute prohibition on any future works, some of which would have been minor and for which consent would most likely have been given. 

The Upper Tribunal therefore held that the covenant ceased to have any effect due to a change of circumstances and was now obsolete. It was therefore discharged.

Such approval covenants are not uncommon and this case is a helpful application of the principle in the Crest Nicholson case.