Build In Haste, Repent At Leisure – Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd – Real Estate and Construction

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Build In Haste, Repent At Leisure – Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd

08 June 2021

PDT Solicitors

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For the first time, the Supreme Court has considered the power
of the Upper Tribunal (Lands Chamber) to modify or discharge
restrictive covenants. Its recent Judgment in the case of Alexander
Devine Children’s Cancer Trust v Housing Solutions Ltd confirms
that a developer will not be allowed to rely on its own deliberate
breach of a restrictive covenant so as to create the necessary
public interest ground for modification.

The Facts

Part of the land purchased by Housing Solutions Ltd in September
2015 was burdened by restrictive covenants which prevented use of
the land for anything other than car parking and provided that no
building structure should be erected on the land.

The previous owner, Millgate Developments Ltd, was fully aware
of the restrictive covenants but failed to make any application to
the Upper Tribunal to modify or discharge the covenants before
seeking planning consent and starting to build houses on the
land.  By the time Millgate eventually applied to the Upper
Tribunal for modification of the covenants (in accordance with
Section 84(1) of the Law of Property Act 1925) in July 2015,
Millgate had already built 13 houses on the burdened land.

The Upper Tribunal granted Millgate’s application. 
However, this decision was overturned by the Court of Appeal on
appeal by the Trust.  Following its purchase of the land in
September 2015, Housing Solutions Ltd appealed to the Supreme
Court.

The Supreme Court Decision

Whilst there were 4 grounds of appeal to the Supreme Court, the
key issue was the extent to which Millgate’s conduct should be
taken into account in deciding whether or not the covenant should
be modified on the ground that it was “contrary to public
interest”.  Millgate was only able to satisfy the public
interest test in Section 84(1) because it had already obtained
planning consent and built 13 social housing units on the land
before making the application to the Upper Tribunal.

In a Judgment which may have ramifications for all developers,
the Supreme Court held that Millgate’s conduct had
fundamentally altered the position in relation to public interest
and that it would be wrong to allow a developer to secure
modification of a covenant in reliance on a state of affairs that
the developer had itself created by its own deliberate and cynical
breach. 

The Supreme Court also placed emphasis on the fact that Millgate
could have discharged its planning obligation in relation to
delivering social housing by providing the social housing units on
an alternative site or by paying a commuted sum to the Local
Authority.  In either case, the public benefit would still
have been delivered.

The decision on this ground of appeal alone was held to be
sufficient for the dismissal of the appeal.

Lessons to be learnt

The obvious learning point from this Judgment is that developers
should take legal advice in relation to restrictive covenants
burdening the land they wish to develop, arguably before an
application for planning consent is made and certainly before they
actually start to build. 

The Supreme Court is also sending a clear message that a
developer will not be able to engineer the circumstances needed to
support modification of a covenant and that presenting the Upper
Tribunal with a fait accompli will not help.

Where land is burdened with restrictive covenants, options for a
developer to consider include:

Seeking indemnity insurance to protect against any claims made
under the covenants;

Negotiating a release from the party with the benefit of the
covenants;

Applying to the Upper Tribunal to modify or discharge the
covenants.

Taking advice as to the best option at an early stage can put
you in a stronger position and may save time and cost, particularly
if proceedings can then be avoided.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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