The Court of Appeal has recently provided a sobering reminder of the importance of not ignoring restrictive covenants, particularly for developers.
The case of Alexander Devine Children’s Cancer Trust –v- Millgate Developments Ltd and others  arose following the purchase of land in 2013 by Millgate Developments Ltd (“Millgate”). Millgate’s land adjoined land owned by Alexander Devine Children’s Cancer Trust (“the Trust”) which had been designated for the building of a children’s hospice. The Trust had a restrictive covenant over the land purchased by Millgate preventing development which overlooked the garden of the proposed hospice.
However, in full knowledge of the restrictive covenant and without approaching the Trust or otherwise applying to release or modify the covenant, Millgate proceeded to develop 13 affordable housing units which overlooked the Trust’s land. The units were subsequently sold to a housing association for social housing use.
Only at that stage did Millgate apply to the Upper Tribunal (Lands Chamber) under Section 84 of the Law of Property Act 1925 for the restrictive covenant to be released. The Tribunal did decide to release the covenant on the basis that there was significant public interest in ensuring that affordable housing, which of course had already been built, did not go to waste.
Believing that the presence of the residential development reduced the amenity of its hospice facility, the Trust appealed the Tribunal’s decision.
Given their full knowledge of the restrictive covenant, the Court of Appeal was particularly unimpressed by Millgate’s behaviour in proceeding with the development without first applying to the Tribunal. Allowing the appeal, they reinstated the covenants. This means that the Trust can now seek an injunction requiring the demolition of the development. The Court is yet to decide, as an alternative to demolition, whether to award damages in lieu of an injunction.
This case confirms the courts are prepared to take a tough line against developers who wilfully breach a restrictive covenant which limits or prevents development. The case may have been decided differently had the developer made an application to the Tribunal to modify or release the covenants before embarking on the construction work.
The Court of Appeal found there was no good reason why Millgate chose to delay this process. The court also concluded it was not fair for Millgate to argue the covenants should be released “in the public interest”, just because the development was affordable housing. The judges held it was also in the public interest that developers should follow proper procedures to seek the relaxation of the covenant in the first place.
Of course, after taking specialist legal advice, each case must be judged on its own merit. Both the cost of an application to the Tribunal and the associated delay can prove unattractive to developers, but as this case sorely demonstrates, that must be weighed against the potential financial consequences of proceeding regardless.