It’s vital to consider precise nature and wording of restrictive covenants

Jan 8 2008 by Iain Laing, The Journal

SELLERS of land often impose restrictions as to its future use, normally by way of restrictive covenant.

They can be used to restrict the use of land so that the seller can preserve the amenity of adjoining land retained by them, or so that the seller can seek to obtain additional money if the owner of the land wants to vary the covenant. The wording and interpretation of a covenant is, however, crucial as to whether or not it can be enforced in the future.

As land is sold and resold, parcels of land can, therefore, be subject to any number of restrictive covenants as may have been imposed recently or historically and which may prevent or restrict the current use of land. Given that there is only a finite resource of suitable development land, it is no surprise that the courts continue to deal with cases as to whether or not a covenant is still enforceable. 2007 proved to be no exception with several decisions and clarifications being made as to the enforceability of restrictive covenants.

The case of City Inn (Jersey) Limited v Ten Trinity Square Limited provides an example of the importance of the wording of a covenant. A transfer deed contained a restrictive covenant which prevented the development of the property without the consent of “the transferor”, who owned some retained land. Years after the covenant was imposed, two rival hotel developers came to own the land originally sold and retained. One of the developers sought to prevent the other’s development by enforcing the original covenant as it did not consent to the development. The matter was ultimately heard by the High Court, which ruled that the original covenant had been worded in such a manner that only the original seller of the land, and not the rival developer, had the ability to give or withhold consent. The case of Dobbin v Redpath demonstrates the extent to which some developers will go to seek a modification. A restrictive covenant had been imposed upon the owners of six houses, restricting the use of the property to no more than one dwelling house.

A subsequent owner of one of the houses and adjoining land had obtained planning permission to erect a further bungalow and garage on the land but the wording of the covenant was such that the neighbours would have had to consent to any such building. The neighbours objected and so an application by the owner was made to the Land Tribunal to modify the restrictive covenant. The Lands Tribunal rejected the application, and the Court of Appeal upheld their decision. Ultimately the application was rejected because the low density of the neighbourhood contributed to a pleasant and peaceful environment and the restrictive covenant had a practical benefit of substantial advantage to the neighbouring house owners by helping to maintain this.

If you are buying land that is subject to restrictive covenants or you are selling land and want to impose a new covenant, it is vital to consider the precise nature and wording of the restrictive covenants and their enforceability and to bear in mind circumstances whereby an apparently unequivocal restrictive covenant can either be discharged or modified in the future.

Tom Willows is a solicitor in the commercial development team at Dickinson Dees LLP.