Options To Lease For Renewables - Has The Ridgewood Decision Changed Anything?

Ridgewood Properties Group Limited v Valero Energy Limited

The decision of the Ridgewood Properties Group Limited v Valero Energy Limited (2013) EWHC 98 (Ch) case concerned the enforceability of option agreements by the developer against a purchaser from the original landowner. The case did not concern renewables but did concern options for "wraparound development" at petrol filling stations, granted by Texaco (T) to Ridgewood (R). After entering into the options, T sold the sites to Somerfield (S). When T sold to S, the site was sold subject to the options and S was contractually obliged (to T) to comply with the option agreements and to indemnify T in respect of any breach by S. S asserted that it was not bound by the option agreements and declined to comply with various positive obligations concerned with facilitating the obtaining of planning permission.

Important Points From The Decision

For renewables developers, the following salient points from the decision will be of interest:

Positive covenants by the landowner (e.g. to assist with planning and provide access) will not transmit automatically to a purchaser from the landowner. This is not withstanding the Landlord and Tenant (Covenants) Act 1995 which generally transmits landowner obligations under tenancies and agreements for tenancies to a new landowner. The court's decision was that an option was not an agreement for tenancy. The obligation by S in favour of T to perform the option agreements was not enforceable by T - following a slightly odd (to Scottish eyes) line of English case law with its origins in privity of contract in leases; nevertheless, the indemnity by S in favour of T was enforceable. Options for Scottish Renewables

The case really has no implications in Scotland because options are always personal contracts which do not "run with the land". A developer cannot enforce an option against a purchaser from the original landowner. For this reason, it is advisable for a developer to:

Obtain a contractual obligation from the original landowner that he will not sell or otherwise alienate his interest without the consent of the developer. Such consent should not be unreasonably withheld if the transferee agrees to enter into a new direct contract with the developer and to provide a standard security (see below). If the developer becomes aware of a change of ownership, the developer should take immediate steps to enforce performance by the landowner of its obligation to...