Supreme Court's Input Required On Dealing With Restrictive Covenants

All eyes will be on the Supreme Court this July, as it hears the developer's appeal against the Court of Appeal's decision in Alexander Devine Children's Cancer Trust v Millgate Developments Limited and others [2018] EWCA Civ 2679, a case in which a developer built social housing in knowing breach of covenant. The Court of Appeal refused to allow the developer's application for modification or discharge of the restrictive covenant against building. Will the Supreme Court uphold the Court of Appeal's decision, bolstering the rule that a retrospective application in these circumstances for discharge of a covenant will be unsuccessful? Or will it agree with the decision of the Upper Tribunal at first instance, and allow modification of the covenant on the basis that impeding the occupation of already built and much needed social housing was against public policy if a sum of money could be paid to the beneficiary of the covenant? It will be the first time that the Supreme Court has considered applications for discharge or modification of covenants using the statutory process, and developers will no doubt want to follow with interest.

We first reported on this case in May 2017. Click here for our blog post at that time, and click here for our fuller discussion of the case when it was heard by the Upper Tribunal.

Restrictive covenants and development

Many sites earmarked for development will be the subject of multiple third party rights, such as covenants and easements. Covenants are agreements between owners of land which either restrict the use of the land (restrictive covenants) or impose an obligation on a landowner (positive covenants). When considering purchasing land for development purposes, title to the land should be fully investigated to find out as much as possible about any existing covenants. It is common to see wording along the lines of "No buildings or erections shall be built on this land and the land shall not be used for any purpose other than an open space for the parking of motor vehicles". Once a restrictive covenant such as this comes to light, and the land to which it applies and the beneficiary of the covenant has been identified, the next step is to consider the potential solutions and deal with it proactively.

Background to the Millgate case

Unfortunately for the developer in this case, he was not at all proactive in this sense, and this has proved to be a mistake. The developer purchased a large development site, part...