Circumventing restrictive covenants
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Circumventing restrictive covenants
When appraising and evaluating a site it will become apparent at an early stage whether the property is affected by restrictive covenants. In some instances defective title insurance will be available, and in others a release or waiver of the covenants may be negotiated. A third option (though one which is not by any means always successful – see my earlier blog) is to apply to the Lands Tribunal to have the covenants discharged or modified by relying upon the statutory grounds set out in the Law of Property Act 1925.
The recent Lands Tribunal case of Re Brainshaugh House concerned restrictive covenants imposed for the benefit of an individual, his family and descendants, but significantly (and unusually) not for any other successors in title.
The majority of the land benefitting from the covenants was sold leaving only two small sections of the estate within the ownership of the family. The Lands Tribunal held that there had, as a result of the disposals, been a material change of circumstances (being one of the specified statutory grounds) and the covenants were either discharged or modified as a result.
This case is interesting from a legal perspective in that the “other circumstances” ground had been thought to refer only to physical circumstances and not a change in legal status (i.e. the disposal of the majority of the land with the benefit of the restrictive covenants). The case also serves as a reminder of the commercial imperative to “unlock” development sites which cannot come forward for development without existing restrictive covenants being modified or discharged. In the current climate, where obtaining Planning Consents for the redevelopment of land becomes ever more challenging, it seems likely that sites which are, in all other respects, suitable for development but for the existence of restrictive covenants, may well give rise to further applications to the Lands Tribunal.
If you wish to discuss any of the points raised in this blog please contact Mark Withers at mark.withers@parissmith.co.uk