Restrictive covenants and overage
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Restrictive covenants and overage
Restrictive covenants are frequently referred to as being a means of impeding or restricting the use to which land may be put.
For a restrictive covenant to operate to bind successive owners and to restrict the use of that property, certain formalities must be observed:
- The covenant must be restrictive (or negative) in nature. A positive obligation (such as a requirement to maintain a fence) will not be capable of subsisting as a restrictive covenant.
- The covenant must be drafted so as to bind successors in title (and not be personal to the original covenanting parties).
- The covenant must be imposed for the benefit of other land; and
- The party whose land is burdened must have notice of the covenant.
Statutes and conveyancing practice operate to make the imposition of effective (and enforceable) restrictive covenants a fairly routine affair.
The case of Cosmichome Limited v Southampton City Council however highlights the problems which can be encountered where a restrictive covenant is imposed for purposes other than those directly linked to the use to which one property is put in order to benefit another. The case concerned the BBC’s broadcasting centre in Southampton and a covenant restricting use of the land to a broadcasting centre used solely by the BBC or any wholly owned subsidiary. If planning permission was granted for a use other than a radio and television studio and 50{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48} of any resulting enhanced value would be paid by the BBC to the Council.
Cosmichome acquired the freehold of the burdened property as part of a sale and leaseback arrangement and sought a declaration that the covenant was not binding upon it as a successor in title to the BBC. The court held that the covenant did not benefit other land since the covenant was in the nature of a monetary payment obligation as opposed to a restriction on the burdened land per se.
This case emphasises both the care which needs to be taken when drafting restrictive covenants but also that when seeking to protect overage payments, simple restrictive covenants, as used in the Cosmichome case are likely to be inadequate.
If you wish to discuss any of the issues raised in this blog please contact James Snaith at james.snaith@parissmith.co.uk.