People entering the building.

Restrictive Covenants: Public Policy v Legal Obligations

12 May 2017

A recent decision of the Upper Tribunal to modify a restrictive covenant caused surprise to property legal commentators. In Millgate Developments and another v Smith and another [2016] UKUT 515 (LC) the Tribunal awarded in favour of a developer (Millgate) who had already built in breach of the covenant.

The development, near Maidenhead, consisted entirely of social housing. The land was subject to a restrictive covenant prohibiting building in favour of neighbouring land owned by a children's cancer hospice. Millgate was in full knowledge of this restrictive covenant, but continued with the development regardless. Once the development was completed, it applied to the Upper Tribunal to have the restrictive covenant modified or discharged.

Unsurprisingly the Hospice contested the application, arguing that the development adversely affected their land and did not afford their patients the privacy and seclusion which had been intended when the hospice was built (some of the gardens on the development backed onto the hospice, and it could be clearly viewed from some of the new properties).

The Tribunal agreed with the Hospice that the covenant did indeed confer a substantial benefit on them in the form of the privacy and seclusion it afforded.

Nevertheless, the Tribunal ruled in favour of Millgate. The overriding factor in its decision appeared to be public interest, specifically the need for social housing at a time when there was a housing shortage. It also noted that the development had already received planning permission (to which the Hospice had not objected at the time), and that this planning permission had been granted contrary to both the development plan and the green belt status of the land, suggesting that the public interest of social housing was also an influential factor for the planning inspectorate.

The final consideration of the Tribunal was whether the breach of covenant was capable of remedy via compensation. In this instance it considered it was, and awarded the Hospice £150,000 for the purpose of planting trees and other landscaping to afford the Hospice the privacy and seclusion the restrictive covenant had originally provided.

The Tribunal however made this decision with a word of warning – this should not be seen as permission for developers to "deliberately flout their legal obligations". Whilst the decision may represent a positive outcome for developers, the decision appears to have strongly turned on the fact that social housing was involved, and should be treated with caution rather than as a precedent for modifying or discharging restrictive covenants. 

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