There have been a number of cases over the last few years which impact upon the enforceability of restrictive covenants, whether imposed or not by Local Authorities, and the powers of Local Authorities (and individuals) in relation thereto.
The case of R v Braintree DC
In R v Braintree DC (ex parte Halls) (2000) the Court of Appeal held that a covenant requiring a property to be used as a single dwelling house is unlawful where the purpose of the covenant was to reserve to the local authority a share of future profits on granting a release since such purpose did not promote the policy and objectives of the right to buy legislation. Local authorities should, if they wish to impose such a covenant which they wish to enforce by injunction, rather than by a consent or release in return for payment reflecting an increase in value, ensure that the decision making process in deciding to impose such a covenant clearly shows that the purpose is not for financial gain but for some other proper purpose.
As mentioned, the decision is one of the Court of Appeal and concerned the original covenantee and covenantor. Whether or not the same decision would be reached in a higher court or in circumstances where either one or both of the parties are successors in title is a moot point. Why should a successor who has bought at market value be entitled to treat such covenant as unenforceable?
The case of Wayne Martin v David Wilson Homes Ltd
The case of Wayne Martin v David Wilson Homes Ltd (2004) EWCA Civ 1072 highlights the need to ensure the wording of a covenant restricting the number of dwellings is precise. The court held that the indefinite article “a” did not denote a number but merely usage where the wording of the covenant read "... any purpose than as a private dwelling house…”. The use of the word “single” after “a” would have overcome the problem.
The case of Winter & another v Traditional & Contemporary Contract Ltd
More recently is the case of Winter & another v Traditional & Contemporary Contract Ltd [2007] EWCA Civ 1088. Here the issue is one of the level of compensation for a modification of a covenant under s84 Law of Property Act 1925 compared to damages in lieu of an injunction for breach.
The court held that whilst the “negotiated share” approach is well recognised in proceedings for breach, under s84 compensation is based on the impact of the development on objectors and not on loss of opportunity. As compensation under s84 is likely to be substantially less than damages in an action for damages a defendant in an action for damages would be well advised to apply for a stay on proceedings to allow an application under s84.
The case of Lawntown v Camenzuli
Lastly is the case of Lawntown v Camenzuli [2007] EWCA Civ 949 concerning the effects of s610 Housing Act 1985, a little utilised provision (before now perhaps!).
Under s610 a Local Authority or person interested in any premises may apply to the County Court where:
- Owing to the change of character of a neighbourhood premises cannot readily be let as a single dwelling house but could be more readily let if converted into two or more dwellings, or
- Planning permission has been grated under part III Town and Country Planning Act 1990 for use of the premises as converted into two or more dwellings:
- and conversion is prohibited or restricted by lease provisions or restrictive covenant.
The court may on application vary the terms of a lease or other instrument imposing such a restriction.
The Court of Appeal held that the court’s discretion to vary covenants is one where it is to be exercised judicially having regard to the purpose of s610 to facilitate more intensive use of (usually) large dwellings. The statute provides for a variation to be ordered “subject to such condition and upon such terms” as the court thinks just. The emphasis of s610 is very much on “conversion” rather that construction of a separate dwelling.
Depending on which side of the fence you are on it is as well to bear in mind these cases when either selling or buying.
