03 Jan 2017

Modify your behaviour…restrictive covenants and development

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New development

You've got your eye on an exciting new development site. The site's a bit run down. You're planning to tidy it up and expand the buildings on it, but you don't see any planning problems because you're not planning to change the use. You've done some "light touch" due diligence and you discover some old restrictive covenants dating back to the late 1800s. Those covenants prohibit the current use, which you had planned to continue and expand upon.

Old covenants

You're an experienced developer, so you recollect that there's a procedure allowing you to apply for restrictive covenants to be discharged or modified if certain criteria can be met (S.84 of the Law of Property Act 1925, wasn't it?). You also recall that one of the potential grounds is to show that the restriction is obsolete on the basis of changes in the neighbourhood or the property.

So it's all OK then?

The Seller has also been told about this procedure for discharge and says that the fact that the property has been used in breach of the covenant for more than 30 years means that you can now ignore the covenant, as it must have become obsolete.

Not so fast…

The precise facts will determine the outcome, but the recent tribunal decision in Re University of Chester's Application reminds us that you certainly can't rely on the past use to render the covenant completely obsolete. The key question is the extent of the past use. If the past use involved a small and limited breach, that does not give free rein for later wider and more significant breaches, so care and analysis is required.

Other solutions…

There are usually a number of potential ways to deal with problematic restrictive covenants. The options range from insurance to negotiation to applications under alternative heads of S.84. When the circumstances require it, we'll work with you to assess the options and then recommend an appropriate solution.

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Simon Brading

Simon Brading
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Stephen Laud
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Robert Newman
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Ben Stansfield
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James Trundle
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Jonathon Wilkes
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James Styles
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