Developers will be relieved by the recent Court of Appeal decision which introduces some clarity to the curious world of building schemes, a scheme of mutual covenants between owners relating to a defined area of land.
The High Court decision
We reported on the High Court decision which found in favour of a building scheme, purportedly introduced when land was sold by the original vendors in the early 20th century. This restricted the claimant developer from building additional properties on its land because its neighbours were entitled to the benefit of restrictive covenants in the claimant’s conveyances. This decision has recently been overturned by the Court of Appeal.
Court of Appeal decision
It is well-established law that for a building scheme to exist, the area of the land to which the scheme relates must be identified and each purchaser must accept that they are entering into obligations which will benefit the other purchasers of the building scheme and will in turn be entitled to enforce those obligations.
The Court of Appeal concluded:
• A building scheme is intended to last indefinitely. Purchasers of land have to know the extent of the benefit and burden of the obligations they are taking on.
• In most cases, a building scheme will be found to exist where the extent of the scheme is clear from the description of land in the conveyances or other transactional documents. Even if the original plan showing the extent of the building scheme had been lost, this would not necessarily prevent a court from inferring that the land comprised a building scheme. A plan itself is not necessarily required, a written description of the relevant property may be sufficient.
• By including the description of the estate in conveyances, it follows that purchasers would be made aware of the existence of the scheme and the criteria for a building scheme will be met.
• In certain circumstances, a Court may infer the existence of a scheme from the surrounding facts of a case but these situations are much more unusual.
This helpful decision sets out the key characteristics of a building scheme and the evidence which may be taken into account in determining whether a building scheme exists. It is a common-sense and practical approach to the law in this area and sets out useful guidance for developers with land potentially burdened by a building scheme.