Summary: The Court of Appeal has ruled against an attempt to block a new housing development. The Court ruled that a ‘building scheme’ had not been established. Historic restrictive covenants did not prevent the building of new houses

Building Schemes

Under a building scheme (also known as a scheme of development) restrictive covenants affecting individual plots are mutually enforceable by and against the owner of each plot. The characteristics of a building scheme are that:

  • the area comprised in the scheme must be clearly defined and known to each of the plot owners;
  • the plots within the scheme must have originally been bought from a common owner;
  • each of the plots must be subject to covenants which are (a) intended to be mutually enforceable, (b) known to the parties and (c) in the interests of all of the parties and their successors;
  • the land becomes bound by the scheme on the first sale of a plot within the defined area and the common owner is not entitled to sell further plots within the area otherwise than on the terms of the scheme.

The Facts

Birdlip Limited (“Birdlip”) owned property adjoining the property owned by Mr & Mrs Hunter. Birdlip obtained planning permission to build two detached houses on its land.

The Hunters tried to enforce those restrictive covenants limited the number of houses that could be built on Birdlip's land.)

The Hunters were able to establish that in total, 18 house plots sold by an original common seller in 1909-1910 were bound by similar (but not identical) restrictive covenants. They also established that contracts for the sale of two plots each contained plans showing the extent of the 'Estate' but these plans varied significantly from later plans used on other sales which omitted half the land shown on the earlier plans.

The High Court

The High Court had earlier found in favour of the Hunters, that the ‘Estate’ had many of the classic features of a building scheme. The key factor was the consistency in the restrictions imposed which led the Court to infer that they were for the common benefit of all purchasers.

The Court of Appeal

However, the Court of Appeal noted that in all previous cases in which building schemes had been found to exist, there was something in the documents to alert the purchaser to the existence of the scheme. The mere fact that a series of conveyances contains similar covenants is not enough to establish that a scheme of mutual covenants exists. The Court of Appeal reversed the earlier decision because:

  • there was no reference in the terms of the conveyances to any ‘estate’ of which the plot was said to form part;
  • the conveyance plans showed no other plots – only the specific property the subject of the conveyance;
  • the covenants were expressed to relate to a wide area spreading across three different parishes, rather than for the benefit of the land allegedly subject to the scheme;
  • there was no express provision for mutual enforceability of the covenants;
  • One of the covenants was singled out and expressed to be ‘for the mutual benefit of all purchasers’. If all of the covenants were intended to be mutual it was difficult to explain why only one was expressed in this way.

Conclusion

This case serves as a reminder not to underestimate the persistence of adjoining owners to challenge a development. The evidence which the Hunters brought fell far short of establishing the existence of a building scheme, nevertheless it is essential to establish whether or not restrictive covenants are binding, particularly ones which limit what can be developed, as part of the development appraisal - no matter how old they may be.