Key points

  • Where a building scheme is in place, the owner of a property may have the right to enforce restrictive covenants imposed on all the other properties in the scheme
  • Where there is no building scheme, an owner will only have the benefit of a restrictive covenant if their property was sold by the developer after the burdened plot
  • The presence or absence of a building scheme can therefore affect how many owners are entitled to object to development in breach of covenant
  • In considering whether a covenant should be modified, the tribunal will usually look at its value in providing protection from the effects of the ultimate use of the land
  • However, in exceptional circumstances, disruption during the construction period itself may also be a material consideration

Facts of Re Perkins

A developer was seeking the modification of a restrictive covenant by the Lands Chamber of the Upper Tribunal (formerly the Lands Tribunal). It wanted to build a second house on a plot that was burdened by a covenant not to build more than one dwellinghouse. The site comprised a corner plot on a small suburban square which had central communal gardens. 47 neighbours objected to the application.

Building scheme

The first issue that the tribunal had to consider was whether all of the neighbours were entitled to enforce the covenant. The neighbours argued that there was a building scheme in place. A building scheme is a comprehensive system of covenants established by the initial developer which is designed to be enforceable by, and against, all owners from time to time of plots within the scheme.

In order to establish a building scheme, the relevant owners must derive their title from a common seller. It is a requirement that, prior to sale, the land must have been laid out in lots, subject to restrictions intended to be imposed on all lots. However, the mere fact that conveyances of houses on an estate contain the same covenants is not enough. There has to be an intention on the part of the seller that the restrictions are imposed for the benefit of all lots to be sold, and the purchasers must have bought their plots on that basis.

In this case, there was no evidence that the seller of the properties in the square had imposed the restrictive covenant for the common benefit of all purchasers. The tribunal therefore held that no building scheme was in place.

Where there is no building scheme, a covenant by a buyer in a transfer can only be given for the benefit of land owned by the seller. This meant that only the plots which had been sold off after the application land could have the benefit of the covenant. As a result, only 28 of the 47 objectors were actually entitled to enforce the covenant.

Should the covenant be modified?

Under section 84 of the Law of Property Act 1925, it is possible to apply for a covenant to be modified or discharged. The grounds on which the tribunal may do so include:

  • That the continued existence of the covenant would impede some reasonable use of the land, money would be adequate compensation to the person entitled to the benefit and the covenant secures no practical benefit of substantial advantage
  • That the proposed discharge or modification will not injure the person with the benefit of the covenant.

The tribunal noted that, being a corner plot, the application land was unusually large compared with surrounding properties, and could easily accommodate two houses. This was not the case with other properties in the square, and so this would not be a case of "opening the floodgates". Nor did the tribunal think that there would be a detrimental effect on the aesthetic quality or amenity of the area. However, it concluded that the nearest houses would suffer "visual intrusion" if the new house was built, and therefore ruled that the covenant did secure a practical benefit which was of substantial advantage to those owners.

Many objectors were also concerned about the disturbance that would be caused during construction works. The roads around the square were narrow and would not easily accommodate construction vehicles. The developer argued, relying on previous case law, that any short-term disturbance (which was inherent in any construction project) should be ignored.

The tribunal disagreed. It held that while the primary consideration was clearly the value of the covenant in providing protection from the effects of the ultimate use of the land (i.e. as a plot with two houses), the facts of this case were exceptional in terms of potential disturbance during the construction period. It therefore refused to modify the covenant.

Things to consider

The Law Commission has recommended that the jurisdiction of the Lands Chamber should be extended. Although probably not altering the outcome in a case such as this, the recommendations may, if implemented, go some way towards facilitating development. For a summary of the Commission's proposals see our alert: 'Reform to easements and covenants - the Law Commission recommends changes which could make development easier'.