Where a covenant prohibits action without the consent of the vendor, two questions arise:
- Is the required consent that of the original vendor, or the current owners of the benefited land?
- Where the consent required is that of the original vendor, if that person has died, or (where the vendor was a corporate entity) has been dissolved or wound-up, does the covenant become absolute or does it cease to apply?
Restrictive covenants are often imposed in a conveyance of part of a larger piece of land. Covenants which prohibit certain action, such as a change of use, or alterations to a building, may be qualified by reference to the consent of the vendor being obtained. Such clauses can often give rise to difficulties of interpretation. Whose consent is needed? Is it that of the original vendor? Or (where different) is it that of the current owner of the land with the benefit of the covenant?
In the October 2010 edition of Property update, we considered the case of Re Hutchins Cottage, on the application of Woodhouse. We commented at the time that each case will turn on its own facts. Churchill v Temple provides an example of the court reaching a different conclusion.
In 1967, Mr & Mrs Strong sold part of their garden as a building plot. The conveyance contained the following covenants:
- Not to erect any building other than a single private dwellinghouse
- No dwellinghouse to be erected except in accordance with plans submitted to and approved in writing by the Vendors or their surveyor but with such approval not to be unreasonably withheld
- Not to make any structural alteration or addition to a permitted dwellinghouse without the written consent of the Vendors or their surveyor.
The Strongs sold the retained land about six months later. By 2002, they had both passed away. As anticipated a house had been built on the building plot. The claimant, who was the current owner of the plot, wanted to demolish the original house and build another. The defendant was the current owner of the retained land.
The court began by noting that the covenants did not make reference to the successors in title to the vendors. However, the drafting in the rest of the conveyance was "haphazard", and the court held that for this reason "Vendors" was an ambiguous term when used in the covenants.
The court held that there were possible aesthetic, financial and altruistic reasons why the original vendors may have wanted to have a power of veto, even after they had sold the retained land. When they came to sell the retained land they may have wished to be in a position to promise the purchaser that they would exercise their powers under the covenant if requested to do so, and hence extract a higher price for the retained land. Of course, a covenant which required consent to be obtained from the vendors' successors in title may have served the purpose even better, but might not have been acceptable to the purchasers of the building plot.
The court noted it was possible that the original purchasers of the building plot might have been confident, through their dealings with the Strongs, that they would not act unreasonably. It would be quite another thing for the purchasers to have agreed to such restrictions in favour of successors in title. This was especially true in relation to the third covenant, which would have prevented them from making a structural alteration or addition of any kind without either obtaining the permission of subsequent owners of whom they had no knowledge, or embarking on an application to the Lands Tribunal to discharge or modify the covenant.
On that basis, interpreting the covenant as vesting the power to withhold consent in the original vendors appeared to represent a reasonable balance between the interests of both parties. The original vendors would have wanted to retain control to protect the value of their retained land, but the purchasers would not want to have an indefinite restriction.
For those reasons, the court held that "the Vendors" in the covenants meant the original vendors only, and not their successors in title.
The next question was to consider the effect of the Strongs' death. Read literally, the covenants would constitute an absolute bar, since no consent could be obtained. However, the court thought that this was not the right interpretation. Otherwise, the Strongs' death would put subsequent owners in the same position as they would have been in if the term "Vendors" had included successors. This was because their consent would be required to an alteration in any event if the prohibition was absolute. In fact, as regards the second covenant, a purchaser of the retained land would be in a better position, because as originally drafted consent could not be unreasonably withheld under that covenant.
The court thought that the covenants were designed to operate in the short-term, to prevent an inappropriate house being built, or, once built, inappropriately altered to get round some earlier objection. They were designed for a situation when the Strongs were around to object to an alteration to what they had permitted under the second covenant.
For all of those reasons, the court reached the conclusion that the covenants were discharged by the death of the Strongs.
Things to consider
This is the opposite result from that in Re Hutchins Cottage, on the application of Woodhouse, where the court found that the death of the original vendor meant the covenant had become absolute. Hutchins Cottage concerned a use covenant (trade or business use prohibited without the consent of the vendor). The issues which concerned the court in Churchill v Temple - that alterations to the property could be permanently prevented - therefore did not arise.
The court did point out the fact that the term "Vendors" meant only the Strongs could give rise to difficulties before the Strongs' death. Once the Strongs had parted with the retained land they might become untraceable, or simply unwilling, after so many years, to consider a request for approval under the covenant. Such a result could be avoided by a term which provides for building to be permitted provided that plans have been submitted to the vendor, who has not then refused consent.