House builders are often accused of abusing their dominant bargaining position when selling new homes, a typical example being the imposition of user covenants. Cue the unsuspecting man who uses his savings to buy a dream home, only to discover that he is not permitted to keep the life blood of his trade at the property, his commercial van. Unreasonable? At first glance perhaps. However, this is not necessarily the case.
Developers seek to impose restrictive user covenants for two main purposes:
1. To protect the reputation, value and appearance of their branded development (both for the initial sales period and a number of years thereafter). 2. To help regulate neighbourly relations
In the former case, restrictions can, and in some cases arguably should, be dealt with by way of conditions in the plot sale contract. However in practice, the terms of the sale contract are quickly lost in time once completion has taken place and they are unlikely to bind successive owners should the property be sold on. There is therefore some justification for adding these restrictions to the purchase transfer or lease, albeit to apply for an initial period of time only.
In the latter case, reasonableness can very much depend upon the size and nature of the development. A detached home within its own grounds warrants little intervention and indiscriminate use of restrictions may well be frowned upon. However, we live in a densely populated country and there is pressure for efficient use of available development space. User restrictions can therefore be useful to set expectations and promote positive behaviours between neighbours who live in close proximity to one another or share apartment buildings. Restrictions which (for example) require single household use, restrict construction of oversized outbuildings or prohibit the parking of commercial vans become more reasonable. House builders are often called upon to help settle disputes between new owners and it is easy to see why they prefer to include user restrictions, which are only likely to be called up when genuine problems arise.
In the recent case of Victory Place Management Company Ltd v Kuehn & Anor the High Court upheld what it considered to be reasonable application of a ‘pet license’ restriction in order to enforce a strict no pets policy at a development of leasehold apartments. The Court granted an injunction requiring removal of the flat owner’s dog.
A balance is therefore required, which requires action from both parties. Developers should regularly review their user covenants to ensure they are appropriate for the development in hand. Buyers should carefully check all covenants before legally committing themselves to their purchase. They may have limited opportunity to challenge such restrictions but in some instances, house builders are willing to grant one-off consents. If not, the buyer must then make an informed decision about whether or not they can live with the risk that a user restriction may be enforced against them.