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Discharge of restrictive covenants against development: Recovery of costs?

Why is HAE Developments v The Croft Ealing of interest to property developers?

Our earlier briefing, ‘Removing or relaxing restrictive covenants on land‘, sets out an overview of the legal and practical options for overcoming restrictive covenant-related impediments to property development.

In this article, David Manda, a Director in Walker Morris’ specialist Real Estate Litigation team, considers the recent restrictive covenants case of HAE Developments v The Croft Ealing [1].  It will be of particular interest to landowners and property developers because:

  • the UT pays short shrift to a number of arguments raised by neighbours seeking to object to the proposed property development; and
  • the case highlights the difficulties an applicant may face when it comes to recovering costs, even where an application to modify or discharge covenants has been successful.

Successful removal or relaxation of restrictive covenants…

In this case the Upper Tribunal (Lands Chamber) (the UT) agreed with the applicant property developer that restrictive covenants preventing the development of multiple dwellings on land should be discharged.  In accordance with section 84 of the Law of Property Act 1925: (1) the restrictive covenants were found to be obsolete; (2) their discharge would not injure the objectors; and (3) they were impeding a reasonable development of the land.

The property developer had applied to remove restrictive covenants as it hoped to proceed with the construction of a 3-storey building containing a number of flats.

The UT decided that covenants restricting development on the site to that of a single dwelling were obsolete.  The premises which they were intended to protect had, in the period since the restrictive covenants had been imposed, itself been converted from a single dwelling into several flats and maisonettes.

Discharge of the restrictive covenants would not injure the objectors (adjoining neighbours) because the proposed property development would be in keeping with the surrounding land and housing.

The neighbours had also sought to object to the development on the grounds of loss of light, increase in noise and cooking smells, etc.  The UT stated that the restrictive covenants did not protect against any such disadvantage.  (In any event, the objectors’ property already suffered from noise, light and cooking smell issues from existing flat/maisonette occupiers.  The situation would not be made any worse by the proposed property development.)

The UT also reached the clear conclusion that the restrictive covenants prevented a reasonable use of the land for housing and did not secure any practical benefit of the objectors.

… does not necessarily result in recovery of costs

The judgment was therefore a resounding success for the property developer.  But the developer’s claim for the recovery of its costs was dismissed. Why?

The UT confirmed that it is not practice to award costs against unsuccessful objectors to an application for the removal or relaxation of restrictive covenants under section 84 unless they acted unreasonably.

In this case, although the objectors’ arguments were in part legally unfounded, and although the objectors had refused to accept settlement offers, their position was not so extreme as to be regarded as unreasonable.

HAE Developments v The Croft Ealing therefore confirms that the threshold for unreasonableness, in this context, is high.

How we can help landowners and property developers with removal/relaxation of restrictive covenants

Walker Morris’ specialist Real Estate Litigators are experienced and expert when it comes to the enforcement, modification or discharge of restrictive covenants affecting land – whether that be in relation to freehold or leasehold land; and whether it be in relation to commercial negotiations or legal recourse via an UT application.

If you are a landowner or property developer and would like any advice or assistance in connection with the enforcement or relaxation/removal of restrictive covenants, please contact David Manda or any member of our Real Estate Litigation team.

[1] HAE Developments Ltd v The Croft Ealing Ltd and Ors [2022] UKUT 120 (LC)