Build In Haste, Repent At Leisure – Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd – Real Estate and Construction
UK: Build in haste, repent at ease – Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd
08 June 2021
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For the first time, the Supreme Court has considered the power of the Upper Tribunal (Lands Chamber) to amend or lift restrictive covenants. His recent judgment in the Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd case confirms that a developer should not rely on its own willful violation of a restrictive treaty to create the necessary public interest ground for modification.
Some of the land purchased by Housing Solutions Ltd in September 2015 was charged with restrictive covenants that prevented the land from being used for anything other than parking spaces and provided that no structure would be built on the ground.
The previous owner, Millgate Developments Ltd, was fully aware of the restrictive covenants but made no request to the Upper Tribunal to amend or rescind the covenants before applying for planning permission and starting to build houses on the country. By the time Millgate finally filed an application for amendment to the covenants with the Upper Tribunal in July 2015 (in accordance with Section 84(1) of the Property Act 1925), Millgate had already built 13 houses on the taxed land .
The Upper Tribunal granted Millgate’s request. However, this decision was overturned by the Court of Appeal of the Trust. Following the purchase of the land in September 2015, Housing Solutions Ltd appealed to the Supreme Court.
The Supreme Court decision
While there were four grounds of appeal to the Supreme Court, the main issue was the extent to which Millgate’s conduct should be taken into account when deciding whether or not to amend the covenant on the grounds that it “is contrary to the common interest”. Millgate could only pass the public interest test under Article 84(1) because it had already obtained planning permission and built 13 council houses on the land before submitting the application to the Upper Tribunal.
In a judgment that could affect all developers, the Supreme Court ruled that Millgate’s conduct had fundamentally changed its position regarding the public interest and that it would be wrong to allow a developer to amend a covenant. on the basis of a state of affairs that the developer himself had caused by his own willful and cynical infringement.
The Supreme Court also emphasized that Millgate could have met its planning obligation in relation to the provision of social housing by placing the social rental housing in an alternative location or by paying a lump sum payment to the local authority. In either case, the public benefit would still have been provided.
Only the decision on this ground of appeal was considered sufficient for the rejection of the appeal.
Lessons to learn
The obvious lesson to be learned from this judgment is that developers should seek legal advice regarding restrictive covenants taxing the land they intend to develop, arguably before applying for a building permit and certainly before actually starting construction.
The Supreme Court also sends a clear message that a developer will not be able to create the conditions necessary to support covenant amendment and that it will not help to present the Upper Tribunal with a fait accompli.
Where land is burdened with restrictive covenants, the options for a developer to consider are:
Looking for indemnity insurance to protect against claims filed under the covenants; Negotiate an exemption from the party for the benefit of the covenants; Submit an application to the Upper Tribunal to amend or waive the covenants.
By advising on the best option at an early stage, you are in a stronger position and you save time and costs, especially if procedures can then be avoided.
The contents of this article are intended to provide general guidance on the subject. Specialist advice should be sought regarding your specific circumstances.
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