• Stanley Beckett

The Dangers Of Breaching Restrictive Covenants Affecting Commercial Development

Updated: Feb 8, 2021

Restrictive covenants play an important role in the value and use of a property, yet it is the one factor of a property purchase agreement that is often overlooked until the end of the due diligence period. Some recent cases involving restrictive covenants affecting commercial development including Tillman v Egon Zehnder [2019] UKSC 32, Martin Retail Group Ltd v, Crawley BC and, Tesco v. High Peak have caused the UK Supreme Court to re-examine restrictive covenants first time in 100 years.

Why this lack of consideration takes place is unclear, especially with the significant importance that is placed on the use of commercial properties here in the UK. If you are about to purchase commercial land, shouldn’t knowing what, if any, restrictions or obligations are tied to the land be your number one concern?

Understanding Restrictive Covenants

Knowing the specific land use restrictions and obligations and what could happen if you don’t comply with those restrictions and obligations is something every commercial property buyer in the UK should be aware of. To make understanding this concept easier, we are going to explain what a restrictive covenant is as well as the dangers of breaching restrictive covenants affecting commercial development.

What is a restrictive covenant?

A restrictive covenant is defined as “is any type of agreement that requires the buyer to either take or abstain from a specific action. In real estate transactions, restrictive covenants are binding legal obligations written into the deed of a property by the seller.” Restrictive covenants are typically placed in the property’s title deeds and bind only the land, not the seller or purchaser of the land.

How long does the restrictive covenant last?

A restrictive covenant ‘runs with the land’ which means that it is permanently attached to the land, even if the land is sold to another purchaser many years later. Restrictive covenants are enforceable by one landowner against another with two important stipulations. First, they must be negative in their effect and secondly, the restrictive covenant should allow “a form of private planning control.”

Case Study

The Court of Appeal has reversed a decision of the Upper Tribunal (Lands Chamber) (Martin Rodger QC and Paul Francis FRICS) ([2016] UKUT 0515 (LC)) in the case of The Alexander Devine Children’s Cancer Trust v Millgate Property Developments Ltd. The appeal was awarded to the Alexander Devine Children’s Cancer Trust by the Upper Tribunal Lands Chamber on 28 November 2018. The Court of Appeal held that: ‘(1) The Tribunal had fallen into error in applying Lord Sumption’s guidance in Lawrence v. Fen Tigers [2014] AC 822, a case where an injunction was claimed to restrain noise nuisance, in the context of an application under Section 84.’ This case became a landmark study in the dangers of breaching restrictive covenants affecting land and serves as a strong warning to property developers who breach a restrictive covenant even if they did obtain previous permission from the Upper Tribunal.

Contact Serenity Law

To learn more about the dangers of breaching restrictive covenants affecting land, contact Serenity Law today and speak with a member of our real estate team who can answer any questions you might have about landlord/tenant rights.

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