Building schemes and modifying restrictive covenants

Why is Livett v Henning of interest to landowners/developers seeking to modify or discharge restrictive covenants?

Restrictive covenants can limit the use of land; prohibit particular businesses, undesirable activities or potential nuisances; or restrict the height, type and/or density of buildings that can be erected.  In some cases, restrictive covenants may even prevent development altogether.  Often restrictions will be historic, yet their existence can have a significant impact upon the development potential, and therefore on the marketability and value, of land.

Any party wishing to vary or relax a restrictive covenant has a number of options [2]:

• Negotiate with the beneficiaries of the covenant for an express release or variation
• Proceed with development in breach (probably having taken out an indemnity insurance policy against the risk of a beneficiary seeking to enforce the restrictive covenant[s])
• Apply to the Upper Tribunal (Lands Chamber) (UT) for the modification or discharge of a restrictive covenant
• Obtain a court declaration as to the nature, extent or enforceability (or not) of the restrictive covenant.

Commercial negotiations for release or variation of covenants is often preferable.  A common alternative where, for whatever reason, that’s not possible, is an application to the UT for modification or removal of covenants.

However, certain classes of person are entitled to oppose applications to modify or discharge restrictive covenants affecting land:  those with the benefit of the restriction, either as original covenantee, or by virtue of annexation, assignment, or under a building scheme.

The recent case of Livett v Hennings represents a cautionary tale for anyone attempting to object to the modification or discharge of restrictive covenants by virtue of a building scheme.  It may provide helpful authority for landowners/developers in any application where there’s uncertainty over an objector’s legal standing on the basis of an alleged building scheme.  In such cases, Livett v Hennings may help to pave the way for proposed development.

‘Building schemes’: What legal and practical advice arises when it comes to modifying/discharging restrictive covenants?

To object to an application to modify or discharge restrictive covenants on the basis that they have the benefit of the covenant by virtue of a building scheme, an objector must first prove that the scheme in question meets all of the following five characteristics:

1. The scheme applies to a defined area;
2. Owners of properties within that area were purchased from a common owner;
3. Each of the properties is burdened by covenants which were intended to be mutually enforceable as between the several owners;
4. The limits of the defined area are known to each of the purchasers; and
5. The common owner is bound by the scheme, which crystallises on the occasion of the first sale of a plot within the defined area, with the consequence that the common owner is not entitled to dispose of plots within the area otherwise than on the terms of the scheme.

A building scheme is therefore a deliberate, and fairly rigid, scheme.  It has to have been set up intentionally and clearly, to bind future purchasers of land within the defined area, potentially forever.  Proof of those characteristics will be required before a person is able to participate in/object to an application to modify or discharge restrictive covenants.

What happened in the particular case?

In Livett v Hennings, the proposed objectors failed to prove a number of essential points.  Although there had originally been one entrepreneur who had overseen the development of a garden suburb for London commuters, and who had auctioned and sold plots as the overall development progressed, there was no evidence of a defined area to which a building scheme would apply.  Neither (and related) was there evidence that covenants were mutually enforceable by all owners in the suburb/estate/area/scheme (whatever that suburb/estate/area/scheme might be).

It was not enough that the potential objectors were able to adduce evidence suggesting an idealistic intention on the part of the original developer that all properties within the general, but undefined, area would benefit from restrictive covenants.  Neither was it enough that the titles to a number of surrounding properties within the suburb in fact contained restrictive covenants all to a similar effect.

So, regardless of the merits or otherwise of the objection itself, the UT found, as a preliminary issue, that the potential objectors had no legal standing and were not entitled to object to the landowner/developer’s application.

Building schemes and applications to modify/discharge restrictive covenants: How Walker Morris can help

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; whether it be in relation to commercial negotiations or legal recourse via an UT application; and whether it be in connection with an alleged building scheme.

If you are a landowner or property developer and would like any advice or assistance in relation to building schemes, or 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] [2022] UKUT 325 (LC)

[2] See Walker Morris’ previous briefings for more information and advice on relaxing/removing restrictive covenants against development