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Archive for the ‘Covenants’ Category

What a bind!

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When a deal is done in relation to property there will be a contract. What distinguishes property transactions from simple contracts is the ability of one party to bind future owners of the property. Malcolm Poynter, a commercial property specialist with law firm, Charles Lucas & Marshall discusses an example of this, restrictive covenants.

Malcolm Poynter

Malcolm Poynter – Partner

Properly drafted, a covenant on a property will bind each owner of that property. There are many examples of restrictive covenants, such as not to sell alcohol, not keep pigs and not to use the property for business.

The covenant must be restrictive ie say what you cannot do. If it is positive, such as to contribute to the maintenance of something or to keep something in repair, it is not directly enforceable against successors of the freehold. It is for this reason that flats tend to be dealt with by lease because each tenant is bound by the terms of the original lease in which the covenants will be set out.

Covenants that restrict building can obviously cause problems if you are proposing to develop your land. The wording of these covenants needs to be looked at very closely to decide what may not be done. For example, there was a case where a developer wanted to build a roadway which had to be adopted by the Highway Authority as a public road. A covenant not to erect anything on the land did not prevent the roadway being built but did prevent lamp posts being erected which meant the road could not be adopted and was therefore, in effect, prevented.

Some covenants allow building if ‘the Transferor’ approves the plans. Does this mean the original Transferor or the current owner of the land which has the benefit of the covenant? Difficulties can also arise if the person to give consent cannot be found or has died.

When faced with covenants restricting development sometimes you can establish that the covenants are invalid and may therefore be ignored.

Sometimes there are grounds for applying for the covenant to be modified or discharged by the Upper Tribunal (Lands Chamber). There are a variety of grounds upon which an application may be made.

Compensation may be payable but how is it calculated? The loss of the covenant may have a small effect on the value of the property with the benefit but, on the other hand, the person with the benefit may have been able to extract a significant payment from the developer for the covenant’s release. There is no rigid formula how compensation is to be calculated and, as the Courts love to say, each case depends on its own facts.

Further details please contact Malcolm Poynter on 01635 521212 or malcolm.poynter@clmlaw.co.uk

Written by Malcolm Poynter

April 10th, 2015 at 10:38 am