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Lawbite: No modification of restrictive covenant

  • United Kingdom
  • Real estate litigation

31-01-2019

The Alexander Devine Children's Cancer Trust v Millgate Developments Ltd and others [2018] EWCA Civ 2679

The Court of Appeal has refused to allow a property developer to modify a set of restrictive covenants, reversing the decision of the Upper Tribunal where it had been decided that the covenants could be overridden because they were against the public interest and prevented the continued existence of social housing. 

In July 2013 a developer (Millgate) applied for planning permission to build 23 affordable housing units on land known as Exchange House. Part of Exchange House was burdened by restrictive covenants benefitting land that had been donated to the trustees of the Alexander Devine Children's Cancer Trust (Trust) for the purpose of building a hospice to accommodate terminally ill children.

Millgate obtained planning permission for the development and building on the site was commenced. Mr Smith, who had donated the land to the Trust, objected to the development as it would impact upon the proposed hospice which was to have private gardens for the children.

In July 2015 Millgate applied to the Upper Tribunal seeking modification of the restrictive covenants pursuant to section 84 of the Law of Property Act 1925, to allow occupation of the units.

Millgate also agreed with the local council that it would make alternative provision of affordable housing in the event that the restrictive covenants remained in place and enforceable.

In November 2016 Millgate successfully applied to the Upper Tribunal for the restrictive covenants to be modified so that the units could be occupied, with compensation being awarded to the Trust.

The trustees were successful on all four grounds put forward on appeal, however, and the Court ordered that Millgate’s application to modify the covenants be refused. It held that in this instance public policy interests did not justify the release of restrictive covenants.  We understand that Millgate is seeking permission to appeal to the Supreme Court

Key points

  • This case should act as a warning to developers of the risks involved in carrying out development in breach of a restrictive covenant, even if the beneficiary of the covenant did not object to the planning application
  • The grant of planning permission does not generally have any impact upon private property rights and development may depend upon the developer being able to negotiate to buy out such rights
  • If there is a good case for modification of restrictive covenants pursuant to section 84 then developers would be well advised to make the application prior to development taking place
  • We understand that Millgate is currently seeking permission to appeal to the Supreme Court