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Lawbite: Refusing consent under a restrictive covenant on aesthetic grounds?

  • United Kingdom
  • Litigation and dispute management
  • Real estate
  • Real estate litigation - LawBite

17-07-2020

89 Holland Park Management LTD v Sophie Louise Hicks [2020] EWCA Civ 758

The Court of Appeal has unanimously found that a restrictive covenant benefitted both the freehold owner and leaseholders of a property and allowed them to take aesthetic grounds into account when considering an application for consent submitted by a neighbouring land owner. 

89 Holland Park is the freehold owner of a building at 89 Holland Park, London (the “Building”). Restrictive covenants were created for the benefit of the Building in 1968 when a neighbouring plot was transferred to a third party. The restrictive covenants provided that (1) no planning application could be made relating to the neighbouring plot without the Building owner’s approval (approval not to be unreasonably withheld) and (2) no works of construction could commence until the specifications and drawings had been approved by the Building owner.

In 2011, the neighbouring plot was acquired by the Respondent, Ms Hicks, who purchased with a view to redevelopment. By that time the Building had been divided into flats held by 89 Holland Park’s shareholders on long leases.

The Respondent submitted applications for consent in order to pursue her planned development, but these were refused by both 89 Holland Park and the leaseholders. The objections were based upon concern over a number of factors; the aesthetics, disruption caused by construction, the risk of damage to trees, and concern over subsidence. The Respondent took the matter to court.

The High Court held that the covenant was enforceable by both 89 Holland Park and the leaseholders, as s78 of the Law of Property Act 1925 deemed the covenant to have been made with the covenantee, its successors in title and persons deriving title under it. This allowed the leaseholders to enforce the requirement to seek the freeholder’s approval.  However, the High Court decided that once approval was sought the freeholder was only entitled to consider its own interest (not the leaseholders) when considering whether to grant consent as the covenant was only in place for the benefit of the freeholder.

As 89 Holland Park’s interest in the Building as freeholder was effectively limited to the common parts/ external structure of the building, and as that element of the proposed development had no impact on the value of the reversion, the High Court decided that it could not object on aesthetic or environmental grounds. 89 Holland Park also failed to convince the court that the objection based upon structural concerns, was sufficient to refuse consent.

On appeal, this decision was in part overturned. The Court of Appeal interpreted the covenants as benefiting the Building rather than a specific property interest in it.  This, and the effect of s78 of the Law of Property Act 1925, led the court to the “inescapable conclusion” that the decision maker considering the application (in this case 89 Holland Park) could take both its own and the leaseholders’ interests into consideration when deciding whether to grant consent.

The Court of Appeal also held that it was appropriate for environmental and aesthetic grounds to be taken into account when considering the application for consent. In consequence, the case has been remitted to the High Court to decide whether those grounds were reasonable in these circumstances.

However, the court refused to overturn the High Court’s conclusion that concern over the likely structural impact was an insufficient ground to refuse consent in this case.

Key points

  • the case demonstrates that the position of others who benefit from a covenant can in some circumstances legitimately be taken into account when considering applications for consent. This might prove to be an extra hurdle for development plans in the future
  • a helpful reminder also that a decision maker can, in some circumstances, take aesthetics into account when considering applications for consent to works
  • although it is still unclear how a decision to refuse consent based on aesthetics should be evaluated, the Court of Appeal expressed the view that those aesthetic considerations do not need to be tied to a detrimental effect upon the value of the land benefitting from the covenant.  However, it would not be enough, the court thought however, to simply refuse consent because the proposed works were not in the objectors’ taste