Planning permission secured; the hidden danger of covenants

It is immensely frustrating to secure a planning permission for development only to then fight to implement it. Accordingly, developers employ lawyers to look closely at what rights and covenants affect the land they wish to develop.

Too often they look solely for anti-building covenants and fail to give enough weight to the more innocuous covenant not to do anything that may constitute a nuisance or annoyance to the seller or neighbouring owners.

The reality is that not only the act of building one or more new houses or extensions to existing houses or their subsequent existence once built can breach such a covenant.

This was the judgment of the Court of Appeal in 2009 in the case of Davies v Dennis and others. This case related to the construction of a three-storey side extension to a property that had river frontage. The court was of the view that the works to build the extension were a nuisance and once completed the extension itself constituted a nuisance, as it obscured views of the river for other homeowners.

The test the Court of Appeal set down relating to an existing small residential development was this: Whether reasonable people, having regard to the ordinary use of a house for pleasurable enjoyment, would be annoyed or aggrieved by what is being done.

Even if justifiably annoyed or aggrieved, a party needs to show it has the benefit of the covenant and therefore the ability to enforce it. In this case, it was a small residential development set up so that each owner could enforce covenants against the others. More typically, the issue of being able to enforce the covenant will be more difficult to establish – that is the subject of another article.

Where land is remote then this risk of causing annoyance is smaller, but with infill sites and sites close to established communities the risk is much greater with the ability of one or more objector potentially able to enforce the covenant.

In addition, sites closer to established communities bring a greater risk of a group action. The legal bill shared by 50 objecting occupiers is much more likely to be incurred than one being shared by five or not shared at all.

All this means caution needs to be taken whenever land intended to be developed is subject to covenants against nuisance and/or annoyance especially near existing houses. The prevalence of such covenants makes never developing land with such a covenant commercially unrealistic.

So what can be done to mitigate the risk of such a covenant? It is recommended to obtain title indemnity insurance at an early stage and understand what expenses and losses are covered and not.

Additionally, undertake a review of registered titles to clarify which landowners potentially have the benefit of the covenant. Be aware registered titles do not record a title having the benefit of and ability to enforce covenants, so potential objectors cannot readily look at their title and know. Deeper research is required.

Specialist legal advice is key; seek support on which properties that potentially could enforce the covenant in practice meet the legal criteria for enforcement and the interaction between the proposed development and the covenant, acknowledging that it is never going to be definitive.

It is also worth seeking support on whether it may be possible to apply for a modification or discharge of the covenant via the Upper Tribunal (Lands Chamber), as it may enable the risk to be mitigated by changes in the design.

Finally, where the parties with the benefit of the covenant can be identified and are few in number, consider approaching them about a release or waiver. However, this is a high-risk approach as not only will it put such people on notice of their position, but also remove any chance of relying on title indemnity insurance.

Peter Foskett is a partner in the real estate team at RWK Goodman