At the end of last year the judgment in Fosse Urban Projects Ltd v Whyte & Ors [2023] UKUT 286 (LC)  served as a renewed warning to developers that you develop land at your peril if you fail to deal with any restrictive covenants first. 

The case underlines the fundamental point that whilst the Tribunal may have jurisdiction to modify or discharge a covenant, it always maintains a discretion and conduct will be a very relevant consideration in the exercise (or not) of that discretion. Making an application retrospectively puts a developer at serious risk of falling foul of the discretion and potentially facing, at worst, a demolition order.

Background

The developer, Fosse Urban Projects Limited, had obtained a planning permission to build a house on land subject to a covenant which restricted its use to “garden land” only.

The developer made an application to the Upper Tribunal to discharge the covenant on grounds (a) obsolescence, (aa) reasonable user, and (c) no harm. The application in October 2022 was fairly typical save that by the time of the hearing in September 2023 it had become entirely retrospective. This being because the developer had proceeded to build out before the application had been determined. 

The adjacent landowners (and objectors) contested the application on the basis of (variously) loss of an uninterrupted view and loss of privacy. 

The Warning

Whilst the developer succeeded in establishing that the Upper Tribunal had jurisdiction to discharge the covenant on grounds (a) and (aa), the Upper Tribunal then proceeded to consider whether or not it should exercise its discretion to do so. 

The Tribunal decided not to due (in the main) to the developer’s conduct as:

1. The developer had (the Tribunal inferred) known of the covenant and its enforceability but had taken a cynical gamble that the neighbours would not seek to resist the application after building work began; and
2. Whilst represented by counsel at the hearing, the developer had failed to attend to provide evidence explaining its actions, from which only adverse inferences could be drawn.

The ‘build first and apply later’ approach clearly weighed heavily in the decision. 

This leaves the developer in breach of the covenant. Whilst the Tribunal’s jurisdiction does not extend to making orders for demolition, that being a power that remains with the Court, it leaves this remedy potentially open for the objectors should they choose to pursue it. 

For practitioners this case echoes in many regards the recent Alexander Devine Children’s Trust v Housing Solutions Ltd [2020] UKSC 45 case in which the Supreme Court took a firm line on cynical breaches of restrictive covenants. 

Ultimately, the lesson remains to always put your horse before your cart. This application would have likely succeeded but for the conduct of the developer- a clear warning to all developers thinking of short cutting this process…