Enforcing restrictive covenants in building schemes

Building schemes are a relatively rare beast but several 2016 decisions handed down from the Court of Appeal, the High Court and the Upper Tribunal (Lands Chamber) have highlighted the important role they can play, and the legal, evidential and tactical issues which practitioners should consider in restrictive covenant cases.

In Birdlip Limited v Hunter [2016] EWCA Civ 603, the Court of Appeal emphasised the key indicia advisers should look for to recognise if indeed such a scheme exists and gave useful guidance as to the approach to be taken to conveyancing documents.

The starting point is that any owner wishing to enforce a restrictive covenant against his neighbour must show that his land enjoys the benefit of that covenant. Where a common vendor has sold off individual plots on an estate, taking covenants from each purchaser for the benefit of the vendor’s unsold land, the covenants given by later purchasers will not benefit earlier purchasers (or their successors), unless a building scheme exists. If so, the scheme will render the restrictive covenants mutually enforceable by and against the owners of every plot on an estate, whatever the order of their sale and purchase.

Building scheme?

Elliston v Reacher [1908] 2 Ch 374 set out the criteria for establishing a building scheme: (1) the parties derive title from a common vendor; (2) prior to any sales off, the vendor had laid out a defined estate in lots, subject to restrictions to be imposed on each lot; (3) the restrictions were intended by the vendor to be, and were, for the benefit of each lot; and (4) each purchaser understood that the covenants would enure for the benefit of each lot. In Elliston itself, the relevant conveyances all obliged the purchasers from the common vendor to comply with the covenants in an 1861 indenture, which showed the extent of the estate. As the estate and the mutual covenants could be identified from that document and its plan, a building scheme was held to exist.

In Birdlip, Lewison LJ observed that in almost all cases where a building scheme was found to exist, the affected area was ascertainable from the terms of the conveyance or other transactional documents. The parties’ conveyances in Birdlip, from 1909 and 1910, made no verbal reference to an estate; their plans only showed the properties conveyed. While the claimants’ solicitors had obtained a 1908 conveyance which did include an estate plan, and while the purchasers in 1909 and 1910 may have seen that plan, it could not be assumed that purchasers under later conveyances, up to 1914, were aware of the extent of the estate. As mutual enforceability among all plots is required, the Court of Appeal held no building scheme was established.

Checking title

Advisers who are unsure as to whether a building scheme applies should look carefully at the potential claimant and defendant’s titles and other neighbouring titles. If the essential criteria are not clearly and quickly satisfied, a scheme is unlikely to exist. As Lewison LJ helpfully stated, a building scheme should be ‘readily ascertainable without having to undertake laborious research in dusty archives for ephemera more than a century old.’

San Juan v Allen [2016] EWHC 1502 (Ch), provides an excellent practical example of this approach. A building scheme was readily ascertainable and Master Clark granted the claimants summary judgment for a declaration that the defendants’ proposed development breached covenants in that scheme. Each conveyance identified the estate by a plan, which showed the 36 component plots, and also made clear that the covenants – which restricted each plot to a dwelling house occupied by one family – would be mutually enforceable. The Master rejected the defendants’ argument that the declaration was sought on hypothetical facts, as their intention to build four houses on their plot had not been established.

We also draw attention to two recent Upper Tribunal decisions, Re Hussain’s Application [2016] UKUT 297 (LC) and Re Sunita’s Application [2016] UKUT 368 (LC). These provide contrasting examples of the grant and refusal of applications for modification under section 84(1) in cases where a building scheme exists.Anyone planning development or seeking to oppose it should always check whether any restrictive covenants may be in play. Regardless of whether there is a building scheme, those seeking to enforce restrictive covenants should generally not delay. Those who will potentially be in breach must, of course, consider their approach at the earliest opportunity.

Janet Bignell QC (pictured) and Jamie Sutherland are barristers practising from Falcon Chambers, London

www.falcon-chambers.com

@FalconChambers1