Workshop property: what happens when a building breaches a restrictive covenant?

Restrictive covenants can be tricky. I was recently instructed by a client company which had been approached by a property owner for retrospective consent. My client (S) is a successor in title to the local authority and, as such, obtained the benefit ?of several restrictive covenants. In particular, the property in question contains a covenant from 1989 not to alter the property without consent. The owner (O) proceeded to build a new dwelling on the property in addition to his existing home. Now in a ?position to sell the new house, he approached my client for retrospective consent for the development '“ clearly aware of the breach.

S requested my advice on the matter, and, after checking the title to the property and checking that my client was, in fact, a successor in title, I was able to advise that O had indeed breached the restrictive covenant in his title. From there, I explained, things get ?a little more complicated.

The remedy for a breach of restrictive covenant is ?usually damages. However, there are also equitable ?remedies available.

If S wants the new building to be pulled down then the breach must be capable of being remedied by an injunction, which is granted at the court's discretion. A court can refuse to grant an injunction where the party with the benefit of the covenant has delayed in seeking its enforcement. For example, in a 1998 case the Court of Appeal refused to grant an injunction, stating that, as a general rule, a party who knows it has a clearly enforceable right and ability to enforce that right, but who stands by while ?a permanent and substantial structure is unlawfully erected, ought not to be granted an injunction to have it pulled down. Remember, though, that each case rests on its own facts and the result in the 1998 case may not be the same in every situation.

Where an injunction could be granted, the court has the ability ?to award damages where the following apply: 1) the injury to ?the claimant is small; 2) the value of the injury can be calculated ?in monetary terms; 3) the injury can be compensated by ?a monetary payment; and 4) it would be oppressive to grant an injunction.

Damages for breach of a restrictive covenant ?are calculated on the basis of the sum that would be reached in negotiations between the parties, without holding out for unreasonable amounts.

In my client's situation, S must consider whether the erection of the building causes significant injury to them to warrant an injunction that the building be pulled down. It is clear that a breach of the restrictive covenant has occurred, and, therefore, at its most basic level S is entitled to compensation. Certainly the starting point must be stating to O that a breach has taken place and that damages/compensation is due but that S is willing to give retrospective consent subject to a payment as compensation. This would be the quickest and most cost effective route for S to take. ??That said, should S decide that the erection of the building causes significant injury, then serious consideration should be given to an application to the court.

This matter is ongoing but it is important to keep in mind that restrictive covenants, no matter how old, may still be enforced. Also, remember that if a client tells you of their plans for a property they are purchasing, then you must ensure that you advise them of whether or not there are any covenants that may prevent them from doing so. It is my general rule of thumb not to simply wait for a client to tell you of their plans but to inform them of any restrictions in any event.

Of course, you may say that O's legal representative could have opted for indemnity insurance, but that would depend on whether the new building had been erected and the breach had continued for over 12 months. In this case it had not.