Restrictive covenants: who benefits?

Land Registry titles for agricultural land will often have restrictive covenants that seek to prevent a change of the land's use from anything other than for farming or in some other way limit its development.

While the text of these restrictive covenants will be noted in full on the Land Registry title concerned (ie the burdened land), the land that has the benefit, and whose owner may be able to enforce them, will not always be so easily identifiable. This is principally because the benefit of a restrictive covenant is not a legal but an equitable interest so it is not registrable by the Land Registry.

To identify the benefitting land, it will often be necessary to review the conveyance that initially imposed the restrictions. Ideally, you would like to see within that conveyance the restrictive covenants expressed to be for the benefit of land that is identified by reference to an accompanying plan.

That, however, tends to be a rarity, certainly with older conveyances. More often than not, the benefitting land is given a brief written description such as "… the land owned by the vendor at the date hereof …" or "… the remainder of the Estate".

Being unable to clearly identify the benefitting land presents an obvious problem to a developer. They can neither identify the owner of said land to negotiate a release of the covenant, nor can they proceed with the development free from the risk of enforcement of the restriction in the future from some unknown landowner.

In this situation, there are, in essence, three ways to approach the problem:

• use section 84 of the Law of Property Act 1925 to have the restrictive covenants modified or removed
• persuade the Land Registry that the covenants are personal (ie they do not run with the land) or are in some other way unenforceable etc and should be removed from the title
• proceed with the development but obtain indemnity insurance to protect against the risk of enforcement.

We were recently instructed by a developer who had acquired land that was subject to several restrictive covenants prohibiting its development and that were expressed to be for the benefit of the "… land retained by the seller …". These restrictions were set out within a 1950s conveyance with no plan that identified the extent of the land that was then retained by the vendor.

Our client therefore asked us to identify what land, if any, continued to have the benefit of these restrictions, with the intention to then either do a deal with the covenantee(s), or to persuade the Land Registry that they were no longer enforceable if they could not be identified. It was hoped that an application under section 84 and/or indemnity insurance would be unnecessary.

Having undertaken some preliminary research of the adjoining Land Registry titles, it became apparent that our client's land was the first of several lots that were sold off by the same vendor at auction in the 1950s. The other lots were sold with the same, or similar, restrictive covenants within their respective Conveyances.

What was not immediately clear, however, was whether the intention behind these restrictive covenants was to benefit all of the land being sold (which would mean our client could face enforcement from all owners of the lots that were sold after theirs), or the restrictive covenants were personal (ie they only persisted for so long as the vendor continued to retain land within the vicinity). Our client would obviously have preferred it to be the latter.

Of particular help to our client in establishing that the benefit of the covenants were personal and not annexed to land was the case of Norwich City College of Further and Higher Education v McQuillin & Anor [2009] 2 P&CR 22 where a similar form of words were considered by the court:

"For the benefit of the Trafford Estate …or the part or parts thereof for the time being remaining unsold and so as to bind … the property hereby conveyed … (the purchaser) …will… observe and perform the Stipulations and Restrictions (in the schedule)."

In that case, the Judge was satisfied that the estate was sold off over a period of time and that the covenants only benefitted the vendor while they retained land unsold and, in effect, expired with the last sale. This case was subsequently mentioned by the Court of Appeal in Rees v Peters [2011] 2 P&CR 18 where it was adopted.

This approach to the interpretation of the restriction also helps to undermine any potential "building scheme" argument (ie a scheme of restrictive covenants mutually enforceable by landowners within a development), as if the vendor had intended the covenant to last until he had sold the last plot he was not creating a "local law" which was meant to continue thereafter. The various 1950s conveyances would have had to have been quite clear that was the vendor's intention and they were not.

Our client's argument that these covenants were personal was further supported by the absence of any registered D(ii) Land Charge that would have been required to protect the restriction at the time of the conveyance.

Arguably, at the point of first registration of our client's land, the then owners would have taken the land free of the restrictions in any event. It was not, however, necessary to make this argument to the Land Registry. All that was required was to establish that the vendor no longer owned any land in the area.

As the land was now all registered it was a simple enough fact to establish, and our client has now been able to push ahead with their development, safe in the knowledge that they will not face enforcement of the restrictions in the future.