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Property Developer Pays for Trampling on Neighbouring Charity’s Rights

Private property rights matter and those who trample on them usually pay a heavy price. That was certainly so in one case in which a high-handed and opportunistic property developer constructed affordable housing in knowing breach of restrictive covenants that protected the rights of a charity that owned adjoining land.

ConstructionThe developer built nine two-storey houses and four bungalows after obtaining planning consent for the project. The 13 affordable units were, in planning terms, a quid pro quo that enabled the developer to engage in a much bigger and more valuable housing project on other land in the area.

Before the units were built, the developer was well aware that the site was subject to restrictive covenants that forbade the building of any structures upon it and confined its use to that of an open space for vehicle parking. The covenants, contained in a 1972 conveyance, benefited a charity which planned to build a hospice for sick children on its neighbouring land.

However, it was only after the units were complete that the developer applied to the Upper Tribunal (UT) under Section 84 of the Law of Property Act 1925 to set aside or modify the covenants. In its decision, the UT was critical of the developer’s conduct, but modified the covenants so that the units would not have to be demolished.

Some of the new homes – which had since been sold to a social housing provider – were already tenanted and the impact of demolition on residents weighed heavily with the UT. The developer was ordered to pay the charity £150,000 in compensation, that sum representing the cost of remedial planting and landscaping required to screen the garden of the hospice from being overlooked.

In allowing the charity’s appeal against the UT’s ruling, the Court of Appeal stressed the public interest in honouring contracts and ensuring that private property rights are upheld and protected. The developer had, with its eyes open and completely at its own risk, acted in an unlawful and precipitate manner by building in breach of the restrictive covenants. It was therefore appropriate that the developer should bear the risk that it may have wasted its resources in building the units.

The Court’s ruling meant that the covenants remained in force and that, in order to save the units from demolition, the developer would have to endeavour to negotiate a release from the charity. The developer had previously given an indemnity to the social housing provider that currently owned the site against any losses that might arise if the attempt to set aside or modify the covenants failed.