Restrictive Covenants and ‘not to unreasonably withhold consent’.

Property Solicitor, Property Lawyer, Housing Lawyer, Possession Lawyer, Commercial Lawyer Kensington

Subterranean or so-called super basements are ever popular in London. Restrictive covenants continue to provide significant concern, difficulty and delay for developers. In the recent case of Hicks -v- 89 Holland Park (Management) Ltd [2019] EWHC 1301 (Ch) plscs 132 the court was asked to consider the enforceability and extent of two restrictive covenants preventing specific activities in respect of development.

89 Holland Park concerned proposals for development for a long thin strip of land adjacent to a large Victorian Villa. In 1965 the then owner of both plots sold the undeveloped site, subject to planning permission, for the construction of a single-storey dwelling within two years. The Transfer also contained a number of restrictive covenants such as:

  • not to make any planning application to modify the approved plan without approval by the seller;
  • not to commence development until the plans, workings and drawings had been submitted to, and approved by, the seller.

    Both covenants were subject to the usual helpful proviso that the seller should not unreasonably withhold consent. However, the buyer failed to develop the land within the two year period. As a consequence, the original parties to the transfer entered into a supplemental agreement in 1968 which provided for the development of the undeveloped land in accordance with a new set of plans.

    While the Supplemental Deed imposed almost identical restrictive covenants to those outlined above they did not include the requirement for the seller not to unreasonably withhold consent.

    The 2013 dispute

    The claimants to the 2013 dispute was the freehold owner of 89 Holland and six of the long leasehold owners of the flats in the building (the Claimant). The defendant was the owner of the adjoining, burdened land. The defendant purchased the land at auction in 2012 with the intention to develop it. The Claimant sought declarations that they had the benefit of the covenants and, if so, whether or not the Claimant was subject to an obligation not to unreasonably withhold consent to development.

    The decision

    As an initial point, the court found that the restrictive covenants were validly binding on successors in title. In reaching this decision they applied section 78 of the Law of Property Act 1925 [2]. The wording used in the Supplemental Deed was not sufficient to disapply section 78.

    In considering whether the restrictive covenants were subject to the requirement of reasonableness, the court found that the third argument regarding the reasonableness of the seller’s conduct prior to entering the Supplemental Deed actually, “went the other way”. The court highlighted that, had the parties asked themselves whether the seller would, “be able to unreasonably withhold his consent”, the answer would surely have been no, since the clear intention had been to develop the undeveloped land. It would be pointless for the Deed to provide for a process for approval of the development if the Claimant could refuse consent for any reason, regardless of whether it was reasonable or not.

    The court, therefore, implied a requirement of reasonableness into the restrictive covenants.

    This decision is likely to be welcomed by developers, as it is often the case that requirements to obtain consent in freehold covenants are silent as to whether consent can be unreasonably withheld. This case infers that, in certain circumstances, consent cannot be unreasonably withheld may be useful to future developers.