Restrictive covenants: Supreme Court determines approach when considering ‘public interest’ ground (Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd – 2020)

The Supreme Court considers the Courts’ jurisdiction to modify or discharge restrictive covenants where a claimant relies on ‘public interest’ as a ground.

The background

In Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd [2020], a developer built 23 housing units on land, over part of which there was a restrictive covenant preventing the land from being used for building or any purpose other than parking. The adjoining landowner objected to the housing development as it was a breach of covenant. The local planning authority confirmed that it would have granted permission for the houses to be constructed on the part of the land which was unaffected by the covenant.

The developer applied for a modification of the restrictive covenant, relying on grounds of ‘limited benefit’ and ‘public interest’ contained in s.84(1)(aa) of the Law of Property Act 1925, and notifying both the adjoining land owner and the respondent as parties with the benefit of the covenant. The Upper Tribunal allowed the application on the ‘public interest’ ground on the basis of a need for affordable housing in the area; properly constructed homes should not be taken down if they were needed, even where properties had already been constructed in breach of a restrictive covenant.

At the Court of Appeal, the UT’s decision was overturned. The UT should have considered, when deciding in its favour, that the developer had constructed properties knowingly in breach of a restrictive covenant. The housing association, now the owner of the properties, appealed to the Supreme Court.

The decision

The Supreme Court found the appeal to be unsuccessful, but with different reasoning to the Court of Appeal. In assessing the ‘public interest’ ground, the conduct of the developer is to be disregarded and a simple question asked of whether continuing the covenant and impeding the developer is contrary to the public interest.

The Court of Appeal had found that developers should be required to engage with parties benefiting from restrictive covenants before undertaking a development or otherwise to waive its right to rely on ‘public interest’ as a ground. The Supreme Court’s ruling overturns this.

The Supreme Court also overturned a Court of Appeal finding that, where a developer knowingly breaches a covenant in order to make a profit, any ‘public interest’ ground relied upon should be refused. The Court decided that the UT may consider this at its discretion.

The application was refused because all houses could have been constructed on land unaffected by the covenant, avoiding any conflict, and the ‘public interest’ ground was satisfied only as a result of the properties’ prior construction.

Advice and action

Developers and insurers undertaking developments in breach of restrictive covenants will be comforted by the Supreme Court’s decision that they will not necessarily forfeit an application under s.84 of the LPA 1925 or the ability to rely on ‘public interest’ as a ground for modification or discharge of the covenant.

However, merely commencing or completing the development is not enough to justify reliance on the ‘public interest’ ground. ‘Public interest’ can ordinarily only be relied upon if the developer is unable to construct properties on land which does not breach the restrictive covenant, as was the case here.

When considering whether the covenant was contrary to ‘public interest’, the deliberate breach of covenant by the developer was not relevant other than when the UT determined how to exercise its discretion.