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Consent to development

Who do you ask for consent? The original transferor of the land who took the benefit of the covenant, or his successor in title who now has the benefit of the covenant? Can the consent be unreasonably withheld? Finally, what is the situation where there is a requirement in the covenant to submit the plans to an entity that has ceased to existent. These are the issues considered on this page.


Who do you ask? Can consent be unreasonably withheld?

Mahon v Sims
[2005] 39 EG 138
Hart J in the QBD on appeal from the county court.

Facts

The person with the land which was subject to the restrictive covenant wanted to build a double garage and store. There were two preliminary issues in the case:
    (1) Did the phrase "the Transferor" in the relevant restrictive covenant apply to the original grantor of the covenant or to the successor in title? It was necessary to know for the purposes of determining from whom consent should be obtained for development.

    (2) Was it possible to imply a term that consent should not be unreasonably withheld?
The relevant part of the covenant said:
    "The Transferees hereby jointly and severally covenant with the Transferors not to use the property hereby transferred for any purpose except that of a private garden and not to erect thereon any building other than a greenhouse garden shed or domestic garage in accordance with plans which have been approved previously by the Transferors in writing."
The successors in title to the original transferees wanted to construct a double garage and store on part of the land transferred. The original transferor had no objection but their successors did.

Held

(1) By virtue of s78 of the Law of Property Act 1925 the phrase "Transferor" included successors in title. It was also clear from the express words of the covenant that the benefit of the covenant ran with the retained land. The judgment also seems to make it clear that it is only the successors from whom consent needed to be obtained. There was no apparent reason why the original grantors would want to maintain control over the land after they themselves had sold the land. It was unlikely that the parties intended that a third party, who had retained no interest in the land benefited could control development of a site so as to override the interests of a successor in title who does have the proprietary interest to protect. (See para 12 of the judgment citing the county court judge with approval). (On this point compare the case of City Inn (Jersey) Ltd v Ten Trinity Square Ltd which is dealt with below).

(2) The court would imply a term relating to the approval of plans. Hart J:
    "15. .. it should be emphasised that the question is governed by the general principles applicable to the implication of terms into contracts, the particular species of contract concerned having the special feature that both its benefit and burden may pass to persons who are not the original contracting parties but whose relationship will share certain essential characteristics with that which subsisted between the original parties.

    18. in considering whether a term should implied in the present case, the question might not be so much whether a term should be implied but what is the nature of the term to be implied.

    27. .. it seems to me clear that the words plans which have been approved [etc] as a matter of construction import something more than an untrammeled power I the covenantee to withhold consent. The concept of approval of plans implies at least a process of active consideration. If the covenantee has plans submitted to it for its approval, it cannot .. be said that the wording of the covenant entitles the covenantee to refuse even to consider those plans. It is at least obliged to look at them and to do so in good faith. If the covenant, by necessary implication, obliges it to consider the plans in good faith with a view to their possible approval, it is implicit that some criteria are to be applied in the course of that process. It cannot have been intended to be a matter of pure whim. The covenantee cannot, for example, then refuse to approve them simply on the ground that it does not wish any of the contemplated types of building to be erected in any circumstances whatsoever. To refuse approval on that ground would, in my judgment, be to do so on a ground not contemplated by the covenant. Nor can the covenantee refuse approval on grounds that are unrelated to the purpose for which the power has been reserved, for example that it simply does not like its neighbour. That, too, would be an obvious misuse of the power. So, also, would a refusal of approval not because there was in fact any objection to the proposals but because the covenantee wished to exact a monetary price for the giving of the approval.

    28. In my judgment all these limitations to the power to withhold approval are necessary to give the contract business efficacy. The question that I find more difficult is whether the implication of a term that approval be no unreasonably withheld is the right way in which to capture their essence. The cases discussed [in the arguments before the court] show a possible hierarchy of implied terms ranging from: (i) an obligation to use the power in good faith; through (ii) an obligation not to use the power arbitrarily or capriciously; to (iii) an obligation not to use the power unreasonably

    29. In the present context, I do not think that it does make any practical difference whether the implied provision is express as not to be arbitrarily or capriciously withheld or as not to be unreasonably withheld. If the implied proviso take the latter form, it is important to bear in mind that this does not have the consequence that the court can, at the invitation of the covenantor, simply substitute its judgment as to what is reasonable for that of the covenantee. All the proviso means is that refusal of approval will be unreasonable if the court is satisfied that no reasonable covenantee would have refused approval in the circumstances. .. It will be only if satisfied that no reasonable neighbour would object to the proposal that the court will be justified in overriding a decision by the covenantee to refuse approval. If the refusal is on a subjective ground, upon which the opinions of reasonable neighbours might differ, that will, in a context such as the present , be reasonable ground enough. In my judgment, the application of such a test will not therefore deprive the covenant of what the judge described as the ability to exercise firm control over any building. It will however prevent it from acting arbitrarily or capriciously or from improper motives."

Cases going the other way

City Inn (Jersey) Ltd v Ten Trinity Square Ltd
[2008] EWCA Civ 156.

Summary

In Mahon v Sims above it was held that a request for consent to carry out the works in that case needed to be made to the person who was the current owner of the benefited property; the term "Transferor" was to be construed as referring to that person. However, in this case the court held that the term "Transferor" meant the original Transferor. The court came to this conclusion based upon proper interpretation of the covenant in the context of, and after a careful consideration of, the whole Transfer. In particular, the court came to the conclusion that it was never contemplated that the original transferor would cease to be the owner of the property that had the benefit of the covenant.

Facts

C was subject to the burden of the restrictive covenant. It had planning permission to knock down the existing building and build a hotel. D owned a neighbouring building and had the benefit of the covenant. The covenant required the application for consent to be made to the "Estate Officer for the time being of the Transferor". C made its request to carry out the works to the original Transferor, the Port of London Authority, which had completely moved away from the area and which gave its consent.

The defendant, the successor in title to the PLA, argued that it was the body which now had the power to consider the application. C therefore sought a declaration that D had no right to insist that the proposed works should be subject to D's consent.

Held

The declaration was granted and the decision was upheld on appeal. The CA came to the conclusion that it was never contemplated that the original transferor, the Port of London Authority, would cease to have an interest. Jacob LJ:
    "[Counsel argued that]there is no commercial sense in the covenant being personal to the PLA once it has upped sticks and gone away. It is this point which has caused me to pause long and hard. But in the end I reject it. I do so because I do not think the parties to the Transfer ever contemplated that situation. They simply did not cater for it. At the time the PLA were well ensconced in their grand HQ in Trinity Square. Things seemed as permanent as the nearby Tower of London. The word "Transferor" in the Agreement meant the PLA alone. No successor was contemplated. It is not always the case that in construing a document the court must assume that the parties had thought of every "what if?" This is such a case."
Comment

In most cases the decision in Mahon v Sims is more likely to be apposite; ie that the current holder of the benefit of the covenant is likely to be the appropriate person to ask for consent. However, the case does highlight the need to look very carefully at the relevant covenant and the whole of the document in which it was contained when deciding to whom one should make the request.


“Vendor” definition – application to successors-in-title

Margerison v Bates
[2008] EWHC 1211 (Ch)

Summary

In this case, the Court refused to extend the definition of “the Vendor” to include successors in title as there were no grounds to imply any such extension of the definition and it would have been contrary to the express terms of the Conveyance. Since the exception allowing works to be carried out with the consent of “the Vendor” fell away, the restriction on carrying out alterations without such consent was also discharged.

Facts

The Claimant owned land that had originally formed part of an adjoining property but had been sold by the then owner of that adjoining property in 1966. The Defendants were the current owners of the adjoining property. The Claimant wanted to make improvements to the bungalow that stood on the land and had obtained planning permission to do so.

The Claimant’s land was subject to a covenant “Not to make any addition or enlargement or alteration to the said bungalow… without plans first having been approved by the Vendor and her consent thereto signified in writing such consent not to be unreasonably withheld”.

“The Vendor” was a defined term in the 1966 Conveyance, and the definition did not refer to the Vendor’s successors in title. The Vendor had died and the Defendants had purchased their property from her executors.

Issues

The issues before the Court were:
    (1) Does “the Vendor” whose consent is required mean only the original vendor, or does it refer also to her successors in title from time to time?

    (2) If “the Vendor” means only the original vendor, what was the effect of her death? Has the restrictive covenant been discharged or has it become absolute, so that no alterations can be made to the bungalow?

    (3) If “the Vendor” includes the original vendor and her successors in title, was the Defendants’ refusal to give consent unreasonable?
First issue

Following the same exercise as Jacobs LJ in City Inn (Jersey) Ltd v Ten Trinity Square Ltd (2007) the Court studied the 1966 Conveyance to assess whether at any point the draftsman used the phrase “the Vendor” to mean “the Vendor and her successors in title”. The Court concluded that he had not done so and had, in other clauses, explicitly referred to the Vendor or her successors in title. The Court took the view that the draftsman was clearly aware of the limitations of his use of the definition “the Vendor”.

The present case was distinguished from Mahon v Sims (2005), where the absence of any reference to successors in title had enabled the Court to imply under s78 of the Law of Property Act 1925 the words “successors in title” after the words “the Transferors”. The Court in the present case concluded that “such a gateway to construction is not available because the 1966 Conveyance clearly distinguishes between “the Vendor” and her “successors in title”.”

Nor did the Court feel it could be said that confining the only person able to give consent to the original vendor amounted to commercial absurdity, although it noted that there were greater commercial merits in extending the definition of the person who could give consent. However, it concluded that it was not for the Court, or the reasonable observer, to “re-write the contract that the parties actually made into one which I, or the reasonable observer, think they ought to have made”. There were therefore no grounds to imply any reference to successors in title as it was not necessary to give business efficacy to the 1966 Conveyance and would contradict its express terms. Accordingly, the true construction of the 1966 Conveyance was that under the sub-clause in question only the original vendor could approve plans to alter the bungalow.

Second issue

The Court was of the view that the answer to this issue was a question of construction of the 1966 Conveyance, rather than implying a term. It felt that a strict literal meaning, making the covenant absolute so as to prevent any alterations to the bungalow following the vendor’s death could not have been the true intention of the parties to the 1966 Conveyance. The Court commented that it would be “strange, indeed perverse, if following the death of [the Vendor] [the bungalow] could not be added to, enlarged or altered in any way”. It pointed out that such an interpretation would have put the Defendants in a better position since the vendor’s death than they had been prior to it.

Since the exception allowing works to be carried out with the consent of “the Vendor” was fundamental to the restriction on carrying out alterations without such consent, the Court held that the discharge of the exception as a result of the vendor’s death also resulted in the discharge of the covenant.

Third issue

Although not material to the case given the decision on the first and second issues, the Court expressed its view that it would not have been unreasonable for the Defendants to withhold their consent to the Claimant’s plans

See also Hutchinson, Re 1 Captains Gorse
[2009] UKUT 182 (LC) where on an application to modify a covenant under s84 of the 1925 Act it was held that a person can no longer be viewed as being the original covenantee to a restrictive covenant where he has disposed of the land which had the benefit of the restrictive covenant, even if he has subsequently re-acquired it.


Requirement to submit plans to non-existent entity

Crest Nicholson Residential (South) Ltd v McAllister (At first instance)
[2002] EWHC 2443; [2003] 1 All ER 46.

A covenant that said that no building should be erected on the land conveyed, unless the plans drawings and elevation thereof shall have been previously submitted to and approved by the Company such approval not to be unreasonably withheld. The Company was the original vendor of the plot that had imposed the restrictive covenants but had long since gone into liquidation. An argument to the effect that it was impossible to carry out any development because it was impossible to get the Company's consent was rejected. The court implied a term to the effect that the covenant was discharged on the demise of the company. Alternatively, the exception was so fundamental to the prohibition that the prohibition fell with the exception.

Comment: Another possible way of dealing with the situation is to apply to the Lands Tribunal to modify the covenant to delete the requirement altogether or to substitute a requirement to ask some other, existing, body to grant the consent.

Note: That the case was overturned on appeal on whether or not the person seeking to enforce the covenant had the benefit of the covenant (see the page on benefit of covenants); and that a second point on the meaning of "a dwelling" was disapproved in the case of Martin v David Wilson Homes Ltd.

The position in Crest was approved in Seymour Road (Southampton) Ltd v Williams [2010] EWHC 111 (Ch). The judge at para 41:
    "Once the vendor disappears some of the cases suggest that the dispensing power falls off and the covenant becomes an absolute covenant. I cannot see that is the correct position here as a matter of construction. The reality is that once the Society was dissolved any interest in enforcement of these covenants disappeared likewise. On the construction of the Indenture as I set out above when the Society had sold all of its land it ceased to have any interest in enforcing the covenants. Once it is clear that the interest in enforcing the covenants disappears there is no sense when that event occurs in ripening the covenant to an absolute covenant where no one is in a position to give the consents or the variations contemplated by the various covenants. That cannot be in my view what the draftsman intended in this case."

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