Death can be terminal - to a covenant
When land owners sell off part of their land as a plot, it is not uncommon for them to impose restrictive covenants of various sorts to protect the amenity and value of the land/property that they retain.
Where the original sale contemplates the construction of a building on the part sold off, it is usual to find a covenant requiring that plans must be approved by “the vendor”. Such covenants often give rise to problems, well illustrated by a recent case, Churchill v Temple [2011] 17 EG 72.
In 1967, part of a garden at Wych Elms, was sold off by its owners as a building plot and the buyer constructed a house in accordance with approved plans. In time, that house was sold on and new owners obtained planning permission to demolish and replace it. The original owners of Wych Elms had moved on.
In the original 1967 Conveyance, restrictive covenants had been imposed. One covenant prohibited the construction of a house otherwise than in accordance with plans approved “by the Vendors or their surveyor”, such consent not to be unreasonably withheld. Another covenant prohibited any structural alterations being carried out to the permitted dwelling house “without the written consent of the Vendor or their surveyor”. Although the new owners of Wych Elms had the benefit of the original covenants, the questions for the court were:-
1. Who was able to give or refuse the consents required by the covenants? Was it only the original owners of Wych Elms or was it the new owners of Wych Elms?
2. If only the original vendors’ consents were required, what was the effect of their death? Was the covenant converted to an absolute covenant of prohibition or did death cause the covenant to be discharged?
For both parties, these questions were critical. If the original vendor has the power to consent or refuse, then if he no longer owns any nearby land, he may be completely unconcerned about what is to be built on the land and be happy to consent. On the other hand, if the right to consent or refuse has passed to the successor, then as the party most affected by the proposed development, he is far more likely to have cause to refuse consent.
Of course, had the covenant been sufficiently well drafted, these questions would not have arisen because the covenant would have made the intention clear.
The courts have decided these questions in opposing directions in previous cases. This is because the wording of covenants and the facts of each case, although similar, tend to be somewhat unique. Case law guides us but the answer is to be found on each occasion by construing the precise words contained in the transfer or conveyance. The literal meaning of words is always to be preferred as long as it would not lead to commercial absurdity. The literal meaning wins out where:-
- There are other references to “successors in title” in the Conveyance or Transfer and where the omission to define “Vendor/Seller/Transferor” as including “successors in title” or to refer to them in the actual covenant indicates that the vendor did not intend to include them.
- The transaction was one of a number of plots, where the original vendor would therefore have been more likely to wish to retain control.
Where the courts have extended covenants to include “successors”, they have been influenced by:-
- The annexation of the covenant to the retained land being more explicit e.g. wording such as “to benefit and protect the transferor’s property”.
- The fact that the sale of the original plot was a “one-off”, where the original vendor would have been less likely to wish to retain long term control.
In Churchill, however, the judge decided that although this had been a “one-off” sale, he was persuaded that the drafting of the Conveyance limited the covenant’s consent to just the original “vendors” and not to their successors, the current owners of Wych Elms. The court thought that the covenants were likely to have been imposed for short term control in relation to the house that the immediate purchasers were known to be intending to build.
The second question then arose: had the vendor’s death converted the covenant to an absolute prohibition, so that the new house could not be built because there was no one that could consent to the plans under the covenant or had the vendor’s death discharged it? The court decided that the covenant had been discharged because if the death caused it to become absolute then this would remove the primary right conferred by the covenant to build a house and this could not be a correct interpretation.
Our Hart Brown commercial property lawyers have considerable expertise and experience in considering and advising on restrictive covenant issues.
This article contains information of general interest about current legal issues. It does not give legal advice and specific advice should always be sought about your particular circumstances. We will be happy to assist.
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