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Bryant Homes Southern Ltd and others v Stein Management Ltd and others [2016] EWHC 2435 (Ch)

14 December 2016

Facts

Land was conveyed in 1993 subject to a restrictive covenant preventing the land from being used for any purpose other than agriculture. The covenant was stated to be made with the seller and his successors in title and the owners and occupiers for the time being of adjoining land edged red and blue on a plan (the “Retained Land”).

At the same time, a separate agreement was entered into (that was not registered at the Land Registry) by which the buyers (the claimants) promised to promote the land transferred for development and to pay to the original seller an overage payment. In return, the original seller agreed to release the restrictive covenant.

By 2005, only a small part of the Retained Land remained vested in the original seller (the bed of a track). This track bed was sold together with an express assignment of the benefit of the covenant. The track bed was then subsequently sold again in 2013 to the first defendant (without an express assignment of the benefit of the covenant).

The claimants obtained a release of the covenant from the liquidators of the 2005 buyer (to whom the benefit of the covenant had been expressly assigned), believing that this extinguished the covenant. However, the first defendant claimed that it still enjoyed the benefit of the covenant.

Issue

Did the covenant just create a purely contractual right (assigned in 2005, but not in 2013), so that it was extinguished by the release that the claimants had obtained?

Decision

The covenant created a proprietary right, the benefit of which was annexed to each and every part of the Retained Land (including the track bed now owned by the first defendant). As long as the bed was capable of benefiting from the covenant (a question for another day), the first defendant could enforce the covenant.

Points to note/consider

  1. The claimants argued that the covenant should be read alongside the land promotion agreement and that this showed that the arrangements set up in 1993 were personal to the claimants and the original seller (albeit the benefit of the covenant, as a chose in action, was capable of assignment). This was rejected by the judge because the land promotion agreement was not registered at the Land Registry and so the covenant appeared to the outside world as an ordinary land covenant. This case shows therefore that if you keep arrangements off the register, you cannot expect them to be used to interpret arrangements that are on the register.
  2. Even more importantly though, this case shows the danger of using a restrictive covenant to secure an overage payment. The 2013 case of Cosmichome v Southampton City Council illustrated this in a different context, with the court ruling in that case that the relevant covenant did not ‘touch and concern’ the land retained by the covenantee (meaning that the burden did not pass to successors in title of the covenantor). This case shows the converse (i.e. that a covenant intended to exist as a purely personal right to secure a monetary payment may give rise to unintended benefits to successors in title of the original covenantee).
  3. It did not matter in this case that the track bed was only a small part of the Retained Land that originally benefited from the covenant. There is a strong presumption that the benefit of a restrictive covenant is annexed to each and every part of the dominant land (and there was nothing in this case to rebut that presumption in the wording of the covenant).

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

David Harris

David Harris

Professional Development Lawyer

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