There are basically three controls over the erection and alteration of buildings and the use to which land and buildings can be put. These are:

1. Easements and covenants subject to which the property is held.
2. Town & Country planning legislation and the need for planning permission.
3. Building Regulation consent

A developer purchasing a site will be concerned:

1. That what it is buying does not breach any of those matters. i.e. that the seller has complied with any restriction relating to the site and has obtained all necessary consents and
2. Whether proposals for the development of the site will fall foul of any of these controls.

This briefing will not be considering the Town & Country planning legislation or Building Regulation controls but covenants and easements which may restrict:

• the type of building which can be erected on the property e.g. residential or commercial
• the size of buildings
• the number of buildings
• the use to which any building on the land may be put or
• building without the prior approval of plans by the person who imposed the covenants (covenantee).

The existence of an easement may also restrict development of the property e.g. it is inadvisable to build over a right-of-way unless it can be re-routed to the satisfaction of the parties concerned.

What is an Easement?

An easement is a right over one piece of land existing for the benefit of another piece of land e.g. the right to use a driveway/or access way.
Easements are most frequently created on a sale of part of a piece of land belonging to the seller.

What is a Covenant?

A covenant is a promise made in a deed e.g. a Transfer

Again, a covenant is most frequently encountered on sale of part e.g. where the buyer buys part of the seller's garden and covenants in the transfer not to build more than one house on that part of the land bought.

Positive and Restrictive Covenants

Covenants imposed on land may be positive or restrictive.

Positive covenants usually involve expenditure of money or labour, restrictive covenants restrict the use of the land in some way.

How is an Easement created?

An easement, the right over one piece of land ("the servient tenement") existing for the benefit of another piece of land (the "dominant tenement") can be created in several ways: -

1. Express grant or reservation
2. Implied grant or reservation
3. Prescription
4. Statute

1. Creation of easements by Express Grant/Reservation

In most cases, easements will be created expressly in a transfer document e.g. by a seller in his own favour over the part of his land being sold.

2. Creation of Easements by Implied Grant/Reservation

Implied grant or reservation e.g. an easement of necessity for a landlocked site. There may be implied a right of way, across the surrounding land to the public highway.

3. Creation of Easements By Prescription

The grant of an easement will be presumed following the open and unchallenged exercise of e.g. a right of way, without permission for a long time. There must be a minimum of 20 years uninterrupted use before a right can be presumed to have been granted. However, there are certain situations where notwithstanding uninterrupted use a right of way will still not be acquired.

4. Creation of Easements by Statute

A public right of way which can be created by statute eg under the Highways Act 1980 is not really an easement but a right exercisable by anyone.

Dealing with Restrictive Covenants in practice

Where a restrictive covenant, for example, restricts the use of a piece of land for a particular purpose and a developer's proposed use would breach the restriction, there are several options open to the buying developer:

1. Negotiate a release from the covenant.
2. Take out insurance against the covenant ever being enforced.
3. Apply to the Land's Tribunal to have the covenant discharged.

To consider these in turn:

1. Negotiate a release from the covenant by way of Deed of Release

Obtaining the consent of the person with the benefit of the covenant is rarely a viable option. If the covenant was imposed many years ago, it may be difficult to trace the person with the benefit. If the covenant has been imposed during the last 20 years or so it may be possible to trace the person with the benefit, but the price charged by that person for granting a release or modification of the covenant may be prohibitive.

The person with the benefit will be the present owner of the land for the benefit of which the covenant was taken. Remember also that if the covenant was taken for the piece of land which has now been sub-divided between several owners, consent will need to be obtained of all the present owners of the land

2. Purchase Restrictive Covenant Indemnity Insurance

It may be possible to arrange insurance against the covenant ever being enforced against a buyer who contemplates that his proposed use of the land will cause a breach of covenant. One option to enable development to proceed is to obtain an insurance policy which will cover liability for the future breach of the covenant.

The insurance company would need the following information in order to assess the risk of a claim being made under the terms of the policy and so calculate the premium:

1. A copy of the document imposing the covenant.
2. The exact nature of the breach which has occurred or details of the action which it is contemplated will cause a breach of covenant e.g. the building of commercial units on a site restricted for use for residential purposes only.
3. The nature of other properties in the immediate neighbourhood . This is to enable the insurance company to assess the risk of enforcement of the covenant more precisely.
4. A copy of any planning permission which permits the development to be undertaken by the client. The insurance company would also need copies of any objections which were lodged in respect of the planning application.
5. Details of what steps had been taken (if any) to trace the person with the benefit of the covenant and the results of these enquiries. The identity of the person who has the benefit of the covenant should be revealed (if known) but note it is vital that steps are not taken to approach that person without the prior consent of the insurance company, since it may affect the insurance risk i.e the person who benefits from the covenant will have been alerted to the possible breach and therefore the risk of a claim for damages / injunction for breach of covenant is increased.

If indemnity insurance is available for the proposed development, there are matters relating to the policy which will have to be considered.

As a buyer, whether you are purchasing the property yourself, or if you are accepting a policy taken out by the seller or previous owner, the following matters have to be checked (and this will usually be the job of your solicitor):

1. That the benefit of the policy is not just for a particular person e.g. the buyer but also for the buyer's successors in title e.g. those purchasing from a buyer developer.
2. that the amount of the cover offered by the policy appears to be adequate i.e. not only the cost of the site to be developed but also the final developed value.
3. That your lenders approve the policy terms and conditions and the amount of the cover.

Another option is to apply to the Lands Tribunal to have a covenant discharged or modified.

3. Apply to the Lands Tribunal to have the covenant discharged

The Lands Tribunal has the power under the Law of Property Act 1925 (s84) on application by the freeholder to discharge or modify any restrictive covenants affecting freehold land if certain conditions are satisfied:

1. The restriction is obsolete due to changes in the character of the property or neighbourhood or other circumstances or
2. The restriction impedes some reasonable use of the land and either the persons entitled to the benefit of the covenant get no practical benefit from it, or the restriction is contrary to public interest and in either case money will be adequate compensation to the persons entitled to the benefit if the covenant is discharged or modified or
3. All persons entitled to the benefit of the covenant have expressly or impliedly consented to the discharge or
4. the discharge will not adversely affect the persons entitled to the benefit of the covenant.

This means that restrictive covenants can be deleted from the registers of the title to the site in question.

Note: this solution may not be quick or cheap to pursue

Easements

In addition to restrictive covenants as a method of control of development, the existence of easements may also restrict the development of property.

It is important from the developer's point of view to check Land Registry plans as to the location of boundaries and that they do match the position on the ground. Any plans attached to the results of a Local Authority search should also be compared closely with the situation on site to ascertain whether access can be obtained directly from the site onto a public highway i.e. that there is no ransom strip. If there is a ransom strip, a Deed of Easement/Grant may have to be entered into at the developer's expense.

In conclusion these are the practical points to bear in mind:

• Make sure that the physical characteristics of the site on inspection correspond with any title plans provided by the seller's solicitors.
• Watch out particularly for any evidence of the exercise over any part of the site of any rights, for example, rights of way and rights for the running of services. Remember that these rights, if obtained by prescription, may not be referred to in any of the legal documentation relating to the site i.e. your solicitors may have no knowledge at all of the existence of such rights.
• Look out for any evidence of any other types of right or interest which may affect the site, for example if tenants or squatters are in occupation and report any concerns you have to your solicitors.
• If there any restrictive covenants which affect the site, remember to warn the seller not to advertise the existence of the covenant or make any approach to the beneficiaries of the covenant in any way.
• Do not assume that an application to the Lands Tribunal for the release of a covenant will be the preferred route where a restrictive covenant affects the site as insurance will generally (although not always) be the cheapest and quickest solution.

If you would like further advice about restrictive covenants and easements, or any other matter raised in this paper, please get in touch with your usual contact at plainlaw or Philip Horn on 01865 240202 or e-mail him at philip.horn@plainlaw.co.uk.

This paper is written to provide you with general information is not intended to offer professional advice. It is recommended that you seek specific professional advice before taking any action.

© Copyright plainlaw 2004

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