Restrictive Covenants: Can you rely on your Deed of Release?
A Restrictive Covenant in a property sense, i.e. a promise by a landowner not to use their land in a specified way or not to do certain things on it, can be a powerful weapon, often used to curtail residential development.
If you are burdened by a Restrictive Covenant, you do have options available to you. You may enter into a Deed of Release with the party who enjoys the benefit of the Restrictive Covenant. You may make a Tribunal application to have the Restrictive Covenant removed or modified in some way.
This article is concerned with a Deed of Release, and in particular the Judgment handed down in the case of Derreb Limited (Applicant) and Claire White and Paul Harpin and Others (Objectors), heard before the Upper Tribunal (Lands Chamber).
Briefly, the Applicant was subject to a Restrictive Covenant which had been created by a Conveyance dating back to 1956 which limited the type of development that the Applicant could exercise over his land.
In 2013 however, the Applicant, exercising a “power of release” clause, entered into a Deed of Release with the Personal Representatives of the party who sold off the land back in 1956, now owned by the Applicant. It is commonplace to see a power of release clause where development land is sold off in plots without imposing a building scheme. It gives the developer power to deal in these matters without having to obtain the consent of all of the subsequent purchasers once the covenant had been imposed.
Without a power of release clause, someone looking to enter into a Deed of Release will need to procure the agreement of all those who benefit from the Restrictive Covenant for it to be fully effective.
Following this up, the Applicant was making an application to modify or discharge the Restrictive Covenant. The application was objected to. The Objectors claimed that the word “Vendor”, found in the 1956 Conveyance, did not extend to the Vendor’s Personal Representatives. Therefore, the Objectors, maintained that they were still able to enforce the benefit of the Restrictive Covenant, i.e they had not been released.
As you could imagine, both sides had a good go at trying to persuade the Tribunal that their argument on construction should be favoured. The Tribunal found for the Objectors, the term “Vendor” did not include the Personal Representatives and they were entitled to enforce the Restrictive Covenant. There were other elements of the power of release clause that had not been satisfied too (i.e. the retained land was no longer subject to a trust; it needed to be for the clause to be effective).
So, the importance of taking advice and applying the natural and ordinary meaning to these kind of provisions is paramount. Extreme care should be taken when considering placing reliance on commercial common sense and surrounding circumstances. This is especially so when the result of applying the natural and ordinary meaning hardly gives rise to an absurd result.