A restrictive covenant consists of an agreement in a deed that one party will restrict the use of its land in some way for the benefit of another. While the burden of a restrictive covenant is capable of binding successors in title to the land, positive covenants – which normally require some positive action in relation to, or the expenditure of money on, land – are only binding on the original contracting parties.

A covenant that is, in reality, negative may be expressed in positive terms and vice versa. The best example of a restrictive covenant expressed in a positive manner can be found in Tulk v Moxhay [1848], which involved a covenant to:

… keep and maintain… a piece of ground and square garden… in an open state, uncovered with any buildings, in neat and ornamental order.

The court construed the covenant as a negative obligation not to build on the land, despite the fact that it was expressed in positive terms.

Jarvis Homes Ltd v Marshall

In Jarvis Homes [2004] the developer entered into a conditional contract to buy a property which was subject to a covenant ‘not to permit the land to be used for the erection of more than one two-storey private dwelling house’ and ‘to use the land only as a private residence’, ie the covenant was restrictive in nature (because it was, in reality, a covenant not to use the land in any way other than for the purposes of a private residence) and was, therefore, capable of binding successors in title to the land despite the fact that it was framed in both negative and positive terms. The precise wording of the covenant is set out in the box below.

The developer intended to:

• demolish the house that stood on the land and construct a new one in roughly the same position; and
• construct a roadway across the plot to provide access to a new housing development, consisting of ten new dwelling houses, to be constructed on the land at the rear of the property (which was not subject to the same restrictions).

The owners of an adjoining property objected to the construction of the roadway on the grounds that it would constitute a breach of the restrictive covenant in their favour.

The High Court ruling

The High Court rejected the adjoining owners’ claim. The judge ruled in favour of the developer, holding:

(1) that the developer was only proposing to erect a single dwelling on the land – it had no intention of using the property for the purposes of trade; and

(2) that the construction of a road was not the evil against which the covenant had been aimed.

The Court of Appeal decision

The owners of the adjoining property appealed to the Court of Appeal, which reversed the judge’s decision and upheld their claim.

Their Lordships were unanimous. Neuberger LJ delivered the judgment on behalf of the Court of Appeal. He quickly disposed of the argument that, as a matter of interpretation, the second limb of the covenant could be broken down into two separate parts:

(1) a covenant not to use the land, or any buildings and erections on the land, for any trade business or manufacture; and

(2) a covenant to use any buildings or erections on the land only as a private residence;

because – so the argument went – the expression ‘the same’ referred back to buildings and erections on the land, but not to the land itself. The Court of Appeal ruled that the expression encompassed buildings and erections, as well as the land itself. The developer also relied on the decisions in Co-Operative Retail Services Ltd v Tesco Stores Ltd [1998] and Elliott v Safeway Stores Plc [1995], but the Court of Appeal was not impressed.

In each of those cases, the land whose proposed use was alleged to be in breach of covenant was to be put to a use that was ancillary to the use of adjoining land (see box below). Neuberger LJ disposed of both decisions by differentiating between:

• a covenant not to use land for a specified purpose, ie where the landowner would be entitled to use the land for any other purpose; and
• a covenant only to use land for a specified purpose.

The cases cited to the Court concerned covenants not to use land for a specified purpose. In those cases there would only have been a breach if the land in question was actually being used for the offending purpose. The use of the servient land for another purpose would not constitute a breach, even if that use was for purposes that were ancillary to the prohibited use.

The point at issue in the present case was rather different, because the clause in this case restricted the use of the servient land to a single purpose, ie to use it as a private residence.

The prohibition was not restricted solely to what the landowner did; it extended to any ‘persons deriving title under’ the landowner. Their Lordships agreed that that would include anyone who was granted a right of way over the servient land because a right of way constitutes a legal or equitable interest in land (ie it is a right to which the grantee has – and must prove – a title), so the grantees of rights of way would derive their title from the owner of the servient land.

Neuberger LJ went on to rule that the landowner was entitled to use the land affected by the covenant for all residential activities which might reasonably take place in the curtilage of a private dwelling house, but that using a substantial part of the land as a roadway to provide access to ten neighbouring properties fell outside the range of uses permitted by the covenant.

The judge also expressed the view that the erection of lamp-posts to illuminate the roadway would constitute a breach of the first limb of the covenant, only to permit the land to be used for the erection of a ‘dwelling house’. This was because lamp-posts were not a ‘dwelling house’, and the erection of any item or thing was prohibited unless it fell within the meaning of that phrase. His Lordship concluded by suggesting that the adjoining landowners might also have argued that the construction of the roadway would also have constituted a breach of that first limb (although he did not believe that construction work like this would contravene the second limb of the covenant, as this focused on the use made of the land rather than on the nature of any building work which the landowner might choose to undertake).

Glyn v ABC Cinemas Ltd

The High Court published its decision in Glyn (Copenhagen) Southern Ltd v ABC Cinemas Ltd [2004] just a few days later. In Glyn the servient land was subject to a restrictive covenant that imposed a prohibition on using land as a cinema, or for the purpose of image projection for showing films or for any associated or ancillary or similar use, or for any theatrical or related purpose. The precise wording of the covenant is set out below.

The cinema itself was to be sited on land that was not burdened by the covenant, while the land affected by the covenant was to form part of the cinema concourse. The concourse was to be used as the site for retail units and one or more restaurants; for signage and cinema advertising; and would also provide access to the cinema foyer. Would the use of the servient land for those purposes – which were ancillary to a cinema – constitute a breach of the restrictive covenant?

The High Court ruling

The parties agreed that the Court had to ask itself whether the land affected by the covenant was to be used as a ‘cinema’ – and they all agreed that it was not. They also agreed that using the land to gain access or to provide services to the cinema, or to advertise the cinema, would not of itself constitute use as a ‘cinema’ because those uses were not in themselves the offending use (see Co-Operative v Tesco and Elliott v Safeway, below).

But would the proposed use amount to a breach of the second limb of the covenant, which prohibited use for image projection, for showing films, and any associated or ancillary use? The judge decided that it would not. No one knew exactly what the second limb of the covenant meant, or how image projection and showing films differed from cinematic use, but the parties had obviously intended each limb of the covenant to bear a different meaning, so this limb of the covenant had to be construed differently from cinematic use. The intended use was ancillary to the cinema, ie to the first limb of the covenant, which meant that it could not be ancillary to the second limb of the covenant.

The Court of Appeal decision

The Court of Appeal subsequently affirmed the High Court decision, albeit for slightly different reasons.

The decision has not yet been fully reported but the case summaries indicate that the Court of Appeal took the view that use as a cinema fell within both the first and second limbs of the covenant.

Their Lordships went on to ask themselves whether the servient land was being used for purposes that were ancillary to the cinema because the second limb of the covenant expressly forbade any ‘associated or ancillary use’. The Court ruled that this was a matter of fact and degree – and the fact that the cinema screens made up about 15% of the total properties served by the concourse appears to have told in favour the development.

The Court also confirmed that the restrictive covenant could not be interpreted in such a way as to restrict the use of the adjoining land as a cinema; the draftsman would have needed to have used very clear words in order to do so.

Comment

So the restrictive covenant was effective to deny the developer access in Jarvis Homes, but not in Glyn.

The line of authorities developed in Co-Operative v Tesco and in Elliott v Safeway concerned covenants not to use the land for a specified purpose, ie the landowner was free to use the land for any other purpose even though that use might actually be ancillary to an offending use. By contrast, the covenant in Jarvis Homes was expressed as a covenant only to use the servient land for a specified purpose, ie not to use the land for any other purpose.

Judges are quick to warn that the construction of one covenant is unlikely to assist in the construction of another. The courts may well interpret them differently, in the light of their different legal and factual contexts, even though the wording is identical.

But these cases demonstrate that restrictive covenants which are framed as positive obligations (only to use land for a specified purpose) or as negative obligations (not to use land for anything other than a specified purpose) are far more powerful than covenants which simply prohibit one or more offending uses (even though the draftsman may have had the foresight to prohibit any associated or ancillary uses as well). Developers will need to consider the Court of Appeal’s judgment in Glyn when it is published, and will also need to analyse the precise wording of restrictive covenants to check whether anyone is entitled to deny them access to a planned new development.

The covenant in Glyn

12.2 The Transferee for itself and its successors in title and assigns hereby covenants with the Transferor for the benefit and protection of the Transferor’s land and premises capable of benefiting from this covenant (and each and every part thereof) that the Transferee shall not… use or permit the use of the property hereby transferred or any part of it: 12.2.1 as a cinema [the first limb of the covenant]; or 12.2.2 for the principal purpose of use for image projection for the showing of whole films in an auditorium setting or for any associated or ancillary or similar use [the second limb of the covenant]; or 12.2.3 for any theatrical or related purpose.

The covenant in Jarvis Homes

The Purchaser hereby covenants with the Vendor for the benefit and protection of [No 30] and so as to bind so far as may be the land hereby conveyed into whosoever’s hands may come that he the Purchaser and the persons deriving title under him will not at any time hereafter:

(a) permit the land hereby conveyed including the site of the existing dwelling house thereon to be used for the erection of more than one two-storey private dwelling house with all necessary outbuildings and garage for use in connection therewith [the first limb of the covenant];

(b) use or permit or suffer to be used the land hereby conveyed or any part thereof or any building or erection now or at any time hereafter erected thereon for any trade business or manufacture but will use the same as a private residence only [the second limb of the covenant].

The previous authorities

Elliott v Safeway Stores Plc

Here the servient land was subject to a restrictive covenant that it would not be used for the sale of fuel and lubricants. The claimant sought an injunction restraining Safeway from using part of that land for access to a petrol filling station. The High Court ruled that Safeway was simply using the land as an access way and was not in breach of the restrictive covenant.

Co-Operative Retail Services Ltd v Tesco Stores Ltd

The servient land was subject to a restrictive covenant not to use the land ‘for the purpose of food retailing’, but Tesco took care to ensure that none of its retail premises were situated on the servient land. However, the land was used for external seating and as an amenity area for Tesco shoppers in accordance with the planning permission for the construction of the store. The Court of Appeal rejected the argument that Tesco was using the land in breach of the covenant because it was an integral part of a site which, as a whole, was used for the purpose of food retailing. It ruled that the only question for the Court was whether the servient land was being used for that purpose. The restrictive covenant prohibited food retailing, but did not prohibit the landowner from using the land to enhance the attractions of an adjoining property.

Case references Co-Operative Retail Services Ltd v Tesco Stores Ltd (1998) 76 P&CR 328

Elliott v Safeway Stores Plc [1995] 1 WLR 1396

Glyn (Copenhagen) Southern Ltd v ABC Cinemas Ltd [2004] EWHC 1682 (Ch); [2004] PLSCS 214 (CA)

Jarvis Homes Ltd v Marshall [2004] EWCA Civ 839

Tulk v Moxhay (1848) 2 Ph 274

Allyson Colby is an associate in the real estate group at Wragge & Co LLP.  © Property Law Journal