A freehold property is subject to restrictive covenants prohibiting erection of buildings except those of a particular type and in accordance with plans first approved by the vendors. Whose approval is needed when the land benefited by the covenants has changed hands? May approval be withheld unreasonably? These were the issues considered in Sims & anr v Mahon & anr [2005] and Rickman & anr v Brudenell-Bruce & anr [2005].

Sims & anr v Mahon & anr

The facts

In 1995 Mr and Mrs Houghton, owners of 1 Wharf House and associated land, transferred a piece of garden to Mr and Mrs Martin, owners of 5 Wharf House. The transfer defined the Houghtons as ‘the transferors’ and the Martins as ‘the transferees’. It contained a covenant as follows:

The Transferees hereby jointly and severally covenant with the Transferors to the intent and so as to bind the land hereby transferred and each and every part thereof into [whoever’s] hands the same may come and to benefit and protect the Transferors’ property known as number 1 Wharf House Barton Turns aforesaid and lands held therewith not to use the property hereby transferred for any purpose except that of a private garden and not to erect thereon any building other than a greenhouse, garden shed or domestic garage in accordance with plans which have been approved previously by the Transferors in writing.

There was also an agreement and declaration that the transferees should:

… not be or become entitled to any right of light or air or other right or easement which would or might in any way interfere with the free use of the adjoining premises of the Transferors known as number 1 Wharf House Barton Turns aforesaid and lands held therewith for building or any other purpose.

The benefited land was later acquired by Mr and Mrs Sims (the respondents). The burdened land was acquired by the appellants, who wished to construct a double garage and store on part of the burdened land. Mr and Mrs Sims brought an action to enforce the covenants to prevent that development.

The courts’ findings

The County Court and the High Court both rejected the appellants’ argument that approval need only come from the Houghtons (‘the first issue’). It was held that the approval needed was that of the respondents as current owners of the benefited land.

The County Court ruled (on preliminary issues) that there was no implied term that approval of plans would not be unreasonably withheld. This ruling was reversed by the High Court (‘the second issue’).

The first issue

The arguments

The appellants argued that on a literal reading the transferors were the Houghtons. Although s78 of the Law of Property Act 1925 extended the covenant with the transferors to apply to their successors and assigns, the requirement was to obtain approval from the transferors. The appellants sought support for this argument from the authorities.

In Mayner v Payne [1914] the claimant, Mayner, had purchased lots on an estate laid out by the vendor, Webb, subject to standard statutory stipulations under a building scheme. In 1898 Mayner sold off six of these lots subject to the same stipulations. These included a stipulation that:

The houses to be erected on the estate are each to be of a uniform elevation in accordance with the drawings to be prepared or approved by the vendor’s surveyor…

A further stipulation reserved a right for the vendor to allow departures from these stipulations.

The defendant acquired one of the six lots and obtained a release by Webb from one of the standard stipulations. Neville J held that the 1898 conveyance was merely subject to the ‘local law’ of the building scheme, and therefore references to the vendor only related to Webb.

In Bell v Norman C Ashton Ltd [1956] a standard stipulation under a building scheme provided that except ‘with the written consent of the vendors’ no part of the estate or any building on it should be used for any purpose other than that of a garden or private dwellinghouse, and that not more than two houses should be erected on any one plot. It ended by providing that every building erected on the estate should be erected according to an elevation and design ‘to be approved of by the vendors their heirs or assigns’.

(As the vendors were trustees for sale, reference to ‘heirs’ was not, in fact, appropriate).

The defendants began to erect nine houses on two of the plots. The two original vendors had died but consent had been obtained from the personal representatives of the second of them to die.

Harman J held that a consent under the first part of the stipulation could only be given by the vendors, and not the personal representatives, unlike an approval under the second part of it, which extended to assigns.

As in other cases, the court proceeded on the basis that if there was nobody that could exercise a power to give a dispensation then the prohibition became absolute.

The High Court in Sims & anr v Mahon & anr did, however, refer to 4rest Nicholson Residential (South) Ltd v McAllister [2002], in which Neuberger J (as he then was) held that where a provision required approval of plans by a company (such approval not to be unreasonably withheld) but the company no longer existed, the covenant was discharged.

The decision

In Sims & anr v Mahon & anr Hart J distinguished the cases cited as each having compelling reasons for a restrictive interpretation regarding who could give a valid consent or approval.

The express annexation in the transfer before him made clear that benefit was to run with the land of the transferors, so that reference to approval having to be obtained from the transferors could, where applicable, relate to their successors in title.

He agreed with the views expressed in the County Court as to the Houghtons having no possible interest in retaining power to give approvals after ceasing to own the benefited land. This was a case of a private sale concerning one piece of land rather than a building estate.

He added that the conclusion was reinforced by the way that the term ‘the transferors’ had been used in the agreement and declaration about no adverse rights being acquired, presumably so that successors in title could also rely upon that provision.

Comment

The decision can be contrasted with the position in University of East London Higher Education Corporation v London Borough of Barking & Dagenham & ors [2004], discussed in PLJ143. That involved covenants restricting use without the consent of the vendors, requiring approval of plans and elevations by the vendors and giving a right of pre-emption in favour of the vendors.

Two councils had taken over the relevant functions and assets of the original vendors (London County Council (LCC)) by virtue of statutory vestings.

Having held that the two councils could enforce the covenants against the university (although not against a purchaser), Lightman J considered the argument that the covenants only gave the vendors (but not successors and assigns) the powers to give consents and approvals, and to be given an offer under the pre-emption covenant. As LCC no longer existed, had the covenants ceased to apply?

Statutory vesting applies even to what are normally personal rights and liabilities so that the successor replaces the original party.

It may be appropriate to adapt references to the parties in a document so as to make them applicable to their respective successors and assigns. On that basis, the councils could exercise the powers of the vendors together.

Lightman J considered what would have been the position if LCC’s powers had not been transferred to the councils. The ‘approval covenant’ might not apply if nobody could give approvals. However, the ‘user covenant’ would become absolute.

The councils might then have released the covenants upon being paid to do so, had the wording of the ‘pre-emption covenant’ not indicated that the covenants would not be binding on purchasers.

The second issue

There have been numerous cases that have focused on the question of whether it is implied in a particular document that consent or approval will not be unreasonably withheld.

In Cryer v Scott Brothers (Sunbury) Ltd [1986] a covenant required approval of plans by the surveyor of the transferors before building work commenced. Years after the dwellinghouse was erected the claimant wished to build an additional bedroom over his garage.

The Court of Appeal held that it was implied that approval must not be unreasonably withheld. The covenant had been imposed under a sale of land for development. That purpose would have been defeated if approval of plans could be withheld capriciously.

The Court of Appeal referred to a distinction between ‘regulatory’ covenants to approve a specific matter and covenants requiring ‘general and unrestricted consent’ giving a dispensation from an otherwise absolute prohibition.

The transfer in that case had defined ‘the transferors’ as including successors in title, but the covenant was:

… for the benefit of the remainder of the land comprised in the above title or the part thereof for the time being unsold.

As the defendants had sold all except two distant plots that were unaffected by the proposed extension, they could not withhold approval on grounds concerning the impact on the estate as a whole.

By contrast, in Hale & ors v Bellway Homes Ltd & ors [1998] the High Court held that the prohibition against use as a road or way to adjoining property without the consent of the vendors was not subject to any implied reasonableness term. This decision took account of the purpose of the restriction (to prohibit use rather than regulate something intended) and the other provisions of the deed, including a stipulation with an express proviso that approval of plans should not be unreasonably withheld.

In Sims & anr v Mahon & anr àhe County Court had said that the intended purpose was that the garden land would remain free from buildings but that the transferees or their successors might allow certain outbuildings in accordance with approved plans.

The argument here was that the intended purpose would not be destroyed if there was absolute discretion in withholding approval of plans for such buildings.

This was reversed by the High Court. Hart J held that the covenant envisaged that a greenhouse, garden shed or domestic garage might be erected. The reference to ‘plans which have been approved’ could not be interpreted so as to imply that approval could be withheld on a whim. He considered alternative qualifications – for example to exercise the power of approval in good faith – but held that the implied term was that approval would not be unreasonably withheld.

Rickman & anr v Brudenell-Bruce & anr

In this case a conveyance in 1972 contained a covenant against erecting any building or structure (other than an existing cottage) without obtaining the vendors’ written consent to the size, nature, materials and colour.

The claimants (the Rickmans) wished to enlarge the existing building. A preliminary issue was whether the defendants (trustees of the Savernake Estate) would be entitled to withhold consent unreasonably.

The defendant argued that as the 1972 conveyance had been of land with an existing cottage, it would not destroy the purpose of the sale if the defendants had an absolute right to withhold consent to proposals for further building work.

Against this it was argued that the parties to the conveyance could not have intended that the defendants could absolutely veto rebuilding of the premises following a fire, nor that they could veto even minor works such as building a garden shed or a porch.

The deputy judge in the High Court (George Bompas QC) held that a term could be implied for ‘business efficacy’ where a specific term would otherwise be rendered nugatory. The implication had to be necessary, not merely reasonable, but a term could be implied even though its absence would not destroy the subject matter of the transaction.

After considering the authorities and the arguments, he decided that the defendants would not be entitled to withhold consent unreasonably. He pointed out that the consent required concerned specific details of a building or erection rather than being for the works generally.

It was the only qualified covenant in the conveyance and it followed two covenants that restricted use, with no exception for circumstances in which consent might be obtained from the vendors.

Conclusions

Where a building estate is sold off in plots it is common for the original vendors to have powers to grant approvals, consents, releases and waivers so as to bind whoever else may have the benefit of the standard restrictions. The alternative for someone wishing to depart from the restrictions would be to obtain agreement from everyone entitled to the benefit of the covenants.

If the transaction or the covenant implies that something will be permitted but will be subject to regulatory controls (such as approval of plans) that break down because nobody is available to give an approval, the covenant is discharged. If there is someone able to give the approval then it may not be unreasonably withheld.

Ÿn cases that do not involve a building estate it may be that it is the successors in title to the benefited property that must give the approval or consent.

Each case will depend on the wording of the particular document. However, dispensation can be obtained from whoever has the benefit of the covenants, even where the document is silent on the point.

In such a case an express reference to the possibility of approval or consent being obtained may imply that this will not be unreasonably withheld.

What is reasonable would then have to be considered according to the circumstances. This is better than being held to ransom. © Property Law Journal