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Restrictive Covenants: Must parties act reasonably? |
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Restrictive covenants which require the approval of a change of use or development
of land are relatively common. However, must the party whose consent is required
act reasonably? In the landlord and tenant context, the law is relatively settled.
Where the covenant concerns freehold land, the position is much less clear.
In the recent case of Rickman -v- Brudenell-Bruce, Earl of Cardigan
the High Court reviewed the principles and considered whether the party whose
consent was required had to justify the refusal of consent.
Facts
The case concerned a property consisting of a house and surrounding land owned
by the Claimants. In 1972 a restrictive covenant was imposed not to construct
on the property any building or other structure other than the existing cottage
without first submitting detailed plans to the vendors and obtaining their consent.
The Claimants wanted to carry out works to the house and submitted to the Defendants
detailed plans for the proposed works. The Defendants refused consent.
The Defendants' position was that they had complete freedom whether to give
or withhold consent and that their decision could be made on any grounds they
chose. The Claimants argued that the Defendants could withhold consent but only
if they had reasonable grounds to do so.
Decision
The Judge agreed with the Claimants. The Judge pointed out that if the building
was destroyed it would be nonsensical for the Defendants to be able to refuse
consent without good reason. This would defeat the purpose of the covenant which
was not designed to hinder development.
Comment
- In interpreting the covenant the Court will look at both the language of
the document and the circumstances in which the covenant was made. Each case
will turn on its facts.
- It may be necessary to imply a reasonableness term to give business efficacy
to the agreement and because it represents the obvious but unexpressed intentions
of the parties.
- It is not automatic, however, that such a term will be implied. It will
depend on the circumstances of the particular contract. Bear in mind also
that legislation (e.g. the Disability Discrimination Act 1995) may impose
such a term in any event.
- If there is such a reasonableness term, however, it will be for the party
challenging the refusal to prove the withholding of consent was unreasonable.
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August 2005 |
