Covenants restricting the use of a property can seriously affect value. In the past many owners have tried to defeat covenants by claiming that registration formalities have not been complied with. However, recent cases have highlighted that there is another way to deal with problem covenants, namely where the imposition of the covenant was outside the scope of a local authority’s powers.
Contrasting decisions came from cases dealing with houses sold under the "Right to Buy" scheme. Covenants were imposed preventing use for any purpose other than a single private house. The decisions hinged on the Council’s intentions at the date of sale. In the first case, R v Braintree District Council ex p. Halls, the new owner wanted to sell part of his property for development. The Council agreed to release the covenant on payment of 90% of the increased value. The imposition of the covenant was held to be outside the scope of the "Right to Buy" legislation as the Council always intended to share in the future profits from development. The property was therefore free from the covenant.
However, in the second case, Carodon District Council v Paton, the properties were used for holiday lettings and not as 'homes.' The imposition of such a covenant was held to be lawful - the Council’s reason was to retain the residential nature of the area and this fell within the Council’s powers.
The information and opinions contained in this publication are provided by national law firm Hammond Suddards Edge. They should not be applied to any particular set of facts without seeking appropriate legal or other professional advice.
