Frontier – restrictive covenants

Frontier Estate Limited (Frontier) has secured planning permission in respect of a 2 ½ storey, 71 bed care home. However, part of the land upon which the development was intended to be implemented was subject to restrictive covenants benefitting adjoining land which was owned by national housebuilders. That land was part of a large housing estate which had recently been completed, but the housebuilders had retained the benefit of the covenants and sought to prevent the implementation of the care home scheme.

The housebuilders advised that they would only release the benefit of the covenants in return for a significant sum of money which was calculated on a ransom basis. They also argued that the care home development would have an adverse impact on their proposed care home, albeit that development was intended to be implemented on land other than that benefitting from the covenants. In this regard, they advised that they intended to injunct any development and would be seeking substantial damages.

DWD advised Frontier that they should seek statutory modification or discharge of the covenants and that, if successful, the calculation of damages in lieu of such amendment would disregard any ransom potential. Furthermore, the benefit of the covenants could not be extended to protection of the housebuilder’s proposed care home as it lay on other land. Negotiations with the housebuilders were unsuccessful, consequently DWD liaised with Frontier’s legal advisors and commenced a reference to the Upper Tribunal Lands Chamber. As part of this DWD submitted a pre-reference Report setting out full details as to the history and practical benefits secured by the covenants concluding that they were of no significant benefit and any statutory compensation would be nominal.

Following a further period of negotiation, the housebuilders agreed to modify the covenants to enable the care home development to proceed and a nominal sum representing hypothetical damages was agreed.