Supreme Court’s input required on dealing with restrictive covenants

All eyes will be on the Supreme Court this July, as it hears the developer’s appeal against the Court of Appeal’s decision in Alexander Devine Children’s Cancer Trust v Millgate Developments Limited and others [2018] EWCA Civ 2679, a case in which a developer built social housing in knowing breach of covenant. The Court of Appeal refused to allow the developer’s application for modification or discharge of the restrictive covenant against building. Will the Supreme Court uphold the Court of Appeal’s decision, bolstering the rule that a retrospective application in these circumstances for discharge of a covenant will be unsuccessful? Or will it agree with the decision of the Upper Tribunal at first instance, and allow modification of the covenant on the basis that impeding the occupation of already built and much needed social housing was against public policy if a sum of money could be paid to the beneficiary of the covenant? It will be the first time that the Supreme Court has considered applications for discharge or modification of covenants using the statutory process, and developers will no doubt want to follow with interest.

We first reported on this case in May 2017. Click here for our blog post at that time, and click here for our fuller discussion of the case when it was heard by the Upper Tribunal.

Restrictive covenants and development

Many sites earmarked for development will be the subject of multiple third party rights, such as covenants and easements. Covenants are agreements between owners of land which either restrict the use of the land (restrictive covenants) or impose an obligation on a landowner (positive covenants). When considering purchasing land for development purposes, title to the land should be fully investigated to find out as much as possible about any existing covenants. It is common to see wording along the lines of “No buildings or erections shall be built on this land and the land shall not be used for any purpose other than an open space for the parking of motor vehicles”. Once a restrictive covenant such as this comes to light, and the land to which it applies and the beneficiary of the covenant has been identified, the next step is to consider the potential solutions and deal with it proactively.

Background to the Millgate case

Unfortunately for the developer in this case, he was not at all proactive in this sense, and this has proved to be a mistake. The developer purchased a large development site, part of which was subject to a restrictive covenant similar to that described above, which prevented the use of that part of the land as anything other than a car park. The developer was aware of the existence of the covenant at the outset, not least because the neighbouring charity with the benefit of the covenant, a children’s cancer trust and hospice, concerned about the reduction in amenity that the hospice would enjoy if housing was built, had informed him. The charity was relying on the restrictive covenant to make sure that its garden and proposed recreational facilities were not overlooked by any housing. In order to meet its planning obligations, the developer built 13 affordable housing units, and after completion, applied to the Upper Tribunal under section 84 of the Law of Property Act 1925, for retrospective discharge or modification of the covenant.

The Upper Tribunal found that although the developer had acted in knowing and deliberate breach of covenant, and although the covenant gave practical benefits for the charity which were of substantial value or advantage, the covenant should be modified to allow the housing to remain on the basis that there was sufficient public interest in making already built and much needed affordable housing available to those waiting for it. The fact that planning permission had been granted for this development strongly supported that.

However the Court of Appeal reversed that decision and reinstated the restrictive covenant.

So what made the difference to the Court of Appeal?

The Court of Appeal was very clear in its position. It disagreed with the lack of weight given to the covenant as a private property right. It also disagreed with the importance given to the grant of planning consent, holding that the public interest in allowing the social housing to remain did not outweigh the public interest in protecting the charity’s contractual rights under the restrictive covenant. It was possible for the developer to have built the social housing units on land that was not subject to restrictive covenants, whilst still meeting its planning obligation to deliver affordable housing, but it chose not do this, or to pay the local authority a £1.6 million contribution to provide social housing on an alternative site. Furthermore, the developer acted in a way which was “deliberately unlawful and opportunistic” in waiting until the housing units were constructed before applying for discharge of the covenant, and it should not be able to rely on its own unlawful conduct in having built the housing units as a reason to justify why the covenant should now be modified. The developer had long been aware of the existence of the covenant and should either have tried to negotiate a release with its beneficiary or pursued its section 84 application at a much earlier stage in the development process. The Court also held that the fact that the charity did not object to the grant of planning permission did not prevent it from opposing the discharge of the covenant, as it was entitled to rely on its private contractual rights.

What now for developers?

The Court of Appeal sent a strong message to developers not to wilfully build on land in breach of a restrictive covenant. Whilst it made clear that the decision was not intended to be a punishment, it concluded that it would not incentivise law breaking. The case shows that proper due diligence and planning at an early stage in the development process will avoid unnecessary delays and costs in the long term. A developer wishing to build on land subject to a restrictive covenant that impedes his development scheme has four options, which should be considered before any works start:

  1. modify the scheme so not as to infringe the covenants;
  2. make an offer to the beneficiary of the covenants for a release, on the understanding that this may then turn into a negotiation over a period of time;
  3. apply to the Upper Tribunal at an early stage in the development plans for modification or discharge of the restrictive covenant under section 84; and
  4. consider applying for indemnity insurance to cover against the risk of enforcement. Whilst this can be a cost effective way of managing the risk of enforcement and the amount of damages which could be payable and/or the cost of demolition or alteration of part of the development scheme, as well as any reduction in the value of the beneficiary land, insurance is not always available.

Section 84 has an important role in allowing for potential development, at a time when housing is in short supply and development for residential purposes is being encouraged. Clarity on the Supreme Court’s position on balancing the public policy grounds in section 84 and the wider interests of the public, and the rights of beneficiaries of covenants, would be much welcome. July cannot come soon enough.

For more information please contact:

Matthew Bonye
Matthew Bonye
Partner and head of real estate dispute resolution, London
+44 20 7466 2162
Rhian Arrenberg
Rhian Arrenberg
Professional support lawyer, real estate dispute resolution, London
+44 20 7466 2594

Impact of net-zero by 2050 on aviation and airport development

In May, we reported on the outcome of five challenges to the Secretary of State’s decision to designate the Airports National Policy Statement (ANPS), which sets out the Government’s policy support for expansion of Heathrow Airport. All five challenges were dismissed by the High Court. Since then, the Court of Appeal has made an order allowing a number of claimants, including Plan B and Friends of the Earth, to challenge the High Court’s rejection of their claims. A hearing is due to be held on 21 October 2019, which will involve the Court of Appeal hearing the full application for permission to appeal and, if permission to apply for judicial review is granted on that application, the claim for judicial review. One of the issues that will be taken into consideration at the hearing is the change in UK law since May 2019, committing the UK to legally binding net-zero emissions targets. Yesterday, the Committee on Climate Change (CCC) wrote to the Secretary of State for Transport in response to the Government’s request on how to bring international aviation and shipping (IAS) emissions within the UK’s net-zero target.

This post considers the impact of the new commitment to net-zero by 2050 on the forthcoming Court of Appeal hearing. It also considers the CCC letter of 24 September 2019 and outlines the next steps in the Heathrow expansion consultation.

Impact of new net-zero targets

As these are judicial review proceedings, the Court of Appeal will not be able to rule on the merits of the APNS, such as increasing airport capacity or whether a third runway at Heathrow should proceed. It will, however, consider the grounds of the judicial review claims, which include climate change considerations. This will likely be one of the more closely watched issues that the Court of Appeal is dealing with, particularly given the recent legal developments to set a net-zero target by 2050 (see below).

In the High Court, the claimants unsuccessfully argued that the Secretary of State acted unlawfully by not taking into account the Paris Agreement. The High Court held that the Paris Agreement does not form part of UK law and so, while the UK has ratified it, it has no effect in domestic law until Parliament decides if and how to incorporate the agreement’s target to hold the increase in global average temperature to well below to “well below” 2ºC above pre-industrial levels and to pursue efforts to limit that increase to 1.5ºC.

Since the High Court’s rulings in May, Parliament has passed legislation to commit the UK to a legally binding target of net-zero emissions on 1990 levels by 2050, which based on the Committee on Climate Change’s (CCC) Net Zero Report[1], is the appropriate UK contribution to the Paris Agreement.

Now that there is UK law which reflects the UK’s commitment to the Paris Agreement, all eyes (including the eyes of proponents of other nationally significant infrastructure projects in the pipeline) will be on the Court of Appeal and how it decides to grapple with this legal development when considering these judicial review applications.

CCC recommendations on IAS emissions

The CCC’s latest advice on dealing with international aviation and shipping emissions builds on the measures and policy recommendations foreshadowed in the CCC’s Net Zero Report published in May 2019. The recommendations include formally recognising international aviation and shipping emissions in the 2050 net-zero target and building on global initiatives to achieve significant emissions reductions in both sectors. The CCC believes that aviation is likely to be the largest emitting sector in the UK by 2050 even with strong progress on technology and limiting demand but recognises the difficulty in achieving emissions reductions in this sector due to the significant lead in time for technological developments that would result in emissions reductions. The policy recommendations include managing growth in both demand and airport capacity which if implemented, will likely have impacts across the entire sector including for airline and airport operators, as well as consumers who have for so long benefited from cheap short-haul flights.

Regarding airport capacity specifically, the CCC recommends that the Government’s airport capacity strategy should be assessed in the context of the net-zero target and foreshadows that current planned additional airport capacity growth at London airports (including the third runway at Heathrow) will leave little room for growth at non-London airports. This indicates that any capacity restrictions which may be implemented as a result of these recommendations may not apply to the Heathrow expansion, or to other current planned expansion projects at London airports.

We have prepared a more detailed summary of the CCC Letter of 24 September 2019. Please contact us if you would like to receive a copy.

Heathrow consultation

Meanwhile, Heathrow’s statutory consultation on its masterplan for expansion closed on 13 September. This consultation sought feedback on the future layout of the airport, including the new runway and other airport infrastructure such as terminals and road access.

Heathrow’s application is expected to be submitted to the Planning Inspectorate mid-2020. Once the application is received, the Planning Inspectorate will review the application and decide whether to accept if for examination. All application documents will be published on the Planning Inspectorate’s Expansion of Heathrow Airport (Third Runway) project page.

It will be interesting to see how Heathrow deals with impacts on climate change in light of the above, and the impact of expansion on airport emissions in particular.

[1] Net Zero: The UK’s contribution to stopping global warming, Committee on Climate Change (May 2019)

Author: Julia McKeown, Associate (New Zealand), planning, real estate

For further information please contact:

Julia McKeown
Julia McKeown
Associate (New Zealand), planning, London
+44 20 7466 2321
Catherine Howard
Catherine Howard
Partner, planning and environment, London
+44 20 7466 2858

Amending the status quo on reserved matters approvals

Making amendments to details submitted as reserved matters on large development schemes can pose difficulties – until now there has been no specific authority that non-material amendments could be made to reserved matters approvals (RMAs), although it has frequently been done in practice. A recent Court of Appeal decision, R (on the application of Fulford Parish Council) v City of York Council [2019] EWCA Civ 1359, has the potential to make things a lot more straightforward, providing authority both for non-material amendments to RMAs (save for the extension of time) and for the conditional grant of RMAs.

Background

Fulford v York relates to a residential scheme on land at Germany Beck in Fulford, York, which has been the subject of more than one challenge. The issue at the heart of this case is the power of a local planning authority under section 96A of the Town and Country Planning Act 1990 (1990 Act) to amend a planning permission relating to land in its area, provided it is satisfied that the change is not material. The question for the Court of Appeal to consider was whether the power under section 96A could not extend to reserved matters approvals because such approvals are not “planning permissions”.

Fulford argued that it was unlawful for the local planning authority (York) to approve a non-material amendment to a condition attached to a RMA because section 96A did not empower York to make that decision. This was because, they argued, an approval of reserved matters is not a planning permission. The thrust of Fulford’s argument was that legislation and case law maintain a clear distinction between a “planning permission” on the one hand and an “approval” on the other, and nowhere in the 1990 Act does it say that the approval of reserved matters is an application for planning permission.

Lewison LJ, who gave the leading judgment, accepted that the approval of reserved matters is not, itself, a planning permission and that an application for such approval is not, itself, an application for planning permission; however, he held that the “planning permission” to which section 96A refers is the package consisting of the grant of planning permission itself, together with any conditions to which the grant is subjected, whether the conditions are imposed at the time of or subsequent to the grant of permission. On this point, Lewison LJ confirmed that it is lawful for local planning authorities to give conditional approval to reserved matters, provided of course that such conditions are within the scope of what has been reserved at the outline stage for subsequent approval. Lewison LJ went on to state that “an application for an amendment to an approval (or conditional approval) of reserved matters is an application for alteration of an existing condition; which is expressly permitted by section 96A(3)(b)”.

The decision makes clear that the one condition that cannot be overridden using section 96A powers is a condition limiting the time within which development must be begun or an application for the approval of reserved matters must be made (section 73(4) of the 1990 Act). However, LJ Lewison saw no good reason for outlawing non-material changes made after the reserved matters time limit if the original approval of reserved matters had been made within the relevant time limit.

A persuasive point made by Mr Cannock QC for the developer was that in order for a local planning authority to decide whether to exercise its powers under section 96A it must be satisfied that the proposed change is not material. Whilst materiality was not at issue in Fulford v York, Mr Cannock submitted that in order to carry out this assessment, the local planning authority cannot merely consider the original outline permission and its conditions; it must also consider the details of reserved matters that have been subsequently approved. Mr Cannock made the point that “[i]f a developer were to ask: what development is permitted by the outline permission, the only possible answer is that the permitted development is to be found in the package consisting of the outline permission, any approval of reserved matters, and any subsequent non-material changes.”

Comment

This decision should be welcomed by developers who make use of outline or hybrid planning permissions. Section 96A powers were introduced almost 10 years ago with the intention of building flexibility into the planning system; however, because of the ambiguity in the 1990 Act as to whether non-material amendment applications can apply to reserved matters approvals, planning professionals and local authorities alike have tended to take a cautious approach because of the risk of challenge. This has resulted in an inherent lack of flexibility on larger, more complex mixed-use schemes, which, ironically, are exactly the types of developments that would benefit most from the flexibility offered by the informal section 96A procedure.

It wouldn’t be surprising if this decision ends up in the Supreme Court – not only due to local opposition to the scheme, but also because this decision offers a new perspective on the interpretation of this area of law. But, for now at least, this Court of Appeal decision provides developers, advisers and local authorities with a reasoned justification for a very sensible practice that had been tacitly accepted for years without express authority.

Author: Alistair Paul, associate, planning, London

For further information please contact:

Alistair Paul
Alistair Paul
Associate, planning, real estate, London
+44 20 7466 2252
Matthew White
Matthew White
Partner and head of UK planning practice, London
+44 20 7466 2461

Does the Secretary of State’s failure to give reasons on call-in decisions leave us all in the dark?

Last week, the Secretary of State for Housing, Communities and Local Government (“SoS”), James Brokenshire MP, published a written statement in which he announced that he would no longer give reasons for calling-in or declining to call-in planning applications. This comes just short of six months after the Court of Appeal ruling in SAVE Britain’s Heritage that the SoS’s failure to give reasons in the Paddington Cube planning application was unlawful. In the absence of a common law duty to give reasons (see below), the SoS may now make decisions on whether to call-in or decline to call-in planning applications without the requirement to give reasons. We explore below what this means for applicants and other interested parties.

Power to call-in applications

The SoS has a statutory power to direct that applications for planning permission be referred to him instead of being dealt with by local planning authorities. This is a very wide power.

Despite this, in practice, only around 1 in every 23,000 planning applications is called-in each year. This is because, as set out in the Government’s policy statement in October 2012, the SoS should be very selective about calling-in planning applications and should only consider doing so where the application involves issues of more than local importance.

That call-in policy gives examples of cases where the call-in powers might be used, which include (amongst others) where the development might conflict with national policies on important matters or could give rise to substantial cross-boundary or national controversy. The policy is, however, clear that each case will be considered on its individual merits.

The effect of a call-in

If an application is called-in, a public inquiry will be held before a Planning Inspector. The Inspector will then issue a recommendation to the SoS, who will make the final decision on the application.

The call-in process usually results in higher costs for the applicant and a delay to the determination of the application. For this reason, applicants often seek to resist the calling-in of their applications, particularly where the local planning authority is supportive of the development and willing to grant consent at the local level.

In some cases, the calling-in of the application can in itself impact upon the viability of the scheme, a current example being where the delay will push the decision date beyond the coming into force of the Mayoral Community Infrastructure Levy 2 on 1 April 2019 (see our previous blog post of 5 March 2019).

The requirement to give reasons

In December 2001, the Government announced that it would, from that date, give reasons for decisions not to call in planning applications. That statement was confirmed in March 2010. However, there followed a number of instances in which the SoS’s reasons for his decision not to call-in an application were criticised. In one case involving a proposed application for development in Westminster, the reasons were found by the High Court to be plainly wrong on their face. This prompted an about turn by the Government in 2014, when the Government decided that it would actually be more prudent not to give reasons.

However, this change of practice was not widely publicised and in 2018 the Court of Appeal in Save Britain’s Heritage v the Secretary of State for Housing, Communities and Local Government held that the SoS’s failure to give reasons for his decision in March 2017 not to call-in the Paddington Cube planning application was unlawful. Lord Justice Coulson held that there was a legitimate expectation that reasons would be provided based on the Government’s 2001 unequivocal promise, which had not been publicly withdrawn.

Following the judgment, SAVE Britain’s Heritage applauded the Court of Appeal’s decision and announced that it was a major victory for openness and transparency. However, just short of six months later, the Government officially withdrew the 2001 statement. In the absence of a common law duty to give reasons (see below), the SoS may now make decisions on whether to call-in or decline to call-in planning applications without the requirement to give reasons.

What are the implications of this written statement?

From the perspective of the rule of law, it is difficult to reconcile a power that is subject to a published policy stating when the decision maker will exercise that power, with the absence of a duty by the decision maker to publish his reasons for doing so. What purpose does the SoS’s call-in policy serve if he cannot be held accountable for decisions made ostensibly in accordance with that policy? The courts have held that a decision to call-in an application can only be challenged where it is “wildly perverse”, which is a very high bar. What is to stop the SoS ignoring his own policy all together if he does not have to give reasons for his decisions and cannot be challenged in the courts?

In the absence of reasons, applicants and interested parties are left in the dark as to why the SoS made his decision. Pursuant to the “makes no difference” principle, the court must refuse relief in judicial review proceedings if it is highly likely that the outcome would not have been substantially different if the conduct complained of had not occurred, unless the granting of relief is appropriate for reasons of exceptional public interest (for further information on this, see the HSF Administrative and Public Law team’s e-bulletin of 30 January 2019). Without reasons to explain why the decision was made, it will be hard to determine whether the SoS would have made the same decision to call-in or not call-in the application but for the legal flaw in the decision-making process alleged by the claimant.

In the SAVE Britain’s Heritage case, Lord Justice Coulson was clear that the challenge succeeded on the basis of legitimate expectation only and not as a result of a common law duty to give reasons. He held that there are “no good legal policy reasons (let alone strong ones) which require reasons to be given for a decision which is procedural only, and which is not directly determinative of the relevant parties’ rights and obligations“. He believed that it would be unnecessary and burdensome if the SoS had to give reasons every time he decided a straightforward question of who should deal with the planning application (the local authority or the SoS).

However, that fails to give due regard to those applicants whose schemes are significantly impacted by the calling-in of an application. Whilst it is only a procedural decision, it is one which may in itself determine whether or not a scheme can be brought forward and thus have much more far-reaching implications than simply whose name is put on the decision notice.

Author: Charlotte Dyer, Of Counsel, Planning, Real Estate, London

For further information please contact:

Charlotte Dyer
Charlotte Dyer
Of Counsel, Planning, London
+44 20 7466 2275

 

 

Court Interprets Obligation in a Standard Form Construction Contract to use all due diligence to obtain planning approvals

A commonly encountered provision in the standard form JCT Building Contract (2005 edition) was interpreted by the Court of Appeal to include an implied obligation on a developer to use “all due diligence” to obtain planning approvals. The phrase “all due diligence” was held not to require the developer to ensure that planning approvals were in fact granted, or that they were granted within sufficient time to prevent delays. At most it required the developer to make a timely application containing sufficient information and to co-operate with the Local Authority during the planning process.

The decision demonstrates the limits of the obligations commonly entered into by developers in the UK in relation to planning approvals.

1. Facts of the case

2. Developer responsible for Planning Approvals

3. Obligation to exercise “all due diligence”

4. Delays caused by Local Authority

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“Vi for Victory” for landowner in right of way dispute

Authors: Matthew Bonye, Partner and Head of Real Estate Dispute Resolution, London and Judith Smyth, Associate, Real Estate Dispute Resolution, London

In a reassuring judgement for landowners, the Court of Appeal has ruled this week that clear and visible signage can constitute a sufficient objection to prevent unauthorised users claiming a right of way over land in the form of a prescriptive easement (Winterburn v Bennett [2016] EWCA Civ 482).  

1. Background

2. Decision

3. Comment

 

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The return of “Vacant Building Credit”

Authors: Matthew White, Partner and Head of Planning, London and Lucy Morton, Professional Support Lawyer, Planning, London

The world of planning has been busy: the new Mayor of London is making promises including measures to improve air quality and to introduce a long term strategic target of 50% affordable housing, the Housing and Planning Act has received Royal Assent (although the final version has not yet been published at the time of writing), a new Neighbourhood Planning and Infrastructure Bill has been announced and a Court of Appeal decision has restored the 'vacant building credit' and the exemption for small sites from affordable housing requirements.

It's the last of these that we will look at today.  

The restored Government policies state that:

–           Vacant building credit can be claimed for empty buildings brought back into lawful use or demolished for redevelopment: the developer should be offered a financial credit equivalent to the existing gross floorspace of those vacant buildings when the local planning authority calculates any affordable housing contribution which will be sought; and

–           Exemptions from affordable housing requirements can be claimed for small sites (10 units or less and which have a maximum combined gross floorspace of 1,000 sqm).

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