restrictive covenants validity
Discussion
my company recently bought some land subject to restrictive covenants.
reading around the subject, it seems that if the benefiting land and the burdened land have been in common ownership whilst the covenants have been in place (or when they were first put in place), the covenants will have died (or will no longer be enforceable), even if this is not reflected in the title.
in my case, the previous owner of both plots applied the covenants in 2006 when he sold the 'burdened' land to an offshore trust company, of which is the beneficiary. I bought the land from this offshore company with the covenants attached the that previous conveyance.
throughout the period 2006 to now, the previous owner, owned the land benefiting from the covenants and was also the beneficiary of the trust company that owned the burdened land -- in practice, the land was treated as his throughout the period; this is evidenced by planning applications made in his name during this period (ie, where he is the applicant (not the company) and where he gave a site plan showing both plots as one 'whole' plot).
likewise, the whole sale process of the land from the offshore company to my company was undertaken by him, ie, the estate agent refers to him as the client. I have several emails from him during the sales process, answering lawyers questions etc., I have all drawing and architects instructions having been instructed by him etc., I have a statutory declaration stating he is the beneficiary of the trust company
how does this relate to 'common ownership'? do i have enough to question the validity of the covenants?
The planning applications aren't relevant. Anyone can apply for permission on anything, whether owned or not.
Off shore trusts and putative beneficiaries are going to take you into murky, ie expensive legal territory.
Presumably the covenant has been put in place to stop something happening, of which you were aware when you bought the property. The price paid would have reflected that covenant, and it now seems you want to find a back door way to break it without paying the full price to the vendor.
Off shore trusts and putative beneficiaries are going to take you into murky, ie expensive legal territory.
Presumably the covenant has been put in place to stop something happening, of which you were aware when you bought the property. The price paid would have reflected that covenant, and it now seems you want to find a back door way to break it without paying the full price to the vendor.
This is not to be taken as legal advice in any way, but having looked into it more closely, legal ownership by one party and a beneficial ownership under a trust by another party does not count of unity of ownership and as such the restrictive covenants would not be invalid purely for that reason.
That said, if you wanted to get some proper advice and look into it more closely that would be a good idea.
That said, if you wanted to get some proper advice and look into it more closely that would be a good idea.
Ean218 said:
The planning applications aren't relevant. Anyone can apply for permission on anything, whether owned or not.
In his application, he submitted a site plan, showing both plots 'as a whole'. Supporting letters also stated that the object of the planning was 'surrounded by the Applicant's land'.The point being that the covenants were added when he conveyed the property two years previous to the planning application. There is no evidence that the offshore company either sought permission or was required to comply with the covenant at that point (obviously, as they didn't make the application or build anything, he did). How then can the covenant be further applied against my company (as the original beneficiary of the covenant undertook work that he prohibited in his own covenant?).
Ean218 said:
Presumably the covenant has been put in place to stop something happening, of which you were aware when you bought the property. The price paid would have reflected that covenant, and it now seems you want to find a back door way to break it without paying the full price to the vendor.
Not really. The property lies in an area which is currently subject to special planning restrictions. At the point of sale there was no prospect of further developing the site. Also, from my understanding, if the planning scenario were to change, where my company could benefit from an uplift in value due to a positive planning decision, the vendor (or beneficiary) of the covenant only has recourse to claim damages if there is a negative change in the value of their property, rather than any uplift that would accrue with planning.At the moment that is academic. My intentions are simply to refurbish existing structures.
Muncher said:
This is not to be taken as legal advice in any way, but having looked into it more closely, legal ownership by one party and a beneficial ownership under a trust by another party does not count of unity of ownership and as such the restrictive covenants would not be invalid purely for that reason.
That said, if you wanted to get some proper advice and look into it more closely that would be a good idea.
thanks -- this is the crux of the question I need to get proper advice on. As building works were undertaken by the beneficiary of the covenant on the burdened land (even though he was no longer the owner of the land and the works were outside of the scope of what was allowable under the covenant!), my feeling is that this weakens the enforceability or interpretation of the covenant on subsequent owners. That said, if you wanted to get some proper advice and look into it more closely that would be a good idea.
There must be case law for this type of issue, where there is an actual and practical 'unity of seisin' for all intents and purposes, but where the 'legal' ownership is under a beneficial trust. Nothing in my view about the transaction has been 'arms length' - his name and input is over everything, bar the actual signature on the contract.
Muncher said:
I think that's entirely your problem, the legal ownership is distinct.
I'm also not aware of any principle which suggests if you waive enforcement of a covenant against one party that you are then prevented from enforcing it against another party.
I thought the 'intentions' of the vendor who assigned the covenant in the first place would be of relevance., ie, the covenant was put on the land to protect it for the benefit of the vendor. If he subsequently undertakes work (contrary to the covenant) for his own benefit (especially as he no longer owns the land), how does this not undermine his intentions and the strength of his covenant? I'm also not aware of any principle which suggests if you waive enforcement of a covenant against one party that you are then prevented from enforcing it against another party.
isleofthorns said:
I thought the 'intentions' of the vendor who assigned the covenant in the first place would be of relevance., ie, the covenant was put on the land to protect it for the benefit of the vendor. If he subsequently undertakes work (contrary to the covenant) for his own benefit (especially as he no longer owns the land), how does this not undermine his intentions and the strength of his covenant?
You are obviously correct.Go for it - what could possibly go wrong?
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what work did he do ? He put in a planning application - so what - what has that got to do with the price of eggs ? He could put one in that covers your land tomorrow (again) ? The trust is not him. He may well be a beneficiary of it, and could possibly be a trustee, but he isn't it. Ergo, it's not him. I know you don't want it to be true, but you seem to be looking for a reason not to accept what is a fairly basic (legal) truth....
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he built a structure on the land. I understand the trust is not him and vice versa., I am only curious as to whether case law exists around this subject, as this type of 'shadow ownership' must have been tested at some point wrt land tribunals, irrespective of the outcome of the case.
isleofthorns said:
[quote=Muncher
There is case law on it apparently but I don't have details. There is certainly case law whereby subsidiary A and subsidiary B despite being wholly owned by the parent company are not treated as having unity of ownership for covenant purposes.
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thanks -- that's interesting. I'd like to read something like that, and see what the judgement was based on. I can imagine if two companies are operated entirely at arms length, despite the ownership, that this could be sufficient. If however there was a degree of overlap of management, control and decision-making, and the same decision was reached, that would be very interesting!
There is case law on it apparently but I don't have details. There is certainly case law whereby subsidiary A and subsidiary B despite being wholly owned by the parent company are not treated as having unity of ownership for covenant purposes.
[/quote]
thanks -- that's interesting. I'd like to read something like that, and see what the judgement was based on. I can imagine if two companies are operated entirely at arms length, despite the ownership, that this could be sufficient. If however there was a degree of overlap of management, control and decision-making, and the same decision was reached, that would be very interesting!
isleofthorns said:
thanks -- that's interesting. I'd like to read something like that, and see what the judgement was based on. I can imagine if two companies are operated entirely at arms length, despite the ownership, that this could be sufficient. If however there was a degree of overlap of management, control and decision-making, and the same decision was reached, that would be very interesting!
They can have the same ownership, management and control, it makes no difference, only the legal ownership matters.You either need to pay to have it lifted or fight in a land tribunal or accept it. Money talks so if its worthwhile you need to either pay or fight it out. I would look to see how much they would want before fighting it as if you pies them off and aren't friendly they wont want to negotiate. Also there ha to be a cost to fight in a land tribunal thats the next thing to do.
Legal ownership is all that matters not a common management I would think.
Legal ownership is all that matters not a common management I would think.
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