Think carefully before using restrictive covenants to secure overage payments!


8 June 2014

By Keri Constantatou

The High Court’s decision in Cosmichome Ltd v Southampton City Council [2013] EWHC 1378 (Ch) which was issued on 23rd May serves as a warning to those relying on restrictive covenants to secure development clawback payments.

The decision is a further example of how the courts are slow to allow a restrictive covenant to be used where it secures a development clawback payment rather than the amenity of the land that it benefits.

The issue is not whether the covenant will be enforceable against the first buyer of the land that is subject to the restrictive covenant; it should be, because they are the contracting party. The issue is whether it will be enforceable against the first buyer’s successor in title and so on.

One way of trying to fix the covenant obligation to a successor in title would be to insert a Land Registry restriction on the proprietorship register of the title. The intention there would be to prevent the registration of a disposition until the disponee had entered a fresh covenant directly with the original seller.

For further information on the expert advice offered by Gepp & Sons in relation to securing the development value of your land, please see our rural services section.

Note: This is not legal advice; it is intended to provide information of general interest about current legal issues.