ANNEXING THE BENEFIT – WHY BATH RUGBY’S FIRST WIN OF THE SEASON IS GOOD NEWS FOR DEVELOPERS

15 / 03 / 2022

For a restrictive covenant to be enforceable against successors in title, a number of technical, legal hurdles need to be overcome. One such hurdle is that the benefit of the covenant must be annexed to the land intended to be benefitted. Modern conveyancing practice  routinely identifies such benefitting land with great particularity – it is commonly identified by reference to a plan, leaving no scope for interpretation or ambiguity. It was not always so, especially with regard to covenants entered into in 1925 or earlier.

One such example can be found on the title of Bath Rugby to the Recreation Ground, the home of Bath Rugby since 1896. Bath Rugby wishes  to replace its existing stadium with a new, larger stadium incorporating various retail and commercial outlets, with associated car parking but a covenant imposed in 1922 provided that  nothing should be thereafter “erected, placed, built or done” on the [site of the existing stadium] “which may be or grow to be a nuisance, annoyance or disturbance or otherwise prejudicially affect the adjoining premises or the neighbourhood.” Bath Rugby understood this to mean that if there was anyone entitled to the benefit of the covenant, it was conceivable that  the proposed new development might breach the covenant. It therefore sought a declaration under section 84(2) of the Law of Property Act 1925 to the effect that there is no-one who can claim the benefit of the covenant.

As we reported in our March 2021 edition, Bath Rugby lost at first instance, the judge deciding that the description of the land as being “the adjoining premises or the neighbourhood” was sufficient  to identify the land which was to benefit because “it is sufficient for the conveyance to describe the land intended to be benefited in terms which enable it to be identified from other evidence” (which the judge interpreted as being a reference to ‘buildings and land of the vendor…adjoining or near to’ the conveyed land).

Bath Rugby appealed. And won. A unanimous judgement of the Court of Appeal handed down in the week before Christmas disagreed with the judge in the court below. It held instead that there must be a ‘sufficient indication’ of the land intended to be benefited by the covenant, either expressly or by necessary implication, and, that the words ‘adjoining land or the neighbourhood’ were neither sufficient, nor could they be construed in the artificial way that the Judge below had done. In the view of the Court of Appeal the words ‘adjoining land or the neighbourhood’ were more apt to describe the area that the prohibited activities were not to affect, rather than being a description of the benefited land. (One might think that to be a fine distinction but the decision makes it clear that, henceforth, it will be far harder to claim that the benefit of an old restrictive covenant has been annexed to specific land where the identification of it is in similarly vague terms).

The judgment is a lengthy one, comprising over 90 numbered paragraphs and running to almost 28 pages. It is perhaps unsurprising that there are nuances in the judgment which may yet lead to further clarification in future cases. By way of example, the Appeal Court judges differed in their views as to what was meant by, the requirement laid down in earlier cases  that the extent of the benefitted land must be “easily ascertainable” and the extent to which having regard to extrinsic evidence to identify the benefitted land is permissible in order to satisfy that requirement.

So what does this mean in practice?

First, it increases the burden on a would-be claimant to show that the benefit of the covenant has been annexed to the claimant’s land where the description of the benefitted land in the deed is less than completely clear. It is not, of course, the only hurdle which a claimant must overcome. It is often forgotten that to be enforceable, the covenant in question must confer a practical benefit for the benefitted land. It is not so very long ago that this writer had to assist a developer client in persuading a landed estate that where the benefitted land was over a mile away from the potential development site, a covenant not to do something on the burdened land that might be or grow to be a nuisance to the apparently benefitted land was not, in reality, of much practical benefit, thereby dashing the estate’s hopes of releasing the covenant in return for a substantial payment.

Secondly, one might think that it will be easier to proceed with the development of sites ostensibly burdened by such old covenants with vague descriptions of the benefitted land without recourse to indemnity insurance cover. However, buyers, tenants and especially mortgagees of such developments, are cautious souls by nature and it would be unsurprising to find that indemnity cover is still required in practice but as the risk for insurers would be much reduced as a result of this case, cover ought to be available at reduced premium rates. We will see!

Thirdly, in a season where previously the only good news for Bath Rugby was the absence of relegation from the Premiership, the win in the Court of Appeal ought to secure the future for Bath Rugby in its original home.