The case of a cynical breach – a warning to developers

Ignoring restrictive covenants and going ahead with a development knowing that it will be in breach of them, is either brave or foolish and applying to modify or discharge these covenants after the event is also risky.  This dilemma was highlighted in the recent case of Alexander Devine Children's Cancer Trust v Housing Solutions Ltd [2020] when the court had to decide whether restrictive covenants should be modified after houses had been built in breach of them.

Developers frequently apply to the Upper Tribunal to alter or remove covenants under section 84 of the Law of Property Act 1925, but this is the first time an application under section 84 has been decided by the Supreme Court.  So what can be learnt from this important case?

Facts of the case

In 1972, the land in question (Application Land) was sold to an adjoining landowner to form part of a larger plot of land known as the Exchange House site.  As part of the sale, two restrictive covenants were imposed on the Application Land to benefit the retained adjoining land:

  • No building or structure to be built on the land
  • The land can only be used for car parking

In 2012, a parcel of land which had the benefit of the restrictive covenants, was gifted to the Alexander Devine Children's Cancer Trust (AD) in order for a children’s hospice to be built.  Shortly afterwards, Millgate Developments bought the Exchange House site and obtained planning permission to build 23 affordable houses, 13 of which would be built on the Application Land in breach of the covenants.

After completing the development in 2015, Millgate applied to the Upper Tribunal (UT) for the modification of the restrictive covenants under section 84 of the Law of Property Act 1925.  AD objected as the development would affect the privacy of the hospice as some of the houses would overlook the garden and wheelchair walk.  The UT granted Millgate’s application on the basis that the covenants impeded a reasonable use of the land and such impediment was against the public interest.  AD successfully appealed to the Court of Appeal.  Millgate then sold the development to Housing Solutions Ltd who appealed to the Supreme Court.

Supreme Court’s decision

The Supreme Court dismissing the appeal, considered the relevant grounds in section 84 and held:

  • Millgate could have avoided being in breach of the covenants if it had applied for planning permission for that part of the Exchange House site which excluded the Application Land. The court took the view that it is important to deter those who create unnecessary conflict when they could have used an alternative viable option.
  • Millgate’s argument that upholding the covenants would be contrary to public interest as social housing was needed also failed. Had Millgate applied to the UT for modification of the covenants before it had started to build, it is unlikely that it would have satisfied the “contrary to the public interest” ground.  In other words, the developer should not be rewarded for presenting the court with a fait accompli when it was aware that building the houses was a "cynical breach" of the covenants.

Learning points

This case shows that the courts will take a dim view of developers who knowingly commit a breach and then try to profit from it.  Although the Supreme Court did not go so far as to say that a “cynical breach” would always be regarded as outweighing the public interest ground in section 84, it will be a factor which the UT will take into account.  Even the argument that the 13 social housing units which had already been built would “go to waste” if the covenants were not removed did not succeed.

Importantly, the ruling shows that covenants restricting the use of land can only be unilaterally discharged in exceptional circumstances and the fact that planning permission has been obtained will not automatically mean that this will happen.

A well-advised developer should carefully consider the likely impact of any covenants at an initial stage and whether they can be varied or released through negotiation with those having the benefit.  If there is no option other than to apply to the UT then an application should be made sooner rather than later – depending on the circumstances, possibly before planning permission is sought but certainly before building commences.


We are hosting a series of webinars focusing on key legal issues, taking place every day from 18-22 January 2021. To register or find out more about our Property and Construction webinar, please click here.

Our use of cookies

We use necessary cookies to make our site work. We'd also like to set optional analytics cookies to help us improve it. We won't set optional cookies unless you enable them. Using this tool will set a cookie on your device to remember your preferences. For more detailed information about the cookies we use, see our Cookies page.

Necessary cookies

Necessary cookies enable core functionality such as security, network management, and accessibility. You may disable these by changing your browser settings, but this may affect how the website functions.

Analytics cookies

We'd like to set Google Analytics cookies to help us to improve our website by collection and reporting information on how you use it. The cookies collect information in a way that does not directly identify anyone.
For more information on how these cookies work, please see our Cookies page.