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28th July 2017

What is Retained Land?

A recent case has highlighted the need for careful drafting when dealing with the sale of multiple plots at different times. 

In this case, Mr and Mrs Jones (“the Jones”) agreed to dispose of two separate plots to a developer (“Developer”) in two stages – the first plot by way of an unconditional contract and the second plot as a conditional contract.

As part of the terms negotiated, it was agreed:

(i) the land being retained by the Jones would be burdened by a restrictive covenant such that no activity could take place on that land which could cause nuisance or annoyance or otherwise materially affect the use and enjoyment of the land being sold to the Developer for residential purposes (“the Jones Restrictive Covenants”); and
(ii) the land being sold to the Developer could not be used for any purpose other than residential

The unconditional contact completed in 2002 and the conditional contract completed in 2003.

The contract for the 2003 disposal contained a condition by virtue of which if following completion of the sale, a barn that was situate on that plot was demolished, then a strip of land which comprised of 4metres in width and which lay between the land retained by the Jones and the land transferred to the Developer (“the Strip”), would be transferred back to the Jones.

The Developer built a residential home on the land it had acquired and sold all of the land to Mr and Mrs Oven (“the Ovens”).

As during this process, the barn had been demolished by the Developer, in accordance with the terms agreed, the Ovens sought to transfer the Strip back to the Jones however they sought to impose the Jones Restrictive Covenants in the transfer documentation which the Jones refused to accept.

The Jones in the meantime had commenced retaining pigs on their land and on one occasion allowed their pigs onto the Strip.

The Ovens objected to this use on the basis that it was attracting flies, smell and noise and sought to contend that the Strip ought to be caught by the Jones Restrictive Covenants.

If this is correct then no agricultural activities could be carried out on the land owned by the Jones which may be objected to by a residential occupant and the Jones would have to stop retaining pigs on all of their land.  As the Strip lay immediately adjacent to the home of the Ovens, they contended the Strip out to also be subject to the Jones Restrictive Covenants.
 
The Jones however argued that the Strip could not be burdened by the Jones Restrictive Covenants because by operation of law, when benefitting and burdened land is vested in one person, then any restrictive covenants imposed on the burdened land will be extinguished.

Applying this principle, the Jones argued that the Strip and the land which had the benefit of the Jones Restrictive Covenants had both vested in the Developer on completion of the 2003 transfer and as such the Jones Restrictive Covenants (insofar as they applied to the Strip) had in fact been extinguished.  Neither party argued this point.

There also had been no provision made in the drafting of the documents by virtue of which the parties could seek to re-impose the Jones Restrictive covenants in the event of the retransfer of the Strip.

When the matter went to Court, the Courts however were willing to aid the Ovens and uphold the intention of the parties at the time of the original deal. 

As such they concluded that the definition of “retained” land in the 2003 transfer should be construed to include land that might later be transferred back to the Jones which would then capture the Strip and make it subject to the Jones Restrictive Covenants.

The Courts took the view that if this was incorrect then a term should have been expressly provided in the transfer documentation that the Strip once transferred back to the Jones, ought not to be subject to the same restrictive covenants.

It also took the view that the intention of the parties was clearly to protect the land being sold to the Developer and if the Restrictive Covenants are not imposed on the Strip then the land which is closest to the land that had been sold and therefore needing the most protection, would actually not receive this benefit which would clearly defeat the intention of the parties and would be an absurd situation to arise.

This case is interesting for many reasons including that in rare circumstances, the Court is wiling to step in and construe matters beyond what is expressly agreed in the documentation. 

Importantly it also highlights the need to ensure that there is careful consideration in drafting documentation when parties enter into agreements.

For further information on this or other development matters, please contact Bela Zavery on 0207 400 5032