Millgate Developments Ltd Case

Developers who deliberately breach restrictive covenants will have to pay the consequences because of the recent Court of Appeal decision in Alexander Devine Children’s Cancer Trust (the Trust) v Millgate Developments Ltd and others (Millgate).

Millgate had purchased land, with the intention of building social housing on it, even though the land was subject to a restrictive covenant not to use the land other than as a car park. In breach of the covenant Millgate built 13 affordable housing units to satisfy planning obligations which once satisfied would mean that Millgate could market a nearby luxury development.

The land benefiting from the covenant was owned by the Trust and a hospice for terminally ill children was to be built on the land with plans for peaceful gardens.

After completion of the social houses Millgate retrospectively applied to the Upper Tribunal for the restrictive covenant to be modified to allow the development. The Trust objected.

The Upper Tribunal found in favour of Millgate despite recognising that the practical benefits for the Trust land were of substantial value or advantage because it held that the public interest in making social housing was sufficient to justify modifying the covenant.

The Trust appealed, and the Court of Appeal overturned the decision of the Upper Tribunal. It was their view that the public interest in allowing the social housing to remain did not outweigh the public interest in protecting the Trust’s contractual rights.

Millgate’s conduct was also considered, and the Court of Appeal took the view that Millgate should not benefit from its unlawful conduct in intentionally building social housing in breach of the covenant.

Developer’s should take heed of this judgement as should the Trust enforce its covenant Millgate will either be looking at paying hefty damages in compensation to the Trust or may even be required to pull down the social housing.

If you’d like any further advice, please don’t hesitate to contact a member of Geldards’ Real Estate Team.