Restrictive covenants – when to refuse consent

Niki Constantinou and Dannii Wise analyse a High Court case on the reasonableness of a refusal of consent under a restrictive covenant.

A restrictive covenant is a promise from one party (covenantor) that they will restrict the use of the land which they are occupying for the benefit of another party’s land (covenantee).

Some restrictive covenants are absolute, whilst qualified covenants prohibit use without the prior consent of the covenantee (qualified covenants usually expressly state that the consent of the covenantee shall not be unreasonably withheld or delayed). However, what considerations must the covenantee take into account when refusing to give its consent?

The High Court examined these questions in the recent case of Davies-Gilbert v Goacher & Ors [2022] EWHC 969 (Ch).

Facts

The Claimant owned land in East Sussex, part of which benefitted from a restrictive covenant. The Defendant’s land was burdened by the covenant.

The covenant stipulated that the Defendant may “not erect upon any part of the property hereby conveyed any other messuage, erection, building or wall whatsoever without such previous written licence as aforesaid such licence not be unreasonably withheld”.

The Defendant proposed to construct two buildings on the land. However, the Claimant refused to consent insisting that the construction would:

1. have a detrimental impact on the amenity value of the land; and
2. threaten the future use and commercial value of the neighbouring land.

The Defendant believed that the Claimant’s refusal to consent was unreasonable and proceeded with the construction of the two buildings.

Whilst the Claimant maintained their reasoning for refusal, the Defendant argued that the Claimant had assessed “irrelevant considerations” in refusing consent.

Decision

The Court had to fundamentally determine the reasonableness of the Claimant’s refusal to consent and for the first time, the Court also had to tackle the question as to whether the considerations which attributed to the refusal were relevant.

The Court held that the Claimant’s refusal to consent was reasonable taking into account what was concluded to be reasonable considerations in the Claimant’s decision-making process. The Claimant was awarded a declaration to that effect, together with injunctive relief.

Legal Principles

In reaching its decision, the Court provided several legal principles which can now be observed in any case where reasonableness of consent under a restrictive covenant is in question. In summary:

1. the Court must initially establish the reasons behind a covenantee refusing consent;
2. reasons and considerations are not alike. The latter may be potentially broader than the former;
3. the decision-making process of the covenantee must be reasonable as well as the outcome;
4. the covenantee must have excluded extraneous considerations in making their decision However, the refusal will not be automatically rendered unreasonable because of an irrelevant consideration being regarded. This will depend on the weight given to such consideration in the decision-making process; and
5. where there is a refusal for a combination of good and bad reasons, the refusal would still be reasonable if there was at least one single good reason and the covenantee would arrive at the same decision.

Takeaways

• A covenantee will have reasonably refused consent if at least one good reason is provided for in the refusal.
• The reasons and considerations behind the covenantee’s refusal must be examined separately.
• The onus is on the covenantor to prove that the covenantee’s refusal of consent is unreasonable.

Niki Constantinou is an Associate and Dannii Wise is a Trainee Solicitor at Sharpe Pritchard LLP.

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