Full property update

Option notices

A letter referring to the extension of an option period can be a valid notice to extend the option even when it was never intended to be such a notice.

A letter asking for solicitors' client account details was held to be a valid extension of an option period, even though it did not specifically request that the option period be extended. The option was granted for ten years but could be extended for a further five years. This was provided notice was given to the landowner or their solicitors before the expiry of the initial ten year period and upon payment of a fixed sum to the landowner.

Prior to the expiry of the option period, the developer's solicitors wrote to the landowner's solicitors referring to the extension clause in the Option Agreement. They stated that they would shortly be placed in funds for the required sum and requested the solicitors' bank account details so that payment could be made. The question arose as to whether the letter constituted a valid notice to extend the option period.

The court found that it did. It applied the test in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd, holding that a reasonable recipient of the letter would have been left in no reasonable doubt that the developer was seeking to extend the option period.

It seems likely on the facts of this case that the developer's solicitors did not intend the letter to be the actual notice extending the option. This is because they served another notice a few days later, although this was out of time owing to a mistake in calculating when the option period expired. Nonetheless, this did not prevent the first letter operating as a notice because the relevant issue was not the intention of the sender of the notice, but how it would be interpreted by the receiver.

The first instance decision in this case came out earlier this year. The High Court's judgment has now been upheld by the Court of Appeal.

Rennie v Westbury Homes (Holdings) Ltd

Things to consider

Clients who are still uncertain about whether or not to exercise their rights under option agreements or leases should take care in correspondence with the other side. This is particularly the case when the time limit for exercise of the option is drawing near.

A simple statement that "this letter is not intended to constitute notice pursuant to clause [] of the agreement" should suffice.

Easements

The case of Moncrieff v Jamieson was decided under Scottish law and concerned servitudes, the Scottish equivalent of easements. However, the House of Lords stated that there was no difference for the purposes of the case between the common law in England and Wales relating to easements and the common law in Scotland relating to servitudes.

Whether a right to park a car is capable of being an easement has long been a grey area in English law. Previous case law has found against it on the basis that something cannot be an easement if it amounts to exclusive possession of the land by the dominant owner such that the servient owner is "ousted" from their property altogether. The parking of a car in an allocated space is thought by some to amount to such ouster, with the result that such a right is incapable of being an easement.

The facts of the case were relatively unusual. The dominant land was situated at the bottom of a steep slope by the sea. As such, it was not possible for vehicles to reach it. It was accessible only on foot, by a gate and some steps from the servient land. When the dominant land was separated from the servient land in 1973, the conveyance included a right of access from the public road across the servient land.

It was common ground between the parties that this right of access included access with vehicles as well as on foot. They also agreed that it allowed the dominant owner to turn, load and unload, and set down and pick up passengers. However, the owner of the dominant land claimed that the right of access also entitled him to park his car on the servient land as he could only access his property on foot from the servient land. Otherwise he would have to take the car back up to the main road, park it there and walk back again.

The House of Lords endorsed the decision of the lower court. This was that the right of access had, as an incident of it, an accessory right to park such vehicles as are reasonably incidental to the enjoyment of the access to the dominant land.

The case is important for two reasons. The first is that it contains some authoritative dicta on whether the right to park a car is capable of being an easement. Many leases contain such rights. The second reason is that it considers the circumstances in which additional rights will be implied into an expressly grant easement.

Can a right to park a car be an easement?

The previous case law can be summarised by a test formulated by the case of London & Blenheim Estates Limited v. Ladbroke Retail Parks Ltd. This is that a right to park a car will not be an easement if the right granted is such that it would leave the servient owner without any reasonable use of his land, whether for parking or anything else.

This test was then applied in Batchelor v Marlow. The court found that an exclusive right to park six cars for nine and a half hours, Monday to Friday, meant that the plaintiff's right to use his land was curtailed altogether for intermittent periods throughout the week. "Such a restriction would make his ownership of the land illusory". For that reason the Court of Appeal rejected the claim to a prescriptive easement.

As a matter of principle, Lord Scott in Moncrieff v Jamieson said that he was in no doubt that a right to park was recognised as a servitude. On the question of whether such a right "ousts" the dominant owner he pointed out that every servitude prevents some use of the servient land.

Lord Scott thought that it was impossible to say that there would be no use that could be made by an owner of land over which he had granted parking rights. He could, for example, build above or under the parking area, or place advertising hoardings or the walls.

Lord Scott thought the test formulated in the London & Blenheim Estates case (whether the servient owner is left with any reasonable use of his land), as applied in Batchelor v Marlow, needed some qualification. He proposed substituting for it a test which asks whether the servient owner retains possession and, subject to the reasonable exercise of the right in question, control of the servient land. Lord Scott held that sole use for a limited purpose is not inconsistent with the servient owner's retention of possession and control, nor inconsistent with the nature of an easement.

On the question of whether the servient owner was "ousted" from their land, Lord Scott thought that it would not make sense, if an area of land can accommodate 9 cars, for the law to recognise an easement allowing the parking of six, seven or eight cars but not nine. However, it was unnecessary to decide the point since any right to park two or three vehicles near the end of the access road in this case would have been over an area significantly larger than that necessary for those vehicles.

Was a right to park ancillary to the easement?

Their Lordships were divided on this point. Lord Hope placed a lot of reliance on the features of the dominant land in this particular case. So, for example, the owners would have to walk about 150 yards, in all weathers and in the dark as well as in daylight, over a significantly steep descent. This would mean, in the case of a mother with very young children, either leaving them unattended at the house while parking the car, or taking the children on foot in such conditions. Lord Hope felt that in this situation, the owner's right of vehicular access would effectively be defeated.

On the other hand, Lord Rodger felt that the geography of the property was simply a matter which any intending purchaser of the house should take into account, and that it would probably affect the purchase price which they were willing to pay.

Lord Rodger accepted that, in principle, the express grant of a servitude of access could carry with it an implied right to park on the servient land if this was essential to make the servitude of access effective. However, he saw no basis for implying into the grant of a servitude of access, which is effective, further rights simply on the basis that they would be for the convenient and comfortable use of the property.

Nonetheless, the views of the majority held sway and the House of Lords found that the right of access had, as ancillary to it, a right to park. It must be remembered that the facts in this case were unusual, since it was impossible to park cars on the dominant land.

Things to consider

Residential developers often prefer to retain car parking spaces within the common parts of the development. The House of Lords' view in Moncrieff v Jamieson was that a right to park a car is in principle capable of being an easement. This should therefore be of assistance to developers facing arguments from purchasers that the car parking spaces should be demised.

Unfortunately on the facts of the case, the House of Lords did not have to go as far as deciding whether this extends to a right to park a car in a single defined space.

Restrictive covenants

Developers will be aware that a procedure exists under section 84 of the Law of Property Act 1925 by which an application may be made to the Lands Tribunal for the discharge or modification of a restrictive covenant.

Less well known is that a similar procedure exists under section 610 of the Housing Act 1985 in relation to the sub-division of residential premises. We will look at the operation of both sections in the context of the latest case law, along with the issue of how compensation under section 84 of the local planning authority (LPA) 1925 is calculated.

Re Vince's application

In this case, the owners of a large 20 room house obtained planning permission to convert it into five separate dwellings, including the construction of a two-storey extension.

The house was affected by a restrictive covenant preventing its use other than as a single private dwelling house in the occupation of one family. It also prohibited interference with the light and air enjoyed by neighbouring properties. One of the neighbours objected to the conversion. The owners applied to the Lands Tribunal for the covenant to be modified so as to allow the development to proceed.

An application under section 84 of the Law of Property Act can be made on a number of grounds:

• That by reason of changes in the character of the property or the neighbourhood, the restriction ought to be deemed obsolete; or
• That the continued existence of the covenant would impede some reasonable use of the land, money would be adequate compensation to the person entitled to the benefit of the covenant and either the covenant secures no practical benefit or it is contrary to the public interest; or
• That the person with the benefit of the covenant consents to its modification; or
• That the proposed discharge or modification will not injure the person with the benefit of the covenant.

If the application is made on the basis that the covenant impedes a reasonable use of the land, the Lands Tribunal is entitled to have regard to the development plan and any declared or ascertainable pattern for the grant or refusal of planning permissions in the relevant area.

In this case the Tribunal found that although the proposed conversion would not materially affect the value of the neighbouring house or the views from it, it would result in increased vehicle movements. This would therefore affect the peace and quiet enjoyed by the neighbouring property. The Tribunal held that it would also result in some loss of light, although placed less emphasis on this as the rooms affected included a utility room and a cloakroom which were "transitory". This was opposed to habitable rooms such as a living room or bedroom. It also declined to take into account any disturbance caused by the building works themselves, on the grounds that this would be temporary and the covenant was concerned with the long-term use of the land.

The Tribunal decided that the covenant continued to secure a practical benefit and that the neighbour would be injured by its modification, within the meaning of section 84. It therefore refused the application.

Lawntown Limited v Mr & Mrs Camenzuli

The developers in Re Vince's case may wish that they had applied under section 610 of the Housing Act 1985 instead. Section 610 applies where:

• Owing to changes in the character of the neighbourhood in which the premises are situated, they cannot readily be let as a single dwelling-house, but could readily be let for occupation if converted into two or more dwelling-houses; or
• Planning permission has been granted which allows the premises to be used as two or more separate dwelling-houses;

And in either case, the conversion is prohibited or restricted by the provisions of the lease of the premises, or by a restrictive covenant affecting the premises.

Any person "interested" in the premises may apply to the court for the terms of the covenant to be varied. While there is a considerable amount of case law on section 84 LPA 1925, very little exists on section 610 HA 1985. This case concerned how the discretion of the court under section 610 to vary a covenant should be exercised.

The existing section 610 is a successor to previous similar legislation. It was originally enacted to deal with the problem of large houses built during the last century which have outlived their purpose as single family dwellings.

Lawntown was a property development company which had bought a semi-detached house with a view to converting it into two flats. It obtained planning permission for the conversion but the neighbours objected on the grounds that this was in breach of a restrictive covenant affecting the premises.

Planning permission had already been granted for the conversion. Lawntown argued that the only factors weighing against the development which the court was entitled to take into account were those the local authority had not already considered in deciding whether to grant planning permission.

The Court of Appeal disagreed, holding that it should have regard to all relevant factors, including those which had already been considered by the local authority. The factors included not just the respective harm and benefit that would accrue to the parties involved, but consideration of matters of wider public policy. The court acknowledged that the property in this instance was not the sort of property for which section 610 had been originally designed. Nonetheless it found that the urgent demand for more housing in London outweighed the objections of the neighbours and modified the covenant to permit the conversion.

Things to consider

Section 610 has fewer conditions attached to it than its equivalent provision in the LPA. Arguably this may mean that a residential developer should use section 610 in preference to section 84 wherever possible.

The disadvantage of taking this route still remains even after the case of Lawntown Limited v Mr & Mrs Camenzuli. There is very little guidance on how the discretion of the court under the section will be exercised and each case will turn very much on its facts.

Winter v Traditional and Contemporary Contracts

In this case it was common ground that the covenant in question should be modified. The only question before the Tribunal was the amount of compensation which was payable to the neighbours under section 84 LPA. The objector was arguing for a share in the development value, as is recognised to be the usual basis of compensation for damages for breach of a restrictive covenant.

The Court of Appeal held that the starting point for the basis of compensation under section 84 is the loss caused by diminution in the value or enjoyment of the objector's property, not the loss of his financial bargaining position.

There is no hard and fast rule as to how that loss is to be assessed, although the "negotiated share" approach is a permissible tool for the Tribunal. The court acknowledged that it may be difficult as a matter of logic to see why impact on the amenity of one property can in any way be related to the enhanced profitability of another. However, this may be the case where a simple estimate of the diminution in value of the objectors' properties is unlikely to be a fair reflection of their subjective loss.

Where that approach is taken, the percentage awarded must bear a reasonable relationship to the actual loss suffered by the objector. The court expressed concern that claims based on high percentages of development value, such as a 50:50 split, were still being advanced by valuers and lawyers. The court commented that this created unrealistic hopes in objectors, thus delaying settlement and aggravating loss and anxiety.

Things to consider

What seems clear following this case is that, while share of development value may be a permissible method of calculating damages for modification of a restrictive covenant under section 84, the percentage applied is likely to be small. An applicant should certainly not regard a share of the profit as their entitlement as a matter of principle.

From the developer's perspective therefore, it may be better to apply under s.84 for the modification or removal of a covenant, rather than to ignore the breach of covenant, proceed with the development regardless and risk being liable for common law damages (which are more likely to be calculated on a percentage of its profits).

This is particularly the case where insurance is unavailable, perhaps because the identity of the person with the benefit of the covenant is known.

Making an application to Land Registry without due cause

The lodging of a unilateral notice against a registered title is usually, though not always, seen as a hostile act. It is to protect an interest in the property held by a third party where the landowner has not consented to an entry being made. However, a third party must have reasonable cause to apply for the entry. If an application is made without reasonable cause, the third party is liable in damages for any loss which the registered proprietor may suffer as a result.

In Anderson Antiques (UK) Limited v Anderson Wharf (Hull) Ltd and another, the defendant company claimed that it had an equitable interest in a parcel of registered land. The claim was argued on the basis of a proprietary estoppel arising from an alleged oral agreement to sell the land made between one of the directors of the defendant on its behalf and a representative of the claimant landowner. The defendant company registered a unilateral notice against the title to the site.

The judge found that the defendant had failed to prove the existence of an oral agreement for sale and ordered that the notice be cancelled. He also stated that the notices had been registered without reasonable cause for the purposes of section 77 Land Registration Act 2002. The result was that the defendant would be liable in damages if the landowner had suffered loss as a result (e.g. because a sale to a third party had been lost or delayed).

Damages under section 77 are payable on the grounds of breach of a statutory duty, which is an action in tort, and the person liable is the person who applied for the entry of the notice on the register. In this case that was the defendant company, which was a special purpose vehicle incorporated for the purpose of the acquisition. However, the director of the defendant company had instructed solicitors to lodge the unilateral notice and had made the statutory declaration in support of the application. As such, he had procured the commission of the tort and was jointly liable in damages.

Things to consider

The registration of a unilateral notice is sometimes used as a bargaining tool, because of the difficulty it can cause for a proprietor which is trying to deal with its land.

The liability of the director in this case seems to have been a device applied by the court to get around the fact that the defendant was a shell company with little or no assets.

However, Anderson Antiques (UK) Limited v Anderson Wharf (Hull) Ltd and another serves as a useful reminder that a person lodging a unilateral notice must have reasonable cause to do so. Those who fail to observe this could find themselves liable in damages.

Planning reforms

A new bill was published on 27 November 2007 which aims "to make the planning system quicker, more transparent and easier for the public". It proposes changes to the process for dealing with major infrastructure projects to deal with "21st century challenges", namely climate change, environmental protection and the need for new homes. The bill will seek to reduce the time for determination of these applications to less than 12 months.

A major role in this revised system will be played by the Infrastructure Planning Commission which will deal with infrastructure projects with national significance. It will also advise the Secretary of State in relation to national policy statements.

The bill proposes changes which will improve public participation and the appeal process. It will also allow local planning authorities to set charges on developments to contribute to community infrastructure projects.

There will be changes to the process for householder applications to make them less onerous.

Changes to the powers of the Mayor of London

The Greater London Authority Act 2007 introduced amended planning powers for the Mayor. The government has published a draft Mayor of London Order, which it proposes to bring into force on April 2008.

Under the Order, applications of strategic importance must be referred by the LPA to the Mayor, who currently has the power to direct the LPA to refuse permission.

This power will remain, but the Mayor would also have the power to determine an application of "potential strategic importance" (PSI), rather than determination by the LPA. The draft order requires that the application is submitted to the Mayor, who has a timetable in which to consider the application and tell the LPA how he wishes to proceed. This consideration is intended to be dealt with inside the current timetable for determination of applications.

PSI applications are the same categories as those which currently have to be referred but with changed thresholds. For example, developments of 150 dwellings or more would be PSI applications.

PSI applications also have to satisfy three criteria:

• A significant impact on the London Plan.
• Significant effects likely to affect more than one borough.
• There are sound planning reasons for issuing a direction, such as the performance of the relevant London borough.

Land Registry consultation

The Land Registry is consulting on two new events which would trigger the first registration of land which is currently unregistered. They are:

• The appointment of a new trustee of unregistered land held in trust; and
• The partitioning of unregistered held in trust amongst the beneficiaries of the trust.

The consultation closes on 29 February 2008. A copy of the consultation can be found here.

Things to consider

Discounts on Land Registry fees are available for the voluntary registration of unregistered land.

Registration can also provide protection against the acquisition of title by squatters. If you would like to discuss voluntarily registering any of your properties please contact Mark Chester.

This analysis was written by Sarah Allen, associate in Wragge & Co's Real Estate group.