Whitgift Homes Ltd & Ors v Pauline Stocks & Ors

A building scheme requires a defined area and sufficiently disclosed obligations. Each purchaser must know the extent of the reciprocal burden and benefit. A large development may contain one or more schemes, and individual plots may fall outside them, but uncertainty about which properties are included is fatal.

Separately, the benefit of a restrictive covenant may be annexed under section 78(1) of the Law of Property Act 1925 to identifiable land retained by the covenantee. Express words that the covenant benefits the retained estate, supported by admissible extrinsic evidence identifying that estate, may suffice.

A developer sold plots on a large residential estate subject to similar restrictive covenants. The appellants proposed a development of two plots which would breach those covenants. Fifty-five neighbouring owners claimed that the restrictions were mutually enforceable under a building scheme. Three of them also claimed the benefit by annexation because their properties had been sold after the burdened plots.

Neuberger J held that a building scheme operated among properties in the northern part of the estate and that the benefit had also been annexed to the three later-sold properties. He declared that all the respondents could enforce the covenants.

The appellants challenged both conclusions. The central questions were whether the evidence defined an area within which reciprocal obligations operated and whether section 78(1) of the Law of Property Act 1925 annexed the benefit to the retained land.

1. Appeal allowed on the building-scheme issue. Jonathan Parker LJ, with whom Bodey J and Judge LJ agreed, held that reciprocity requires a defined area and sufficiently disclosed obligations. A purchaser must be able to ascertain the properties whose owners may enforce the restrictions and the properties against which the purchaser may enforce them.

2. The evidence did not establish a scheme covering the whole estate. Nor did it define a smaller scheme confined to the triangular northern site. It gave no satisfactory answer as to whether the scheme stopped at that site or extended to adjoining properties. The uncertainty about which plots were subject to the asserted local law was fatal.

3. A large development may contain one or more enforceable building schemes. Some parts, or even a single plot, may lie outside a scheme. Whether the required definition exists is a question of fact. However, a scheme which is ineffective or unenforceable between the owners of the properties said to be included cannot satisfy the equitable doctrine.

4. The vendor's reservation of freedom to lay out or use neighbouring land did not establish a scheme. Such a clause takes its meaning from the surrounding circumstances and can point either way. Here, its occurrence in conveyances which did not identify the beneficiary supported the conclusion that no scheme was intended.

5. Appeal dismissed on the annexation issue. The references to the developer's estate at Croydon were apt to identify the parts retained when the covenants were taken. Extrinsic evidence clearly identified that land. By section 78(1) of the Law of Property Act 1925, the covenants were deemed to have been made with the developer and its successors in title. The benefit was therefore annexed to the three properties sold after the burdened plots.

6. The restrictions touched and concerned the retained land. Where parties expressly state that a restriction benefits the covenantee's retained land, the court will normally regard it as capable of doing so. The three later purchasers could enforce the covenants, but the remaining respondents could not do so through the alleged building scheme.

1. Court of Appeal (Civil Division): By [2001] EWCA Civ 1732, unanimously allowed the appeal on the building-scheme issue and dismissed it on the annexation issue. Permission to appeal to the House of Lords was refused to both sides.
2. High Court, Chancery Division: Neuberger J held that a building scheme existed and that the benefit of the covenants was annexed to three later-sold properties. He declared that all respondents were entitled to enforce the covenants. No citation is stated in the judgment.