New Case Highlights Risks for Landowners Selling Land to Developers

December 10, 2021


By Catherine Burke

When land is sold to a developer, it’s often agreed that the landowner will receive a share of the uplift in value when the land is developed- this is known as overage. One of the landowner’s main concerns will be to ensure that the obligation to pay them the overage- which could be triggered years down the line- is properly secured.  A recent case has highlighted the risk of using restrictive covenants as a means of securing that overage payment.

Landowners and developers will know all too well that restrictive covenants on land can disrupt or even prevent a development from going ahead.  However, the decision of the Upper Tribunal (Lands Chamber) in Father’s Field Developments Limited v Namulas Pension Trustees Limited [2021] UKUT 169 and [2021] UKUT 252 has shown that a developer can potentially discharge or modify a restrictive covenant that is only made for financial gain with no practical benefits, and so would disregard the overage.

The Facts:

In 2001, Father’s Field Developments Limited (“the Developer”) purchased a golf course as a going concern from Namulas Pension Trustees Limited (“the Seller”).  The transfer contained a restrictive covenant preventing the Developer from carrying out residential development on any part of the land for 30 years without the Seller’s consent -unless any such residential development was occupied only by the Developer’s family members or the golf club’s employees.

The Developer went on to construct 3 houses on the golf course, and made an application to the Tribunal under section 84 Law of Property Act 1925 (“the Act”) to have the covenants discharged/modified- so that the houses could be sold to unrelated third parties. The Seller objected on the basis that the restrictive covenant had been put in place to secure an overage payment in return for their consent.

The Decision:

The Tribunal has the power to discharge or modify a restrictive covenant if it impedes a reasonable use of the land, and if it has no practical benefit of substantial value to the benefitting party (the Seller in this case) under section 84 of the Act.

The Tribunal decided that the proposed residential development would be a reasonable use of the land and that the restrictive covenant put in place by the Seller hampered this use.

A significant factor in the Tribunal’s decision was that the Seller did not retain any land which could benefit from the restrictive covenant.  This suggested that the Seller imposed the covenant purely for financial gain and not to protect the amenity of any land, so there was no practical benefit to the restrictive covenant. The Tribunal held that financial gain alone is not a practical benefit.

It was also pointed out by the Tribunal that the introduction of the restrictive covenant did not affect the purchase price of the property when it was acquired by the Developer.

The Tribunal discharged the restrictive covenant, enabling the Developer to construct and sell the houses on the land for occupation by unrelated third parties. No compensation was awarded to the Seller as the Tribunal decided they had suffered no loss in value by the discharge of the covenant.

Practical implications

The Tribunal’s decision highlights the need for landowners to carefully consider the best way to secure future overage payments. In most cases, the safest mechanism will be an overage agreement rather than a restrictive covenant.

For more information and advice on overage agreements or a related topic, please contact Catherine Burke on 029 2082 9112 / for a free, no-obligation conversation.



Contact Our Team
Catherine Burke
View Profile
Damian Phillips
View Profile
Fflur Jones
Managing Partner
View Profile
Gareth Wedge
View Profile
Mark Rostron
View Profile
Nick O’Sullivan
View Profile
Owen John
View Profile
Rhodri Lewis
View Profile
Stephen Thompson
View Profile

I have worked with Darwin Gray for a number of years and the level of service, professionalism and timely response is second to none. I would highly recommend Darwin Gray to any business.”

Becs Beslee, Dice FM Ltd

Darwin Gray have provided us with a first-class service for many years now. They really take the time to understand our business and develop relationships which results in advice and support that is contextualised and effective.”

Rebecca Cooper, ACT Training

We have worked with Darwin Gray for several years and have always found their services and advice to be first class.”

Karen Gale, Stepping Stones Group

An extremely professional and sincere company who make time for your queries and understand the need to break down certain facts and information to ensure everything is understood perfectly. I would highly recommend the company to anyone looking for any type of legal advice”

Gwawr Booth, Portal Training Ltd

PSS has worked with Darwin Gray for many years. We have always received an excellent service. Prompt and professional advice and support.”

Ledia Shabani, Property Support Services UK Ltd

We have used several departments within DG recently and we have been very pleased with an effective, efficient and down to earth service. Very happy thus far and I expect that we will continue to use DG.”

Guto Bebb, Farmers’ Union of Wales

Darwin Gray offer us truly superb services. Very professional, quick and services available bilingually which is very important to us, highly recommend.”

Iwan Hywel, Mentrau Iaith Cymru

My “go to” in urgent and time sensitive cases for direction, support and advice. The team are quick to respond to calls or emails for advice and support on all matters. Always explain complex matters in a way a lay person can easily understand.”

Margot Adams, Guarding UK Ltd