Saughall Parish Council asked a firm of lawyers to evaluate our covenant not to build houses on the farmland of Shotwick Park Estate for 80 years. You can read their report below. In our view, there are some important issues that are not addressed as fully as they might be. That being the case we have written a response to them which is also posted below.
Our Ref: FRS/NAW/SAU0001.1
Date: 17 April 2023
Shirley Hudspeth
Clerk to Saughall and Shotwick Park Parish Council
c/o 10 Merton Close
Little Neston
Cheshire
CH64 0TR
Dear Sirs
Deed of Covenant at Shotwick Park Estate
Thank you for providing us with the details of the above matter.
One thing I would say at the outset is that this relates to a proposed sale to Mr Greensill / Shotwick
Park Estate Management (the 'Owner') so I would expect there to be a Memorandum of Sale
documenting the agreement, contract and transfer deed. I do not have a copy of these other
documents and I am aware that you have stated this was a privately agreed transaction, so the
terms may not have been summarised prior to the drafting.
The significant point is that this deed has been specifically drafted to document a positive covenant
which does not 'run with the land' and is personal to the parties entering into it, i.e. only the
company 'Shotwick Park Estate Limited' will be obliged to uphold the covenant. If this were in some
way to be assigned to another company or if the existing company's assets were sold to another
company (and it is easy to create any number of companies), that second company would not be
liable unless they had also entered into a deed of covenant directly with the Council.
The Council would therefore need to ensure that any disposal (transfer or assignment) between Mr
Greensill and any other company (which could be owned by Mr Greensill) is caught within the terms
of this document.
A further point is that nowhere does the Deed preclude commercial development, agricultural
development or for the obtaining of planning permission only. There is nothing preventing the
Owner from obtaining planning permission only in relation to the development of residential homes.
With reference to the draft Deed of Covenant's individual clauses, I would make the following
comments:
Background:
(A) The Deed has been drawn up to deal with the restrictions by way of a positive covenant, rather
than by a negative “restrictive” covenant. What is notable here is that positive covenants do not
'run with the land' i.e. they are not attached to the property and they are personal only to the
original parties signing the Deed. Usually we would expect to see restrictive covenants contained in
a Deed of Transfer on sale/purchase and these are of unlimited duration.
(B)
(i) The deed only restricts development that is residential in nature, therefore the Owner
would be free to develop agricultural business or commercial business if he obtained planning
permission for a change of use and subsequent development.
(ii) The covenant is limited to a period of 80 years only.
(C) The Deed states that the covenant is positive in nature and therefore does not 'run with the
land'- this is debatable, as this is a covenant which restricts development, and which would usually
appear as a “negative”, restrictive covenant in a Deed of Transfer. As it is drafted, it is claimed that
the clause is positive so the intention must be that it is not to endure.
1. Definitions
Disposal:
Any disposal will trigger the recipient (which could be another company, a
related company or individual) having to enter into a Deed of Covenant on
the same terms directly with the Council. The Disposals which are caught
are:
(i) a conveyance or transfer (including any lender's power to sell)
(ii) a lease or tenancy
(iii) a right to occupy
(iv) assignment of a lease, tenancy or right to occupy
(v) grant, release or surrender of any interest
Excepted Disposal:
a) A Licence under 6 months.
b) Tenancy agreement for no more than 10 years at a time (this seems likely to be commercial
in nature).
c) Farm Business Tenancy.
d) Any easement over the Protected Area (this could include access ways, pipes, cables).
e) A mortgage or charge.
f) A Licence to carry out works in connection with Permitted Development. 'Permitted
Development' is not defined within the agreement but note that there is an intention for
certain development to be permitted despite the restriction. A definition must be included.
g) Transfer of grant of a Wayleave or Lease to a service provider.
h) A Transfer or a Lease to a management company in relation to common parts of the
Protected Area or for other management purposes. It is unclear what 'common parts' there
may be in the Protected Area. This wording is usually used to refer to those parts of an
estate which are shared by numerous tenants. 'Common parts' are usually also clearly
defined, so that all parties are clear what they are and where they are. The management
company may simply be a company responsible for the maintenance of the Protected Area
and this exception could enable land to be transferred to them. Alternatively, a
management company could be set up by any third party. Either way, the 'Common Parts'
of the property can be transferred to them without being subject to the restriction.
i) A compulsory purchase (for example HS2).
j) A planning agreement or statutory obligation in relation to any development on any of the
Owner's property outside of the Protected Area. It is not clear whether the Owner holds any
property adjoining the Protected Area. If it transpires that he obtains planning permission
for a development of a separate piece of land which requires use of the Protected Area for a
larger development or infrastructure such as roads or other access and laying down of
tarmac, then this would not be subject to any restriction in this covenant and could be easily
transferred outside of the terms of this agreement.
Protected Area:
For clarity, I would suggest the Protected Area should be edged red on the
Plan rather than hatched pink. This also needs to be more clearly defined
with its full address and in relation to the Land Registry Title Number (i.e.
'forming part of the property registered at HM Land Registry under Title
Number [CH350044)
1
]'
Residential Development:
Again, the word residential is notable. Commercial or Agricultural
use could involve extensive development.
2. Development Covenant:
This is the covenant with the Council not to develop the Property for residential accommodation.
3. Disposals
The Owner can assign its interest under the Deed to a third party (this can include another
related company), as long as that third party enters into a Deed of Covenant as set out in the
Schedule which is then to be provided to the Council. However, there is no need for the Owner to
enter into a Deed of Covenant or provide any such Deed to the Council at all if this is by way of an
'Excepted Disposal'. If the Owner transfers the property to a related company in any of those situations, there will be no obligation on the related company to comply with the restriction against
development:
3.2 Obliges the Owner to register the restriction at the Land Registry within 5 days of the date of
the Deed of Covenant. This means the Land Registry cannot register any disposal (other than an
Excepted Disposal) without the Council's consent.
3.3 Obliges the Owner to ensure that, on any disposal (other than an Excepted Disposal), the
new owner registers the deed of covenant as contained in the Schedule.
3.5 The Council is equally bound not to assign or transfer their interest without consent of the
Owner and the Council is bound by clause 3.6 to enter into the deed of covenant as contained in the
Schedule.
5. A dispute on a point of law requires the appointment of a Barrister with 10 years'
qualification. A dispute on a point of planning or value requires the appointment of a Chartered
Surveyor. All fees are to be paid equally by both parties.
Summary
In summary you / the Council should be aware that the covenant is intended to be positive - it is not
intended to run with the land and it is intended to be personal only to Shotwick Park Estate Limited,
as long as the company exists. It would be preferable to see the restriction simply dealt with by a
clause within the Transfer Deed itself.
The concern is that as soon as the Owner 'flips it' or sells it on to a third party, there is a risk that the
whole Deed of Covenant would be extinguished. It could of course also be transferred to a separate
company with the same or substantially the same directors - as a separate company is a separate
legal entity. Further, if the original shareholders or Directors of the original Owner Company change,
you will be dealing with other individuals who did not agree the terms or negotiate the deal with
you.
Whether the Deed of Covenant can be extinguished is reliant on subsequent wording. It is right that
certain disposals require any incoming third party to enter into the Deed of Covenant in place of the
Owner but there are various ways by which this can be avoided (see the 'Excepted Disposals' and the
'Permitted Development' which remains undefined) and there are other ways where the use of the
land can be diversified, such as the tenancy agreements lasting just under 10 years.
It is also notable that only residential development is restricted so the Owner is entitled to engage in
commercial or agricultural development, although of course that will be subject to planning
permission in relation to the use.
I hope this is of assistance to you but please do not hesitate to contact me if you have further
questions.
Yours sincerely
Nick Woodward
Solicitor
For and on behalf of Frank Smith & Co Solicitors
Tel 01242 801748
Email nick@franksmithandco.com
Our Response
Dear Shirley,
Thank you for publishing the report on the proposed covenant between Shotwick Park Estate Limited and CWAC. That
report raises several “issues” with the covenant and it would seem useful for these issues to be addressed such that
councillors (and the public) have an opportunity to make an informed decision.
The issues raised are:
- Why is the covenant a “personal” one and not a “negative” one attached to the land?
○ Under English law “negative” covenants run in perpetuity.
○ However, “personal” covenants can be time-bound.
○ It is therefore correct that the intention is, as alluded to in the report, for the
covenant not to endure.
This is entirely consistent with our original commitment presented to the Parish Council that this is to run
for an 80-year period only.
- Is the proposed covenant “attached” to the land?
○ It is correct that it does not attach to the land per se. However, the proposed
covenant must be registered on the land title within 5 days of the property purchase
completing (clause 3.2), so any proposed purchaser would be on notice of its
existence and no subsequent sale could be registered without first entering into a
direct covenant with CWAC.
○ It is important to note that the terms of the covenant require the owner to bind a
subsequent purchaser to the covenant. The intention is that this does follow the
transfer of the land to new owners.
○ CWAC's permission would always be required to remove the covenant even after
the 80 years have passed. In any event, CWAC is unlikely to undermine the intent of
the covenant by granting planning permission contrary to the covenant it has
agreed.
- The covenant is only with respect to residential development and does not cover agricultural
or commercial development.
○ Correct. The concern raised by the Parish Council in November 2022 was that there
would be houses built on the fields. This proposed covenant prevents that and only
that. There is therefore nothing egregious in the way the covenant is formulated.
- What are the “Protected Areas” and “common parts”?
○ The “Protected Areas” are everything apart from the footprint and curtilage of the
existing houses and farm buildings of the estate. All the Protected Land, being the
farmland, is thus protected from residential development.
○ The phrase “common parts” has been used in the context of the setting up in the
future of a management company to service those areas of the estate that may be
provided from time to time by the Company for common use by tenants and
occupiers of the estate. A good example would be the part of Lodge Lane that goes
through the Estate and is privately owned.
- Under “Excepted Disposal (f)” of the proposed covenant, what is “Permitted Development”?
○ Where a license is provided for the purpose of carrying out works, Permitted
Development is any development of the Protected Area that is not in breach of the
covenant (IE. Non-residential development).
○ We would be happy, subject to CWAC approval, to amend the proposed covenant to
make this clearer.
- What are “Excepted Disposals” and can they be used to “get around” the intent of the
proposal covenant to prevent residential development for 80 years?
○ The document would allow the company to:
■ Enter into a short-term lease, tenancy of less than 10 years
or a farm
business tenancy;
■ Take out a mortgage; or
■ Provide access or comply with compulsory government
purchases.
○ The key point is that these “Excepted Disposals” wouldn't allow parties to “get
around” the proposed covenant, because (a) CWAC planning permission would be
required for any change of use and they are a signatory to the proposed covenant
and (b) Shotwick Park Estate Limited's consent would also be required as the
landowner. (e.g. a tenant couldn't develop the land without CWAC and Shotwick
Park Estate Limited approving, which they could not do under the terms of the
proposed covenant.)
- The report apparently doesn't like our use of pink on the map and has asked that it be red.
- We like pink as a colour, but attached is a version in red.
○ We have marked out the Protected Areas with a redline boundary rather than shading.
○ We would be happy, subject to CWAC approval, to use this updated plan.
Our aspirations for Shotwick Park have always been focused on environmental benefits and, in short,
this proposed covenant does what we committed it would do - prevent residential development on
the farmland of the Shotwick Park Estate for 80 years.
In the interests of fairness and transparency, we would ask that you publish this on the Parish
website as soon as practicable. We will also publish it, together with the advice you received, on the
Shotwick Park Estate website.
Thank you.
Warmest regards,
Lex Greensill
Director
