Background
Rose Builders and Manningtree High School Limited entered a 2015 land-swap agreement under which the school transferred agricultural land known as the Green Land to the builder. The transfer restricted non-agricultural use for 25 years and provided for payment of 50% of the uplift in value, subject to specified deductions, if the covenant were released following planning permission. Rose Builders later obtained permission for a phased development, including 35 dwellings and a possible convenience store on the Green Land.
After MHS transferred its undertaking and assets to Alpha Trust and was dissolved, the parties disagreed over whether Alpha had acquired the benefit of the Green Land covenant and how any release payment should be calculated. Alpha claimed an overage payment exceeding £3.6 million, while Rose Builders’ later calculation produced a negative figure after deductions. Rose Builders brought a CPR Part 8 claim seeking declarations on entitlement to the covenant, valuation, ransom value, development costs, and whether it had to complete the release process.
The Court’s Holding
The High Court held that Alpha did not acquire the benefit of the covenant over the Green Land. The covenant was for MHS’s personal financial benefit and was not annexed to the school site. Although the school-transfer agreement was broadly drafted, the covenant was not sufficiently identified and no express notice of its assignment was given as required by section 136 of the Law of Property Act 1925. A recital in a later deed stating that Alpha was entitled to the covenants neither transferred the right nor estopped Rose Builders from denying Alpha’s entitlement.
Because MHS had ceased to exist, Rose Builders was entitled under the land-swap agreement to serve notice terminating the agreement and to remove the restriction registered against the Green Land. No person remained entitled to enforce that covenant. Alpha nevertheless retained the benefit of an equivalent covenant over a separate strip called the Sliver because Alpha itself had transferred that land to Rose Builders subject to the covenant.
For the Sliver, the court held that existing-use value meant its value for perpetual agricultural use without hope value. Enhanced value was to be assessed at the date of the relevant Price Notice by reference to the March 2023 planning permission and release of the covenant, without ransom value arising from earlier permissions for other phases. The Long Road access costs were attributable to the Green Land, not the Sliver or Phase 4a; permitted deductions were to be taken from the 50% uplift figure; and Rose Builders was not obliged to pursue a variation and pay the resulting price if it abandoned development of the restricted land.
Key Takeaways
- A personal overage covenant does not pass with unrelated land merely because the transferee succeeds to the original beneficiary’s wider undertaking; assignment formalities must still be satisfied.
- A recital reflecting the parties’ mistaken belief that a covenant had been transferred did not itself assign the right or create an estoppel on these facts.
- Valuation depended on the planning permission identified in the Price Notice, not superseded conditions under an earlier permission or asserted ransom value from other development phases.
Why It Matters
The decision underscores the need to identify and expressly assign personal overage rights when a school, charity, company, or other landowner transfers its operations and assets. Broad asset-transfer language and later acknowledgments may not preserve a valuable covenant if the statutory requirements for legal assignment are not met.
It also offers practical guidance on construing overage provisions in phased developments: valuation assumptions should track the contractually identified planning consent, specified deductions must be applied in the agreed sequence, and commencing a release procedure does not necessarily compel a developer to complete an uneconomic project where the agreement imposes no enforceable duty to pay.