High Court simplifies approval process for building on land covered by a restrictive covenant

Applicants wanted to improve the property to become visually integrated with the surrounding resort

The High Court has simplified the approval process for construction and alteration on land covered by a restrictive convent.

In AGD Trustee Limited v Millbrook Country Club Limited [2023] NZHC 2141, the owners of a property located at Mill Vista Lane on the southern boundary of the Millbrook Resort development in Arrowtown, Queenstown, have successfully obtained an order to modify a covenant that was registered against their property. The covenant had limited property use and construction within the Millbrook Resort development.

The applicants, who purchased the property in 2021, sought modification of the covenant to streamline the approval process for construction and alterations on their land. The applicant’s property was previously part of a larger piece of land held by the former owners, who sold part of their land in 2004 to be developed as part of the Millbrook Resort, a five-star golf and lifestyle resort.

The covenant initially required approval from the “grantee” for any construction or alteration of a building. Under the covenant, the original grantee was Millbrook Country Club Ltd. However, the dominant land has been subdivided and developed since the covenant’s creation. It now entails around 40 titles, with approximately 91 owners benefiting from the covenant.

The applicants planned to build on the property in a way that is visually integrated with the surrounding Millbrook Resort Zone land. However, securing the grantee’s approval had become increasingly burdensome and time-consuming due to the development’s expansion and the subsequent increase in owners.

The applicants’ proposed solution is to see a modification of the covenant so that any requirement for approval only requires that of Millbrook. The proposed modification would remove the burden of the approval requirement while protecting the dominant owners’ interests in the consistency of the development of the Millbrook Resort.

The applicants relied on s. 316 and 317 of the Property Law Act 2007 (PLA), which allow for modifications to restrictive covenants if certain conditions are met. The applicants argued that their proposed modification would not cause substantial harm to any party involved, and it was just and equitable to modify the covenant considering the changes in land use and the neighbourhood’s character since the covenant’s creation.

The modification sought to centralise the approval process by requiring consent only from the Millbrook Country Club Ltd., the organisation overseeing the Millbrook Resort development. The applicants contended that since Millbrook represented most owners’ interests and had a structured mechanism for enforcing compliance, this modification would maintain the integrity of the development while relieving property owners from the time and expense of seeking individual approvals.

The opposition to the application came from a subset of owners concerned about the potential visual impacts of development on their property’s views. However, the applicants and the opposing respondents reached a confidential settlement, resulting in the applicants agreeing to a substitute covenant that would protect the opposing respondents’ interests.

The High Court found merit in the applicants’ arguments and granted the modification to the covenant. The court said there is a close alignment of interest between Millbrook and the owners of the residential properties, such that the owners can rely upon the approval of Millbrook.

Furthermore, the court accepted that the subdivision and development of the dominant land so that it is now in multiple ownership is a circumstance supporting the amendment of the covenant. However, it does not render the purpose of the covenant obsolete. Instead, it supports the rationalisation of the identity of the grantee as long as that does not cause injury to any owner of the dominant land.

Ultimately, the court allowed the replacement of references to the “Grantee” in the covenant with “Millbrook Country Club Limited” and a new clause clarifying the nature of required consents.

Source: thelawyermag.com

(*) If there are any copyright-related issues regarding the articles published on our website, please do not hesitate to contact us. We would handle the request accordingly.