The High Court has recently delivered a stark warning to property developers and landowners about the importance of clearly defined and achievable obligations when it comes to the adoption of estate roads by local authorities (LAs).
Background:
By a transfer dated 26 July 2017, the claimant, the present Trustees of Lady Belinda Gadsden's 1997 Children's Settlement, sold a specific parcel of this land, now title number ND189680, to Home Farm Ellingham Ltd. for £950,000 plus VAT. The claimant owns further land at Home Farm, “the Retained Land", which is adjacent to the land.
Prior to marketing the land for sale, the claimant had successfully obtained two planning permissions for residential developments on the land. The first, granted in 2013, was for ten houses in the north of the land, including an initial access road from the public highway leading to a cul-de-sac. This initial road also provided access to a farmhouse and office on the retained land. The second permission, granted in 2016, was for another ten houses in the south of the land, accessed via a spur road from the initial access road, leading to a second cul-de-sac.
The case revolved around the wording of the transfer, in particular the obligation regarding the adoption of newly constructed roads. The defendant had covenanted to "procure" the adoption of the roads by the local highways department. The local highways department, however, refused to adopt the roads. The seller sued Home Farm Ellingham for breach of its covenants requiring specific performance.
Decision:
The High Court refused the claimant's claim for specific performance of paragraph 6 of Schedule 3 to the transfer and awarded the claimant only £1 in damages. The Court first analysed whether the defendant was bound by the relevant covenant in the transfer and concluded that it was. The Judge rejected the defendant's arguments of mistake and estoppel as reasons why this covenant should not be enforced.
The Court found that it is impossible for the defendant to comply with its contractual obligation to procure the adoption of the entire access roads by Northumberland County Council (NCC), as NCC's position has been very clear that it will not be adopting such access roads. The Judge noted “it is a sustained refusal since 2012, at the outset of the first part of the development plans, and more pertinently since October 2019, during and since the construction phase. The refusal has continued despite changes of personnel at NCC.” NCC has raised valid concerns about the geometry and layout of the access roads, specifically the narrow width of the cul-de-sacs (which are below NCC's adoptable standard). The Judge also agreed with NCC that the access roads primarily serve the residents of the twenty houses, the farmhouse, and an office, and, as such, are not through routes or of general public utility.
The Court concluded that the defendant did not need to exhaust every conceivable step, such as a formal Section 37 application to the Magistrates' Court, to prove impossibility, as the clear and consistent stance of NCC, which was based on justifiable reasons and policy, provided sufficient evidence.
Implications:
This case, while specific to its own facts, highlights the critical issue of securing road adoption and has important implications for both landowners selling development land and developers purchasing it. Assuming that planning permission equates to automatic adoptability of roads is a dangerous gamble. LAs have their own stringent standards for road construction, geometry, and public utilities, which may differ from planning requirements. Failing to address these discrepancies in the sale agreement can lead to unenforceable obligations.
This ruling underscores the absolute necessity of clarity and precision when including obligations related to road adoption in the sale agreement. Failing to do so can lead to costly and protracted legal disputes, potentially leaving roads unadopted and creating headaches for future residents and landowners. This is one of those cases that could have been avoided by careful wording choice when drafting the transfer documents.