Claims case study: restrictive covenants
A recent restrictive covenant claim demonstrates how we tailor our approach to the specific circumstances of each claim we receive.
We’ve demonstrated that we have to be extremely flexible in our approach to underwriting restrictive covenant enquiries, and this extends to how we handle claims too. Our experienced claims team needs to balance a number of elements of a claim, most importantly the needs of our policyholder.
Carry on building
One of our policyholders wanted to build 14 flats and 4 houses on their land. Any delays would interfere with their ability to sell plots, so, when we received notification of a claim in January 2016, we knew we needed to act fast.
Our policyholder had received letters from another developer claiming the benefit to enforce restrictive covenants from 1905 that would be breached by our policyholder’s construction plans. But when our claims team examined the details of the case, they identified other properties which had breached similar covenants and, more importantly, the developer’s claim appeared to be very weak from a legal point of view.
So, we wrote to the developer and asked them to provide proof that they benefited from the covenant. Our policyholder was keen to continue construction, and, as the developer’s claim seemed tenuous, we advised them it was safe to do so.
The developer responded to our letter a month later, but the basis of their claim remained unclear. After a further two months, they had filled in some, but not all of the gaps, leaving us with doubts that they could effectively claim the benefit of the covenants and prevent our policyholder’s ongoing construction.
Despite this, the developer began to threaten our policyholder with an injunction which, as the case of Lea v Ward demonstrates, could cause significant delays and costs. As such, we instructed a property specialist solicitor from our dedicated panel to take a look at the case and offer us a fresh perspective.
The solicitor’s advice complemented our own thoughts: although the developer still had not demonstrated they benefitted from the covenants, an increasing amount of evidence was slowly being revealed, and therefore there was a risk that they held enough proof to support injunctive proceedings.
Backing the right horse
Although the claim might have been defensible in court, avoiding the delays that would come with such proceedings was paramount to our policyholder, so we decided to make the developer a modest offer of £5,000 to settle the claim and put an end to the dispute.
We didn’t hear anything for many months until, in January 2017, the developer responded with an astonishing demand of £27,000! Although we wanted to settle the claim for our client, this figure was unreasonable, so we entered into negotiations with the developer, eventually agreeing a figure of £13,500.
Although some might accuse us of being a ‘soft touch’ for refusing to battle this claim in the courts, our priority is always to put our customer’s needs first. Our approach to this claim protected our policyholder from unnecessary costs, delays, and disruption, and left them very happy that we had handled the issue in a way that left them free to continue with the development of their land as they wished.