Subdivision, infill housing and restrictive covenants

Back in the era of the quarter-acre pavlova paradise, there was no such thing as infill housing. Pretty much everyone owned their standard sized section with a "freehold title", which meant that your land was yours to do what you liked with. If you wanted to build a shed, put an extra story on your house, or knock up a three story apartment block, it was never a problem. Increasingly, however, we are seeing more and more infill housing, as owners of standard sized sections cross-lease or subdivide and build an extra house on the land. This article examines a hypothetical situation in light of the recent release by the Wellington City Council of a discussion document on infill housing, together with a couple of recent cases about restrictive covenants, and asks whether a combination of the two might help those who wish to restrict infill housing in their area in the future.

The 1970s and 80s saw something of a surge in landowners subdividing or cross-leasing their properties. Planning rules of the time meant that permission was virtually guaranteed provided your site was big enough. This was music to the ears of the hypothetical Dave and Margaret, who owned a 1930s property on a double section in a street filled with similar character properties. They happily cross-leased their property, built a two-bedroom townhouse on the front, and sold both on for a handsome profit.

Fast forward to the 21st century. The little townhouse is now a sorry sight: poorly maintained, on an overgrown section, occupied by a series of short term tenants who move on as soon as winter arrives. Bob & Kate, who own a lovely 1910s villa overlooking the townhouse are, together with several of their neighbours, worried that the townhouse detracts from the otherwise consistent character of their street. They have heard that a similar development might be in the offing on another section up the road. They are worried that infill housing could negatively impact the value of their properties. Is there anything they can do to stop any more infill housing going ahead?

The Wellington City Council have turned their mind to just this type of issue in their recently-issued discussion document entitled "How and where Wellington might grow". The discussion document starts from the position that Wellington will need more housing to cope with anticipated population growth and suggests that, rather than allowing subdivision on an ad-hoc basis, a better approach would be to stipulate areas with "potential for growth", such as the central city, Johnsonville, Newtown, and the Karori Rd "corridor". Alongside this, other areas have been considered for character protection due to their historic significance, coastal fringe location, or "consistent streetscape".

If Bob and Kate happen to live in an area that has been earmarked for protection then they may be in luck, as developers are likely find it much more difficult to get Council approval to build infill housing in these areas. But what if their area is, while not in the potential growth area, not earmarked for protection? Filling an objection to a notified development will help, and could lead to the imposition of a restrictive covenant on the title.

So what is a restrictive covenant? Basically a restrictive covenant can limit any number of potential uses of freehold land, for example restricting construction to only one building on the site, or prohibiting buildings over a certain height.

Two recent cases concerning restrictive covenants have highlighted their increased use by subdividers – and consequent attempts by subsequent landowners to get around them.

In Big River Paradise Ltd v Congreve, Big River Paradise ("Big River") bought a large parcel of land (about 190 hectares) on the banks of the Clutha River. Restrictions placed on the title by the previous owner/subdivider meant that Big River was only entitled to divide the land into three lots with no more than one building on each lot. Big River tried to get around the restrictions by applying to divide it into 52 leasehold allotments, arguing that leasehold title meant it wasn't a "subdivision" in the usual sense of the word. Unfortunately for Big River (but luckily for their neighbours!) the court found that division into leasehold allotments amounted to a subdivision and therefore couldn't proceed.

In Thomas v Batton (not their real names), the land in question was subdivided in the 1970s, well before Thomas or Batton bought their properties. A restrictive covenant was registered on the title of Mr Batton's property that prevented any building being erected past a certain line. Mr Batton started building an extension to his deck that crossed that line; the plans also provided for a wall designed to protect his privacy. Mr Thomas wasn't impressed, as the wall would interfere with his extensive sea views. He went to court, but lost on the basis that decks and walls are not buildings, so it didn't matter that they crossed the building line.

The really interesting thing about these cases, and others like them, is the extent people can place limits on freehold title to land by using restrictive covenants. But how does this help Bob & Kate and their neighbours? Provided they are notified of any proposed subdivision of the property up the road, Bob & Kate could object (and possibly prevent the development getting off the ground).They could perhaps argue that restrictive covenants should be placed on the title as a condition of granting subdivision consent, restricting the number of houses that could be built on the land, or requiring any building to conform with houses in the area, or maybe imposing height restrictions.

Certainly, the proposed new Council rules, together with greater use of legal "tools" like the restrictive covenant, mean Bob & Kate and others like them now have a greater chance of preventing infill housing - or at least minimising its impact on a character area - than they might have done in the 70s and 80s.

This article is brought to you by Colette Mackenzie of Gibson Sheat Lawyers and its subsidiary The Conveyancing Company, specialists in property law, mortgage broking, refinancing, buying and selling residential or commercial property, and subdivision.

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