The Devil is in the Detail

The recent High Court Decision in Ridgewood Properties Group Ltd and others v Valero Energy Ltd and another [2013] EWHC 98 (Ch) provides a useful reminder to developers and landowners of the importance of ensuring that agreements adequately reflect the parties intentions.

In this case Ridgewood entered into a number of conditional contracts and option agreements with the defendant, then known as Texaco. The properties were petrol stations, which Ridgewood planned to develop by building flats and offices above and around them. This was to be achieved by Texaco granting the Ridgewood an option to take a building lease of each site. The options were conditional on satisfactory planning permission being granted. On completion of the development, the freehold of each site was then to be transferred to Ridgewood, with a leaseback to Texaco of the forecourt and shop. Ridgewood was to apply for planning permission and Texaco was obliged to assist Ridgewood in that process, and facilitate access to the site for that purpose.

The agreements prohibited any assignments by Ridgewood except to group companies, but there was no express restriction on assignments by Texaco. Ridgewood registered notices to protect the agreements at the Land Registry.

Before any planning permission was obtained Texaco sold its interest in all of the properties to Somerfield. The problem arose when Somerfield denied that it was obliged to perform Texaco’s obligations in the agreements.

Ridgewood claimed that it was an implied term of the agreements that Texaco would not sell the properties until the agreements had been terminated, however the Court held that, where a professionally drafted agreement does not contain a specific provision, the court will normally assume that this is what the parties intended. There was nothing the agreements to prohibit a sale of the properties by Texaco and so the court took the view that there was no proper basis for implying a term to that effect.

Had the agreements required Texaco to seek Ridgewood’s consent before selling the properties, Ridgewood could have protected its position by registering a restriction against Texaco’s titles. This would have enabled Ridgewood to refuse to grant consent for the sale unless Somerfield entered into a deed of covenant to perform Texaco’s obligations under the agreements.

Although the court held that Texaco had committed a repudiatory breach of the agreements, Ridgewood was left unable to compel Somerfield to perform Texaco’s obligations. Ridgewood’s only remedy is to pursue Texaco for damages.

Practical points for developers:

  • Unlike a lease, or agreement for lease, a conditional contract or option agreement is not automatically binding on successors to the landlord’s title.
  • A developer should insist that an agreement expressly provides that the landowner will not dispose of the land without the developer’s consent.
  • A developer should ensure that it registers a restriction against the landlord’s title in order to protect its position.

It is of paramount importance that you ensure that your interests are adequately protected and your agreed intentions reflected in the legal documentation.

If you have any property related queries, please do not hesitate to contact our commercial property team on via 01283 526 200.

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