Restrictive covenants operate to limit the types of use that a landowner can put their property to.

But even where such a covenant is, on the face of it, perfectly effective and binding on the parties, that does not always mean the covenant will be set in stone.

Applications to Modify/Discharge Covenants

Under section 84(1) of the Law of Property Act 1925 (“LPA 1925”) a party can make an application to the Upper Tribunal (Lands Chamber) to either vary a restrictive covenant or remove it all together. This might be done where, for instance changes to the property and/or neighbourhood render the covenant “obsolete” or if the party with the benefit of the covenant has previously agreed, whether expressly or by implication, to the covenant being modified/discharged.

The Tribunal’s Discretion

It is also possible, although less common, for the tribunal to modify/discharge a covenant where the covenant impedes some “reasonable use” of the land in question and the covenant either;

  • (a)Does not secure any practical benefit of substantial value or advantage to the person with the benefit of the covenant; or
  • (b)Is contrary to public interest.

In accordance with s.84(1)(aa) LPA 1925, where the above circumstances are met, if an award of money would be adequate compensation for the loss or disadvantage then the tribunal has a discretion to modify or discharge the covenant if it deems it fit to do so.

Millgate Developments Limited v Smith

In a recent decision the Tribunal has exercised its discretion under s.84(1)(aa) to modify a restrictive covenant even though:

  • One of the parties with the benefit of the covenant was a hospice for terminally ill children;
  • The owner of the adjoining land had acted in a blatant disregard for the terms of the covenant, which it acknowledged it had been aware of at the time; and
  • There was a very real and significant detriment to the hospice.

In the circumstances of the case, the applicant had undertaken a residential development of land, including the construction of 23 “social housing” properties. This land, and specifically the social housing element of it, immediately abutted the hospice in question. Some of these houses directly overlooked the hospice. The land which the housing was built on was subject to a restrictive covenant which meant it could not be used to anything other than a car park.

During the construction of the houses objections had been raised on the basis of the restrictive covenant in question, which had been brought to the attention of the developer. Notwithstanding this the development continued and was eventually completed. Only at that point did the developer apply to modify the covenant to allow for the use of the land for the purpose it was then being put to.

Decision

In its judgment the tribunal held:

  • The covenant in question did secure a practical and substantial benefit to the hospice, namely that it provided them with a significantly increased amount of privacy;
  • However, the covenant was contrary to public interest, given it would prevent the use of 23 already constructed social housing properties at a time where there was a general shortage of such properties;
  • Money was adequate compensation for the loss/disadvantage suffered by the hospice; and
  • In those circumstances the Tribunal had a discretion as to whether or not it modified the covenant; it was not compelled to do so;

When exercising its discretion the Tribunal decided an award of £150,000 was ample compensation for the loss suffered by the hospice; this sum would enable them to undertake some “privacy planting” along the boundary of the two parcels of land and still leave them with a significant surplus of funds. The tribunal was not convinced by the respondent’s arguments that the sum payable by the applicant should be calculated with reference to the profit they would be able to make if the covenant was modified.

Comment

The key aspect of this case, and something which was cited frequently in the judgment of the Tribunal, was that the use of the land in question was for social housing. In other words, the use of the land was in the wider public interest.

Whilst at first glance therefore this case may give developers hope that they can simply ignore inconvenient covenants and then subsequently seek relief from the Tribunal to retrospectively ratify their actions, that is unlikely to be the case in most circumstances.

Any owner of land that is subject to a restrictive covenant should remember the Tribunal will always have a discretion as to whether or not it modifies or discharges a covenant. Accordingly there is never any certainty that a covenant will be altered or removed all together upon application. It is vital therefore to take advice at an early stage and before taking steps to do anything with land that might infringe a restrictive covenant.

For further information relating to the points raised in this article, please contact Senior Solicitor in the Property Litigation Team, Daniel Edwards.

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

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