Restrictions on the usage of land laid out by past owners can severely impact potential plans for development or redevelopment, with the legal complexities that developers grapple with having been demonstrated in a series of recent court decisions. Here’s what you need to know:
What is a restrictive covenant?
A restrictive covenant is a condition of a contract or deed in which one landowner promises another not to carry out certain acts on their own land. This usually occurs during the sale of land where the seller wishes to restrict what the buyer – often developers – can do with it.
The conditions set out in the covenant are binding on future owners of the burdened land and can range anywhere from owners and tenants being restricted from renovating or developing land to even owning pets and raising livestock.
Once a restrictive covenant is in place, the obligation to comply with the restrictions remain no matter how many times the land changes hands and any attempt to bypass or remove them will require legal intervention.
Section 84
One such tool by which restrictive covenants can be dealt with is Section 84 of the Law of Property Act 1925.
Available for covenants on freehold and (less commonly) leasehold land, Section 84 gives developers the ability to apply to court for the modification or discharge of the covenants, with the two main grounds relied upon being:
- that the covenant has become obsolete;
- that it impedes a reasonable user of the land and doesn’t give any substantial practical benefit or value to the person seeking to enforce the covenant.
Lessons from recent notable cases
There has been a flurry of cases during 2023 that have showcased how appeals for usage of powers under Section 84 can vary. Here are some key examples:
Great Jackson Street Estates Ltd v Manchester City Council
This case related to the failed attempts by a developer who had a long lease on land in the centre of Manchester(Great Jackson Street Estates Ltd) to request that the Upper Tribunal use its jurisdiction under Section 84 to modify a series of covenants on the site upon which the developer had intended to build two 56 storey tower blocks.
Having secured planning permission from the Local Planning Authority, Manchester City Council, to demolish two warehouses on the unused site and construction of the towers from the Local Planning Authority, Manchester City Council, the developer found that the same council was then unwilling to consent to the project in its capacity as the landlord. There was a covenant on the long lease that there could be no development without the council’s consent, with the refusal motivated by the council’s long-term strategic plan for the area.
Taking the case to the Upper Tribunal, the developer argued three grounds on which Section 84 could be invoked:
- the covenants were obsolete given the land had been unused for 15 years and the subsequent changes in character of the neighbourhood;
- the covenants impeded a reasonable use of the land with the proposed modifications not depriving the landlord of value, benefit or advantage; and
- hat the landlord would not be injured by the proposed modification.
Contrary to these arguments, however, the Tribunal held that the relevant lease covenants had not become obsolete and rather, the covenants gave the Council the ability to control the use and development of its land. Further to this, the Tribunal found that, whilst the covenants did impede a reasonable use of the land, they also bestowed a substantial “town planning benefit” to the council.
Overall, the Tribunal felt it would be inappropriate to intervene in this case and instead decided that the redevelopment should be a matter for negotiation between the two commercial parties.
Lesson: Do your due diligence on any proposed plans to overcome a covenant and have a robust argument that can secure the grounds for approval under Section 84.
Even then, the Tribunal’s discretion may not go the developer’s way. As part of any acquisition deal, a deed of release or deed of variation releasing or modifying problematic covenants is the only cast-iron guarantee for removing the impediment that a restrictive covenant may carry to a development.
Naidu & Anor v Morton & Ors
This case was a prime example of where a Tribunal can exercise its discretion to refuse Section 84 applications even when one of the grounds is proven by the applicant
The applicants, Mr and Mrs Naidu, were planning major works to their house, including a three-storey extension, which they later discovered would be subject to two covenants – the first restricting building works and the second restricting use to residential – both benefitting other residents on the estate.
An initial application to modify the relevant covenant was successful in demonstrating the plans were reasonable with no substantial benefit to the neighbours in blocking the words but the Tribunal still chose to not modify the covenants, highlighting concerns over the lack of planning permission and the worries of local residents around potential structural issues.
The Tribunal did, however, invite the applicants to come back once they had addressed these concerns and, once they had secured planning permission, secured approval on the second attempt.
Lesson: It isn’t enough to just meet one of the technical legal grounds for modifying or discharging a covenant. To be successful, the Tribunal still needs to be convinced to exercise their discretion.
The Ridgeway (Oxshott) Management Ltd v McGuinness & Anor
Whilst Section 84 does assist in overcoming restrictive covenants, this case demonstrated how it is not a weapon for developers to overcome easements that are limited in scope – with the county court awarding an injunction to restrain the excessive use of an easement by the defendants in an attempt to turn one house into two.
The issue pertained to a right of way (easement) over the management company’s land which was for the sole purpose of access to and egress from the property in connection with its use as a single private dwelling.
Having obtained planning permission to demolish the house and build two on the plot, the defendants were met with legal proceedings from the management company who insisted that the rights granted would not accommodate the proposed development.
The language of the easement was clear in supporting the ‘one house per plot’ policy on the estate with the defendants’ proposals set to exceed the scope of the rights granted. In granting the injunction requested by the applicant, the court rejected the argument that the easement was effectively a covenant restricting use and refused to allow an application under Section 84.
Lesson: Know whether the restrictions are the result of a covenant or an easement – if the latter, Section 84 is unlikely to help. Seeking robust legal advice when planning how to address restrictions will help to avoid being on the receiving end of injunctions, damages or other court-ordered restraints.
Thrings’ Property Litigation lawyers are experienced in working with developers, landowners, landlords and tenants to overcome their property disputes and have an outstanding track record in reaching a resolution, often without recourse to court proceedings, and with an excellent track record when cases do go to Court. To find out more, get in contact.
