Applying to discharge restrictive covenants
A guide to practical benefits of substantial value or advantage
As there is a shortage of land for development, developers are increasingly looking to develop land which may be considered less suitable, for instance land which is subject to a restrictive covenant prohibiting development.
One option for the developer is to apply to the Upper Tribunal to discharge or modify the restrictive covenant under section 84 of the Law of Property Act 1925. The applicant must rely on one or more of the grounds set out in that section. The “reasonable user” ground is the most widely applicable.
Although the “reasonable user” ground is generally perceived to be the easiest ground to satisfy, it can actually be very difficult to succeed on this ground if neighbouring landowners with the benefit of the covenant object.
This is because, as well as showing that the proposed use is reasonable (which is often done through obtaining planning permission), the applicant needs to show that the covenant does not secure any “practical benefits of substantial value or advantage” to those with the benefit. There have been a number of examples this year where applicants have failed to do that, including:
- Colin and Jeanette Thompson (1) Patricia Duckett (2) Jeffrey Fisher (3) Alan and Jacqueline Parry [2021] in which the Tribunal refused an application on the basis that the erection of a new house in the garden of the applicants’ property would affect the “general feel” of “quiet tranquillity” and “sense” of “unspoilt countryside” in the gardens of the objectors’ properties.
- Palmer v Harrison [2021] where the Tribunal refused an application because the applicants’ proposed extension up to the boundary of the objectors’ property would give the objector’s garden a significantly “more enclosed feel”.
- Nathwani v Kivlehan [2021] where the Tribunal accepted the objectors’ evidence that the new house prosed by the applicants would reduce the value of their £1.2m property by £80,000 and found that therefore the covenant obviously secured practical benefits of substantial value.
- Brookmans Park Roads Ltd and others [2021] where the Tribunal decided that although the individual impact of the applicants’ erection of a building containing five flats on the surrounding area was marginal, the relaxation of the covenants would likely give a green light to other developers such that the current character of the estate would be lost “whether that takes two years or twenty”. The application for modification was refused, even though the applicants’ development was substantially completed.
While each Tribunal decision turns on its individual facts, and does not bind the Tribunal in future, it is clear that the Tribunal continues to take a broad approach to what amounts to a practical benefit of substantial value or advantage.
However, that is not to say that the Tribunal will always refuse to discharge or modify a covenant where those with the benefit object, as is shown by:
- Moskofian v Vanda Foster [2021] in which the Tribunal recognised that the applicant’s proposed extension and conversion into flats would have some impact on the objectors’ properties (including creating a less attractive outlook and an increase in pedestrians and delivery vehicles) but held that preventing this impact was not a considerable enough advantage to be “substantial”. The Tribunal accepted that there would be some reduction in the value of the objectors’ properties (ranging from 1% to 4.8%) and required the applicant to pay compensation accordingly.
- Father’s Field Developments Ltd v Namulas Pension Trustees Ltd [2021] where the Tribunal discharged a covenant requiring the applicant to obtain the objector’s consent where the objector had no land in the vicinity, holding that the opportunity to demand a price for giving consent is not a practical benefit of substantial value or advantage.
It is also true that looking at Tribunal decisions may not give a complete picture of how disputes over restrictive covenants are resolved in practice. There will be many cases in which those with the benefit of a covenant will not have the inclination or resources to object to an application. There will also be many cases which are settled before a final hearing at the Tribunal.
If you have plans to develop land which is subject to a restrictive covenant, you should seek legal advice at an early stage to determine your strategy for dealing with the covenant. This may include obtaining insurance, negotiating a release or making an application under section 84.
Our experienced property litigation team act for retailers, developers, housebuilders, social housing providers, property investors, utilities companies, holiday parks and other landowners. We are always ready to discuss your case, so please do contact a member of the team for a consultation.
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