Restrictive Covenants Preventing Development
Getting Them Discharged through the Courts
The law of restrictive covenants is a potential minefield for developers, land purchasers and lawyers alike. Recent case law has, however, helpfully clarified some of the circumstances in which obsolete restrictive covenants may be discharged.
Restrictive covenants which have become obsolete after many years are potentially capable of discharge of under Section 84 of the Law of Property Act 1925 if they prevent the reasonable use and enjoyment of the land. In the event of discharge, damages may be awarded by the Lands Chamber.
In the case of Graham v Easington District Council (2009) the Lands Tribunal allowed the discharge of a restrictive covenant (under Section 84) as it did not secure any practical benefit. In this case, the beneficiary of the restrictive covenant was a Local Authority whose planning department had already given planning permission for a residential development of 30 houses.
The land in question was situated on the site of a former colliery in County Durham. The Local Authority, Easington District Council, had sold the land off in August 2000 and, at that stage, had imposed a restrictive covenant preventing the land being used other than as a coach depot and an associated residential bungalow - to be used in conjunction with the coach depot. The bungalow had been built but the coach depot had not.
Despite the grant of planning, the developer still had to get over the hurdle of the restrictive covenant imposed in August 2000. The estates department of the Local Authority refused to discharge the covenant. Consequently an application was made to the Lands Tribunal for discharge of the covenant.
Ground (aa) of Section 84 of the Law of Property Act 1925 was highly relevant in this case. This provides that a covenant may be discharged if it prevents reasonable use of the land and does not secure to the person entitled to the benefit of the covenant any practical benefits of substantial value or the restriction is contrary to public interest. The Lands Tribunal accepted that as the Local Panning Authority had been given planning permission and as there was a perceived need for affordable housing in the area, the District Council were preventing reasonable use of the land in failing to discharge the covenant. It was also found that the Local Authority would suffer no loss or injury should the covenant be discharged.
In the absence of loss, the Tribunal then went on to award compensation to the Council on a very limited basis – based on the difference in value of the land with and without the burden of the restrictive covenant at the time of the original purchase in August 2000. This amounted to £23,500. Therefore if the covenant had been very old then the level of compensation would have been almost negligible.
We take the view that this case may lead to a string of further applications before the Lands Tribunal. This is because a Local Planning Authority, by giving planning permission for a particular activity, most notably residential development, might then tie the hands of its own estates department. Therefore a large number of covenants may be open to question, ranging from covenants preventing major development down to more everyday covenants against, for example use other than as a single private dwelling and covenants requiring consent to plans and alterations.
The case of Lawntown Limited v Camenzuli (2007) deals with a little use method of modifying restrictive covenants, specifically Section 610 of the Housing Act 1985.
The case involved a large Victorian dwelling house in South West London. The property was subject to a restrictive covenant not to use the land other than as a single private dwelling. Lawntown Limited purchased the house and obtained planning permission to convert the property into flats. The owners of a neighbouring property (Mr and Mrs Camenzuli) objected to this and tried to enforce the benefit of the restrictive covenant and prevent the development from going ahead.
Section 610 of the Housing Act 1985 provides that:-
“a.....the Housing Authority or a person interested in any premises may apply to the County Court where, owing to changes in the character of the neighbourhood in which the premises are situated they cannot be readily let us as a single dwellinghouse but readily be let for occupation if converted into two or more dwellinghouses, or
b.....planning permission has been granted under Part III of the Town and Country Planning Act 1990 (general planning control) for use of the premises as converted into two or more separate dwellinghouses instead of a single dwellinghouse and the conversion is prohibited or restricted by the provision of the lease of the premises or by a restrictive covenant affecting the premises or otherwise…..”.
It was accepted in this case by the Court of Appeal that as the Local Planning Authority had granted planning permission, there was a shortage of housing in the locality and a large number of the dwellings had already been converted into flats, the covenants should be discharged.
Although this particular case involved a provision which is quite distinct from applications made to the Lands Chamber under Section 84 of the Law of Property Act, it is submitted that similar arguments as in the Lawntown case may be used in applications to the Lands Chamber under Section 84 to discharge or modify restrictive covenants.
In conclusion, if in the future the Local Authority wishes to enforce user covenants as a means of controlling development, it might be more effective to impose a positive clawback so that, for example, if planning permission is obtained 90% of the enhanced value of the land will be paid to the Local Authority.
March 2011