Restrictive Covenants - applications to discharge/modify

The Land Tribunal's decision on an application by Wimpey Homes to have a restrictive covenant discharged or modified has revealed that if a developer has deliberately ignored a restrictive covenant, that will prejudice any application for discharge/modification.

Wimpey Homes owned land that was granted planning permission for residential development. This land was subject to a restrictive covenant in the following terms:

"for the benefit of the adjoining land...that no building shall be erected on the piece of land to the west of the line drawn on the said plan between the points marked 'A' and 'B'..."

The restrictive covenant clearly prevented development of the land. Aware of this, Wimpey commenced construction on the land.

A number of adjoining land owners subsequently instructed solicitors who wrote to Wimpey asking them to stop works on the land on the basis of the covenant. Wimpey refused and the adjoining owners subsequently commenced Court proceedings in respect of the breach of covenant. These proceedings were stayed pending the hearing of Wimpey's application to the Lands Tribunal for modification of the covenant to allow its development to proceed.

Wimpey's application for modification was made under section 81(1)(aa) of the Law of Property Act 1925. At the Tribunal, Wimpey argued that money would adequately compensate the adjoining owners.

What did the Court decide?

The Lands Tribunal decided that it had no power to modify the covenant as Wimpey had failed to meet the grounds in section 84(1)(aa) LPA 1925. Section 81(1)(aa) allows a restrictive covenant to be modified where its continued existence impedes a reasonable user of the land and in impeding that user:

• it either does not secure any practical benefits of substantial value or advantage to those entitled to the benefit of the covenant; or 
•  it is contrary to the public interest.

In both cases money has to be adequate compensation for the loss or disadvantage which any person will suffer from the discharge or modification of the covenant.

In applying the tests laid down in the case of Re Bass Ltd's Application (1973) 26 P & CR 156, the Lands Tribunal said:

1. The proposed development was reasonable since the proposed density of the development was only slightly more than the local authority planning inspector's report;
2. The practical benefits to the objectors were of substantial value and advantage, as their properties were currently overlooked only in a limited way and now enjoy outstanding views over open land to hills in the distance. If the development proceeded the properties would become suburban in character with the attendant loss of views and privacy;
3. Wimpey had failed to show that increased flooding was not due to their other developments in the area; and
4. The objectors were justified in objecting on the basis that the proposed modification would prove to be a precedent for further modification of the covenant and would allow further development

In the circumstances, the covenant was of practical benefit to the objectors as it allayed their reasonable fears about increased flooding and high density development. In the Tribunal's view these benefits were of substantial value.

The Tribunal also decided that Wimpey had deliberately commenced building work on the site in an attempt to force through the development in breach of the restrictive covenant, in the hope that by presenting a fait accompli to the Tribunal its application would be successful. The Tribunal stated that "is not inclined to reward parties who deliberately flout their legal obligations in this way."

Practical points

The Lands Tribunal's power to modify a restrictive covenant is discretionary, and in this case Wimpey failed to show that the covenant impeded a reasonable use of the property. 

However, the Tribunal made it clear that due to Wimpey's conduct and total disregard for the covenant, it would in any event have exercised its discretion to refuse Wimpey's application, as it would have been unreasonable for Wimpey to benefit from ignoring its legal obligations.

When a developer becomes aware of a restrictive covenant which restricts a proposed development, the developer should either:

• make an application to the Tribunal for discharge or modification; or
• seek to reach an agreement with the beneficiaries of the covenant.

Emma Wilson is a solicitor in the Michelmores Property Litigation Team. For further information on the issues raised in this article, please contact Emma at emma.wilson@michelmores.com.