Removing restrictive covenants

Brendon Lee analyses the role of planning permissions in the removal of restrictive covenants.

National pressures on housing growth, and the importance for local planning authorities to identify deliverable five-year supply of housing sites, have seen significant changes in the residential pattern and characteristics of towns and villages. This inevitably leads to an increased likelihood of conflict between the private covenants prohibiting certain types of use or development and planning permissions which have determined such use or development acceptable in planning terms.

Discharge/modification applications to the Upper Tribunal

In such conflict an owner of land affected by a restrictive covenant, and who cannot agree its release with the beneficiaries of the covenant, can apply to the Upper Tribunal (Lands Chamber) for its discharge or modification pursuant to section 84 of the Law of Property Act 1925 (“LoP Act”).

There are several grounds for which the discharge or modification can be advanced under this section but, of most importance to planning considerations, is the ground set out at s84(1)(aa). This ground enables the tribunal to discharge or modify a restrictive covenant where:

the restrictive covenant impedes some reasonable user of the land for public or private purposes and EITHER (a) it does not secure to persons entitled to the benefit of it any practical benefits or substantial value or advantage to them (the first limb) OR (b) is contrary to the public interest (the second limb) PROVIDED that money will be an adequate compensation for the loss or disadvantage (if any) which any such person will suffer from the discharge or modification.

The importance of planning policy and permissions to the tribunal’s consideration of the above ground is reinforced by s84(1B) LoP Act which requires the tribunal to ‘take into account the development plan and any declared or ascertained pattern for the grant or refusal of planning permission in the relevant areas’.

The recent decision of the tribunal in Millgate Developments Limited & Housing Solutions Limited v Bartholomew Smith & The Alexander Devine Children’s Cancer Trust [2016] UKUT 515 (LC) provides a helpful guide in understanding the tribunal’s balancing exercise under s84(1)(aa) in deciding whether to modify or discharge a restrictive covenant which is preventing the implementation of a planning permission.

The Millgate Developments case

This case concerned restrictive covenants preventing: the construction of any building structure; and the use of the land other than as an open space for the parking of motor vehicles. The restrictive covenants arose from a conveyance dated 31st July 1972 as part of a related (now expired) overage agreement.

In March 2014 Millgate had obtained planning permission for the construction of 13 social housing units on the land as part of a wider development. While aware of the restrictive covenants, they had in fact constructed the dwellings by the time the application to the tribunal was heard. Mr Smith and the Children’s Cancer Trust had beneficial interest in the restrictive covenants and objected to Millgate’s application to modify or discharge the covenants so as to enable lawful use and (importantly) occupation of the affordable housing.

Millgate principally argued their application on s84(1)(aa) grounds.

Mr Smith’s land was largely agricultural and was not immediately adjacent to the servient land being separated by the Trust’s land. The Trust’s land, having been gifted by Mr Smith, had planning permission granted in December 2011 for the construction of a hospice for terminally ill children. The building of the hospice was substantially underway at the time of the hearing.

Decision

The tribunal determined that the restrictive covenants should be modified to enable lawful development pursuant to section 84(1)(aa).

It was agreed by the parties, and accepted by the tribunal, that the development was a reasonable use impeded by the covenants. Importantly, the tribunal noted that the existence of planning permission ‘is generally taken to be conclusive that the proposed use is a reasonable one’.

Therefore, the following issues remain:

1.  In impeding the housing development, did the covenants secure practical benefits to the objectors?

The first four practical benefits advanced by the objectors was summarised by the tribunal as privacy and environment. Given the separation of Mr Smith’s land to the servient land by the hospice on the Trust’s land, the tribunal found no such practical benefits for him. However, for the Trust the tribunal found:

‘the presence of the terraced houses on the boundary means that families spending time together with their sick children, and children and young people enjoying time together with friends and siblings, will do so in a more urban, less private, less secluded and less attractive environment than would have been the case if the covenants had been observed. We are satisfied that what have been lost are practical benefits in the form of enhanced primacy and seclusion for the hospice land’. [emphasis added]

The fifth to seventh practical benefits advanced were: freedom of light pollution; restriction on increased burden on public infrastructure; and restriction on urbanisation. The tribunal found that none of these practical benefits were secured by the covenants.

2. Are the practical benefits secured by the covenants of substantial value or advantage (the first limb)?

The tribunal found that practical benefits of privacy and environment to the Trust are real and of substantial advantage given the whole purpose and nature of the hospice. Millgate thus failed the first limb.

NB. The Upper Tribunal case of Ben Lynch [2016] UKUT 488 (LC) is an example where the tribunal found no substantial value or advantage in a restrictive covenant benefiting a housing estate which prevented a second house on the original estate plot that had received planning permission.

3. Is impeding the proposed use contrary to the public interest (the second limb)?

The tribunal found that the restrictive covenant was contrary to the public interest. They confirmed that the existence of a planning permission was a material consideration noting permission reflects ‘an objective assessment of appropriate land use which fully takes into account the public interest’.

The tribunal noted the comments of Carnwath LJ in Shephard v Turner [2006] 2 P&CR 28 where he stated the policy behind s84(1)(aa) was “to provide a fair balance between the needs of development in the area, public and private, and the protection of private contractual rights”.

The tribunal also noted the comments of Lord Neuberger in the Supreme Court decision of Coventry v Lawrence [2014] UKSC 13 where it is stated (albeit in reference to nuisance) that a planning permission “would have real force in cases where it was clear that the planning authority had been reasonably and fairly influenced by the public benefit of the activity”.

In considering the above, the tribunal gave significant weight to the fact the housing was for social housing and the local importance and demand for such type of housing in finding the restrictive covenant was contrary to the public interest. However, the pressure on housing supply (locally and nationally) may well have equal significance to other non-social housing developments.

4. Would money be an adequate compensation?

Pertinent to this question are the comments of the Supreme Court in the Coventry case as to the material factor in which planning policy and permission plays in deciding whether compensation is an adequate remedy between harmed private rights and benefits and the competing public interests which would otherwise be prevented.

In this case the tribunal found there was reasonably suitable mitigation measures which the Trust could undertake to minimise the impact of the development to its privacy and environment. This was particularly focussed on boundary features. Therefore, compensation was adequate to address the loss and disadvantage suffered by the Trust.

5. Discretion

The tribunal considered whether to exercise its discretion not to modify the restrictive covenants on the grounds that Millgate had carried out the construction of the development in disregard of the covenants. The tribunal noted the decision of Re: Trustees of Green Masjid and Madrasah’s Application [2013] UKUT 355 where it was stated:

“Where jurisdiction has been established I consider that the discretion of the Tribunal to refuse the application should only be cautiously exercised. It should not be arbitrarily and… should not be exercised as, effectively, a punishment for the applicants’ conduct unless such conduct, in all the circumstances of the case, is shown to be egregious and unconscionable.”

The tribunal gave significant reliance on the generous and open attempts by Millgate to negotiate a settlement by compensation in finding that they should not exercise their discretion.

Lessons

The Millgate Developments case highlights the importance of planning policy and permissions when considering applications to modify or discharge restrictive covenants under s84(1)(aa). Each case will depend on its facts but the following are key points to remember:

1. The existence of planning permission is generally conclusive that the proposed use is a reasonable one;
2. The practical benefits of a restrictive covenant, and whether any such benefits are of a substantial value or advantage (first limb), are assessed on the facts as at the time of the application. In this instance the ‘new’ hospice use by the Trust was the determining factor;
3. The greater the public benefit from a planning permission (and associated planning policies) the more likely such development will be of public interest (second limb) and compensation adequate for any loss of individual private rights. The provision of social housing and permission on allocated sites are examples likely to carry considerable ‘public interest’ weight; and
4. Developers should be slow in acting contrary to restrictive covenants or risk the tribunal exercising its discretion to refuse a discharge/modification application where otherwise it would have granted it.      

Brendon Lee is a solicitor at Buckles Law. He can be contacted on 01733 888920 or This email address is being protected from spambots. You need JavaScript enabled to view it..