[2023] UKUT 251 (LC)

I will deal firstly with ground (a) (obsolescence as a result of changes in the character of the property or neighbourhood). Mr Peachey submitted that the division of Mrs Cunningham 's plot in 2016 constituted a significant change to the neighbourhood. It could similarly be said that the earlier change of use of Lamp Cottage from a family home to a property for holiday letting was a change of similar magnitude but neither involved any physical alteration to the two properties, there was simply a change in the manner of occupation of one of them.

Mr Kay considered that the opening of several bed and breakfast establishments in the wider locality was an indication of the changing character of the neighbourhood but equally there could have been a number of properties that had reverted to residential use over the same period. The net effect was not quantified. The most obvious physical change to the locality was the reinstatement of the original driveway but in the context of the whole estate its effect was, in my view, minimal. Mr Francis drew attention to the comments of Farwell J in Chatsworth Estates Ltd v Fewell [1931] 1 Ch 224, where he said at 229:10:

“To succeed on [ground (a)] the defendant must show that there has been so
complete a change in the character of the neighbourhood that there is no longer
any value left in the covenants at all.”

In my view none of the alterations referred to by the applicant are sufficiently impactful to lead me to the conclusion that the covenant should be deemed obsolete.

Mr Peachey submitted that the covenant could no longer achieve the purpose originally sought by Mrs Cunningham, namely that it ensured privacy and tranquillity for her young family, when she insisted on its inclusion in the 2005 transfer. Mr Peachey’s contention was that since Mrs Cunningham’s family were now adults the covenant was defunct. However, that argument ignores the second limb of Mrs Cunningham's original justification, that the covenant protected her investment by preventing development of the Lea Hurst estate. Moreover, the benefit of the restriction is not personal to Mrs Cunningham and her current circumstances cannot be determinative; the restriction provides continuing protection for her and for future owners. In the circumstances I consider that the case under ground (a) has not been made out.

Turning to ground (aa), Mr Francis had identified a series of ‘key markers’ which he considered to provide the context for the examination of the familiar questions posed in Re Bass Ltd’s Application (1973) 26 P&CR 156. The first of these observations was that the covenant is in absolute terms and was agreed by the transferors to protect the interests of Mrs Cunningham. As such, he submitted, it may be said to have greater weight than that of a transferee’s covenant because in a situation between a willing buyer and willing seller it was more usual on sale of part for the transferee to be willing to encumber the property than the transferor.

It seems to me that the circumstances under which the agreement was made simply reflect the respective negotiating strength of the parties to the transaction. I cannot discern any reason why a covenant demanded by a transferee should be more resilient to alteration than one granted by a transferor and Mr Francis did not suggest any. On the other hand, the fact that the covenant was given to Mrs Cunningham herself, and not to some previous owner, is a matter to which I would be prepared to attach some weight if one of the statutory grounds was made out and it came to the exercise of the Tribunal’s discretion.

Mr Francis said that there was a very special reason why the covenant was agreed to, namely that Mrs Cunningham did not want the risk and uncertainty of a non-restrictive user at Lea Hurst. Mr Francis said in applying the user covenant just to Lea Hurst, rather than to the estate as a whole, the parties had engaged in ‘bespoke tailoring’ and the ‘red line’ of the covenant preserved it by not being qualified.

He went on to say that the objectors were using the covenants for their intended purpose; the control of development on the site. Mrs Cunningham and Mr Nix were entitled to be concerned about the future especially as it would be difficult to ‘police’ the covenant where it to be modified. He described their fear of the future as rational given the behaviour of Mr Kay and the nature of Lea Hurst.