[2024] UKUT 384 (LC)

Most property owners are familiar with the effect of restrictive covenants entered into on the sale or transfer of land. Fewer are aware that Parliament has provided that restrictive covenants can be modified so that they have a different effect, or discharged altogether so that they no longer have any effect. The power to modify or discharge covenants is conferred on this Tribunal by section 84, Law of Property Act 1925 and is exercisable if certain grounds in section 84(1) are made out.

It is for an applicant to demonstrate that at least one of the statutory grounds is made out and that the Tribunal therefore has power to modify or discharge the restriction. If that burden is discharged, the Tribunal then has a discretion whether to exercise that power by making an order or not. The Tribunal may impose conditions on a discharge or modification which may include adding a different restriction if that appears to us to be reasonable having regard to the relaxation of the original covenant.

The application in this case is made under two of the grounds in section 84(1): ground (aa) and ground (c).

In summary, ground (aa) is satisfied where the restriction which is sought to be modified or discharged impedes some reasonable use of the land for public or private purposes, and the Tribunal is satisfied that, in so doing, it secures “no practical benefits of substantial value or advantage” to the person with the benefit of the restriction, or that it is contrary to the public interest. The Tribunal must also be satisfied that money will provide adequate compensation for any loss or disadvantage which that beneficiary of the restriction will suffer from the proposed discharge or modification.

In determining whether a restriction ought to be discharged or modified on ground (aa), the Tribunal is required to take into account the statutory development plan and any declared or ascertainable pattern for the grant or refusal of planning permissions in the area. It must also have regard to the period at which and the context in which the restriction was imposed and any other material circumstances. The Tribunal may direct the payment of compensation to make up for any loss or disadvantage suffered by the person entitled to the benefit of the restriction, or to make up for any effect which the restriction had, when it was imposed, in reducing the consideration then received for the land affected by it.

To succeed in its alternative case on ground (c), the applicant must demonstrate that the proposed modification of the restriction would not cause injury to those entitled to the benefit of it. In Ridley v Taylor [1965] 1 W.L.R. 611 Russell LJ referred to this ground as a ‘‘long stop against vexatious objections … designed to cover the case of the proprietarily speaking, frivolous objection.”

Although the applicant has only a relatively short term tenancy (which it hopes to renew if the application succeeds) it has sufficient standing to make this application in its own name. Section 84(1) authorises the Tribunal to modify a covenant “on the application of any person interested in any freehold land” which is affected by a restriction arising under a covenant. It is not necessary for an applicant to be the freeholder and it is sufficient that they have some interest in the land. That condition is satisfied in this case by the applicant’s two year tenancy which has more than six months still to run.