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Recent case highlights the extent of “benefitting land” to be considered when modifying restrictive covenants

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31/03/2021

Why is Re Copleston and Norton of interest?

Developers will be all-too aware that restrictive covenants can prevent land being used for a particular purpose. Such restrictions may restrict the type or density of development that can take place, or may even prohibit development altogether. Often restrictions will be historic, yet their existence can have a significant impact upon the development potential, and therefore on the marketability and value, of land.

The Law of Property Act 1925 (LPA 1925) affords the Upper Tribunal (UT) discretionary jurisdiction to modify or discharge restrictive covenants affecting land if one or more of the grounds in section 84 LPA 1925 applies, namely:

  • the covenant is obsolete;
  • it impedes some reasonable use of the land;
  • the beneficiaries expressly or impliedly agreed to the release or modification; and/or
  • no injury will be caused.

The recent case of Re Copleston and Norton [1] is of interest (albeit possibly unwelcome to developers) because it seemingly widens the circumstances in which objectors may oppose applications to modify/release covenants under section 84, and concurrently limits scope for such applications to succeed.

What happened in the case?

Ms Copleston and Mr Norton (the applicants) obtained planning permission to erect a new house in the grounds of their home.  The proposed development site was burdened by restrictive covenants which prohibited use of the land other than as a private garden and which prohibited the erection of buildings such as sheds and other outhouses.  The applicants applied to release/modify the restrictions to enable the development to proceed on the alternate bases that the covenants were obsolete and/or they restricted reasonable use of the land.  Mr and Mrs Harris, who owned a substantial property across a road from the proposed development site, objected.

The Harris’ argued, in accordance with section 84 (1A) LPA 1925, that the restrictions secured for them practical benefits of substantial value or advantage which could not be adequately compensated in money.  However, only part of the Harris’ land [2] benefitted from the restrictive covenants.  The UT therefore had to determine whether it should consider the effect of the proposed development on the whole of the Harris’ property, or on just the benefitting land.  (In the former scenario, the effect on the Harris’ property overall would be significant, and the application to release/modify restrictive covenants would fail.  In the latter scenario, the effect on the benefitting land only would be small, and the application to release/modify would succeed.)

The UT decided that it should consider the effect of the proposed development on the whole of the Harris’ property.  The UT’s reasoning was:

  • Mr and Mrs Harris purchased the whole of their land as a single plot and the benefitting land was a substantial part;
  • The practical benefits secured by the restrictive covenants were enjoyed by both the benefitting and non-benefitting land;
  • The enjoyment of the Harris’ land was not meaningfully divisible into benefitting and non-benefitting parts;
  • Prior case law [3] suggested that the practical benefits which can be secured by a restrictive covenant should be construed widely; and
  • Perhaps crucially, section 84 is not limited on its wording to benefitting land. Instead, the wording refers to practical benefit to the persons benefitting from the restriction, not to the beneficiaries’ landholding.

The UT justified its decision further by pointing out that this was not a case where an objector had acquired benefitting land as a means of leveraging its position against an applicant, nor was it a case where the beneficiaries owned only a minimal amount of benefitting land.

What practical advice arises?

The Re Copleston and Norton decision is, on the face of it, unhelpful for developers.  It does emphasise, however, the fact- and context- specific nature of section 84 application cases, and the discretionary nature of the UT’s jurisdiction.  As such, developers may wish to note the following practical advice:

  • It’s good to talk. Fostering good neighbourly relations, co-operating with beneficiaries of restrictive covenants and working with them to design developments that are less likely to incite objections, can go a long way [4].
  • In many cases, negotiating openly and fairly with beneficiaries can avoid the need to pursue a section 84 application at all. It can result in a developer who wishes to remove or relax restrictive covenants simply reaching an agreement with any beneficiaries (which might also involve the payment of a premium), to that effect (again, see [4]).
  • Even if neighbourly negotiations do not result in an agreement, they can stand a developer in good stead with the UT if and when it is subsequently asked to exercise its discretion on a section 84 application [5].
  • Finally, in such applications, evidence will be key.  The UT will consider all relevant circumstances – including the nature of the land and the proposed development, the extent of any benefitting land, and the position of the beneficiaries and any practical benefits claimed by them to be secured by the restrictions. As this case and other restrictive covenant cases suggest, the motivation and conduct of the applicant and respondent may also be taken into account.  Overall, the UT will make a decision on all the facts and particulars.

How we can help?

If you would like any advice or assistance in connection with the enforcement, modification or discharge of any restrictive covenants – whether that be in relation to freehold or leasehold land; and whether it be in relation to commercial negotiations or legal recourse via an UT application – please do not hesitate to contact David Manda or any member of our Real Estate Litigation team.

 

[1] [2021] UKUT 18 (LC)

[2] in fact, land which was separated from the proposed development site by the road and by a substantial detached house

[3] Gilbert v Spoor [1983] Ch 27

[4] The terms of any title indemnity insurance must be considered before any contact is made with beneficiaries as such contact may well invalidate any insurance policy

[5] As regards developer conduct in restrictive covenant cases, see the Court of Appeal‘s and Supreme Court‘s decisions in the Millgate case, explained in our earlier articles.

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