The Upper Tribunal (Lands Chamber) in James Hall And Company (Property) Ltd v Maughan & Ors, Re The Aclet [2017] UKUT 240 (LC) has reconfirmed that any indirect positive benefits in consequence of a restrictive covenant limiting the use of land are irrelevant when assessing the practical benefits of the covenant itself in a section 84(1)(aa) application for its discharge or modification.
The case concerned an application under section 84(1)(aa) of the Law of Property Act 1925 (“the 1925 Act”) for the modification of a restrictive covenant limiting the use of a building as a public house. The owner provided evidence that such use was unviable. The restrictive covenant was sought to be amended to allow the conversion of the building into a SPAR convenience store. If the restrictive covenant was not so modified then it was submitted that the public house may be closed indefinitely (and the building may remain vacant indefinitely).
The beneficiaries of the restricted covenant, adjacent owners, had objected to the s84(1)(aa) application on the grounds that the public house was the centre of the community and as such was a source of support and enjoyment for many residents. This would be lost if the restrictive covenant was discharged or modified as per the application. It was noted that an application for the listing of the public house as an asset of community value was submitted to the county council but was subsequently withdrawn. It is unlikely, in any event, that the listing would have affected the tribunal’s decision.
The Legislation
Section 84(1)(aa) provides:
“(1) the Upper Tribunal shall…have power from time to time, on the application of any person interested in any freehold land affected by any restriction arising under covenant or otherwise as to the user thereof or the building thereon, by order wholly or partially to discharge or modify any such restriction on being satisfied:
(aa) that (in a case falling within sub-section (1A) below) the continued existence thereof would impede some reasonable user of the land for public or private purposes or, as the case may be, would unless modified so impede such user; or
(1A) Subsection (1)(aa) above authorises the discharge or modification of a restriction by reference to its impeding some reasonable user of land in any case in which the Upper Tribunal is satisfied that the restriction, in impeding that user, either:
(a) does not secure to persons entitled to the benefit of it any practical benefits of substantial value or advantage to them; or
(b) is contrary to the public interest;
and 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 decision
The Tribunal granted the application and made an order for the modification of the restrictive covenant so as to enable the change of use to a convenience store. In reaching such decision, the Tribunal considered each relevant element of section 84(1)(aa) (as underlined above) and found as follows:
- Is the proposed user reasonable and impeded by the covenant?
The Tribunal found the proposed use was reasonable. It is established case law that the grant of planning permission means prima facie the permitted use is a reasonable one. However, the tribunal noted that such case law concerned express planning permission which had followed a procedural planning process. In this case the proposed change of use was within general permitted development rights and not therefore subject to the public consultation and consideration planning processes. Notwithstanding, the Tribunal found the general permitted development rights were still relevant to the reasonableness of the proposed use. In finding the proposed use was reasonable they concluded it would be restricted by the covenant.
- Does impeding the proposed use secure to the objectors practical benefits?
The Tribunal found that the objectors were seeking to rely upon a negative covenant to achieve a positive result. That is, they were using the limitation on the use of the building as a public house to try and achieve the ongoing trading of such public house. The Tribunal noted the case of Re O’Reilly’s Application (1993) where the Lands Tribunal said:
“in order to secure a practical benefit for the purposes of subsection 1(A) the restriction must itself in consequences of its wording and effect be capable of providing a benefit.”
The O’Reilly case concerned a restrictive covenant imposed by a council limiting the use of land as a carpark. In that case, the Tribunal noted that the likely purpose of the covenant was to secure off-street parking. However, the cessation of the off-street parking facility didn’t breach the restrictive covenant and, as such, this purpose was found not to be a practical benefit itself in consequence of the covenant.
The Tribunal concluded that if trading of the public house ceased there would be no breach of the restrictive covenant. As such, the practical benefit claimed by the objectors was not itself in consequence of the covenant. Therefore, in granting the application, it was determined no practical benefits arose to the objectors.
Lesson: a valid objection to a section 84(1)(aa) application to modify or discharge a restrictive covenant must identify a practical benefit that itself is in consequence of the covenant. Therefore, if such benefit can cease without breach of the covenant then it will not be a practical benefit of the covenant.
