Discharge before you develop
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Discharge before you develop
Section 84 of the law of property act 1925 can in certain circumstances be used by developers to modify or discharge restrictive covenants which will otherwise restrict the use of land.
An application may be made under section 84 to the Lands Tribunal for modification or discharge of a covenant based on a number of grounds being:
- The covenant is obsolete (Ground (a)).
- There is agreement to the discharge or modification between all those with the benefit of the restriction (Ground (b)).
- The restriction restricts a reasonable use of the land and confers no practical benefit of substantial value or advantage on the persons entitled to the benefit of it(or is contrary to the public interest) and the loss of the covenant can be compensated in money (Ground (aa)).
- No injury will be caused to those entitled to the benefit of the covenant by reason of its discharge or modification (Ground (c)).
Section 84 (1) (aa) was considered by the supreme court in the recently reported case of Alexander Devine Children’s Cancer trust v Housing Solutions Ltd.
The case concerned a piece of land which planning permission was obtained to build 23 affordable housing units upon. Part of the site was burdened by a restrictive covenant. Once development had commenced the parties with the benefit of the covenants objected and the developer applied to the Lands Tribunal to vary the covenant.
The lands Tribunal decided to modify restrictive covenants in consideration of which the party with the benefit of the covenant was awarded £150,000 in compensation. The party with the benefit of the covenant appealed.
The Court of Appeal allowed the appeal and remade the decision of the lands Tribunal by refusing to allow the application.
The Supreme Court disagreed with the Court of Appeal on a number of the grounds upon which their decision was made and gave a different reason for agreeing with the fourth decision. The outcome however was that the application to discharge the restrictive covenants was refused.
It appears to have been key to the thinking of the Supreme Court that the conduct of the developer was perceived as being “ cynical”. The developer was considered to have deliberately committed a breach of the restrictive covenant with a view to making profit from doing so. The site could have been laid out in a way which avoid breaching a restrictive covenant but the developer chose not to do so.
This decision is particularly striking given the passage of time and affect the units have been constructed. It remains to be seen whether the plant would benefit of the covenants chooses to pursue an application for a prohibitory injunction preventing occupation of the units or a mandatory injunction requiring their removal.
This case will serve as a warning to any party considering development which might infringe or breach the terms of a restrictive covenant. Section 84 may provide a means of modifying covenants but any developer should be mindful of the comments of the Supreme Court that the actions of the developer when making an application will need to be viewed as being beyond reproach.
If you have a restrictive covenant affecting a development of land you are involved in and need help to resolve the issue please contact Mark Withers.