Modification of restrictive covenants
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Modification of restrictive covenants
A party with an interest in land subject to restrictive covenants can apply to the Lands Tribunal to have the covenants discharged or modified pursuant to section 84 of the Law of Property Act 1925. Covenants can be altered where the Tribunal reaches the view the covenant:
- is obsolete
- impedes some reasonable use of the land
- doesn’t protect the party with the benefit of the covenant
The decision in George Wimpey v Gloucestershire Housing Association made it clear the Lands Tribunal wouldn’t be inclined to assist developers by altering or discharging restrictive covenants where the covenants were claimed to be obsolete as a result of development carried out in breach.
The recent case of Millgate Developments Limited v Smith is an interesting example of how the Lands Tribunal decides whether to exercise its discretion. Millgate owned land burdened by restrictive covenants which benefited a nearby property. Millgate obtained planning permission, built social housing in breach of the restrictive covenants and then applied for the covenants to be modified to allow the properties to be occupied.
In contrast to the George Wimpey decision, the Tribunal in the Millgate case accepted the covenants secured a practical benefit but considered that preventing the use of land for social housing wasn’t in the public interest. A monetary payment (to enable screening along the boundary of the land with the benefit of the covenants) was considered adequate compensation for any loss arising from the breach of the covenant.
Whilst the warning given in the George Wimpey case was repeated (the Tribunal wont reward parties for breaching covenants) the net effect of the judgement was only minimal sanctions for breaching the covenants.
Any development carried out in breach of restrictive covenant will inevitably entail a risk of the covenants being enforced and the development halted. The Millgate case suggests however that where development is for social housing or other uses of value to the community at large, the prospects of varying or discharging adverse restrictive covenants may be increased.
If you wish to discuss any of the issues raised in this blog, please contact me.