Restrictive covenant – Modification – Applicant owning property subject to covenant not to use it other than as single private residence – Applicant proposing to use bedrooms for bed and breakfast purposes – Applicant applying to modify covenant – Whether covenant securing practical benefits of substantial value or advantage to neighbouring owner – Application granted
The applicant owned a substantial property known as Lea Hurst, Lea Shaw, Holloway, Matlock, in Derbyshire, an imposing Grade II listed dwelling. In 2019, he decided to let rooms in the house on a bed and breakfast basis. Such a use breached a covenant imposed in an earlier transfer of the house not to use the property other than as “a single private residence”. Therefore, the application sought modification of the covenant under section 84(1) of the Law of Property Act 1925 in order that the bed and breakfast activity could continue.
The application was under grounds (a) (restriction obsolete), (aa) (the covenants impeded reasonable user and did not secure practical benefits of substantial value or advantage) and (c) (no injury to those entitled to the benefit of the restriction).
The objectors lived at Cressbrook Hall, some 20 miles north-west of Lea Hurst. They also owned Lamp Cottage, a detached house which occupied a site adjacent to land forming part of the Lea Hurst estate but some distance from the house itself. The cottage had the benefit of the covenant.
The objectors argued that the applicant was in breach of covenant and, as they were persons entitled to the benefit of the restriction, the proposed modification would harm their investment.
Held: The application was granted.
(1) The case under ground (a) had not been made out. The restriction provided continuing protection for the objectors and for future owners and was not obsolete as a result of changes in the character of the property or neighbourhood.
(2) As regards ground (aa), the applicant’s use of part of the property as letting rooms was allowable in planning terms under permitted development rights.
The proposed use was reasonable and the fact that it did not require planning permission was an indication that it was a minor alteration to the use of the premises that would not normally give rise to concerns, even where properties were conjoined.
The application related only to the covenant restricting the use of the house to a private dwelling and in that context it was clear that the proposed use was impeded.
In all the circumstances, the likelihood of the occupants of the cottage being disturbed by guests at the property was negligible. The owner and occupier of a house adjacent to the property (unlike the cottage) had given their tacit approval to the modification.
The listed status of the property and its relationship to the wider planning environment placed strict limits on the use of the house and the wider estate which rendered the protection offered by the covenant less important than it otherwise would be.
In any event, in the case of significant change that would have an impact on neighbours, the planning system and the way it applied to the property, fulfilled the same function as the covenant. Furthermore, any other proposal to develop the house or the estate would require a further application to the tribunal which would be determined on the facts and circumstances of that case.
(3) The objectors’ fears were misplaced. As well as the protection afforded by the planning system, the modification of the covenant to allow the use sought by the applicant would leave its primary purpose and effectiveness untrammelled. As the owner, the applicant was entitled to explore development proposals and was not obliged to discuss them with his neighbours. The covenant did not prevent him from doing so but provided a measure of comfort. Every change would require an application for modification.
This was not a case where such practical benefits as they were, could be described as substantial in value or advantage.
The covenant in its modified form would not be difficult to “police”. Prospective guests would expect to be able to visit the website and see photographs and details of the rooms and facilities. It would be obvious how many rooms were being offered and their availability. It followed that ground (aa) was satisfied and the tribunal had jurisdiction to allow the application. As a corollary, ground (c) was also made out.
(4) It did not follow as a matter of course that the tribunal would exercise its discretion to allow the modification or discharge of the covenant.
The purpose of section 84 of the 1925 Act was to enable applicants to obtain modification or discharge of restrictive covenants where they could demonstrate statutory jurisdiction. Where it was satisfied on the facts, and the applicable law, that it had such jurisdiction, the tribunal was loath to exercise its discretion to deny the applicants the relief that they sought. Where jurisdiction had been established, the discretion to refuse the application should only be cautiously exercised. It should not be exercised arbitrarily or as a punishment for the applicants’ conduct unless such conduct was egregious and unconscionable: Re The Trustees of Green Masjid and Madrasah [2013] UKUT 355 (LC); [2013] PLSCS 243, Alexander Devine Children’s Cancer Trust v Housing Solutions Ltd [2020] UKSC 45; [2021] EGLR 1 and Hodgson v Cooke [2023] UKUT 41 (LC) considered.
In the present case, the applicant’s conduct was neither egregious nor unconscionable and, because the application concerned the future use of the house, rather than the physical development of the site, the tribunal was not being presented with a fait accompli. There was no evidence that any activity associated with the letting of rooms in the property had caused a nuisance or was likely to do so in the future.
(5) In deciding to grant the application, the tribunal had balanced the applicant’s behaviour in not recognising that he was in breach of the covenant, when it should have been self-evident, against his apparently sincere desire to preserve a heritage asset and make it available for use, albeit on a small scale, to the paying public. He had spent a considerable sum to enable the property to be enjoyed as a family home and small-scale bed and breakfast establishment and the tribunal was inclined to believe that his motivation was, in part at least, altruistic rather than wholly pecuniary.
There was no credible evidence that showed that modifying the covenant would affect the interests of the objectors.
David Peachey (instructed by A City Law Firm Ltd) appeared for the applicant; Andrew Francis (instructed by BRM Law Ltd) appeared for the objectors.
Eileen O’Grady, barrister
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