The Upper Tribunal (Lands Chamber) has considered the relevance of an applicant’s conduct in deciding whether to exercise its discretion to discharge or modify a restrictive covenant under section 84(1) of the Law of Property Act 1925 in Fosse Urban Projects Ltd v Whyte and others [2023] UKUT 286 (LC); [2023] PLSCS 205.
The background
The application, filed in October 2022, concerned land at the rear of 87 and 89 Silfield Road, Wymondham, Norfolk, for which planning permission for a single house was obtained in July 2021. By the date of the hearing in September 2023 the building works were complete and the house was occupied by a director of the applicant company and his family.
The land was burdened by a covenant which provided that the land was not to be used “other than as garden land in connection with the adjoining property”, which was agreed to be 93 Silfield Road.
The objectors lived in 41 and 39 Osprey Crescent, opposite the new house. Both had chosen their properties in the knowledge that the application land would be protected by the covenant and would remain open green space.
The new house was around 25m away from 41 and just over 29m away from 39. The previously clear, uninterrupted view from 41 was now blocked completely by the new house and its privacy was infringed: one window in the new house looked directly into its bedrooms, lounge and study. Both objectors argued that their properties had declined in value as a result of the development.
Evidence
The applicant did not provide a witness statement but relied on an expert valuation report which rejected the objections and any impact on value owing to the development. It claimed that, over time, planting would screen the development from the objectors’ properties.
However, there was no planting plan or information to support the expert’s landscape credentials, and the methodology for establishing that there was no decline in value of 39 and 41 was flawed.
Surprisingly, the expert did not attend the hearing, so the objectors and the tribunal had no opportunity to question the evidence.
The grounds
An applicant must overcome two hurdles to obtain the discharge or modification of a restrictive covenant: first, it must establish that the tribunal has jurisdiction to do so under one of the grounds in section 84(1) of the 1925 Act; and then it must persuade the tribunal to exercise its discretion to do so.
The applicant relied on three grounds under section 84(1): (a) that the restriction ought to be deemed obsolete by reason of changes in the character of the property or neighbourhood; (aa) that the continued existence of the covenant would impede a reasonable use of the land, it secured no practical benefits of substantial value or advantage to those who benefited from it and money would provide adequate compensation for its discharge or modification; and (c) the proposed discharge or modification would not injure the persons entitled to the benefit of the restriction.
The tribunal concluded that there was no physical connection between the application land and 93 Silfield Road, which was intended to benefit from the covenant, the land having been developed. In fact, the application land was now completely encircled by housing developments. This constituted so complete a change in the character of the neighbourhood that there was no longer any value left in the restriction (Chatsworth Estates Ltd v Fewell [1931] 1 CH 224). The covenant could no longer be fulfilled and was obsolete. So, ground (a) succeeded.
Ground (aa) also succeeded. The use of the land was reasonable and the covenant impeded such use. The retention of an open aspect and the prevention of being overlooked were practical benefits. The tribunal was not satisfied that the planting would provide adequate screening for the new house. However, such benefits were not of substantial value. A road and pathway passing in front of 41 meant that the location was not entirely private; 39 still enjoyed an open aspect and the loss of privacy was marginal. Any negative impact on the value of both properties was modest.
Since both objectors would be injured by the discharge or modification of the covenant, ground (c) failed.
Discretion
Jurisdiction having been established, the tribunal had to decide whether to exercise its discretion to discharge or modify the restriction. A refusal to do so should be exercised cautiously and not as a punishment for conduct unless such conduct is egregious and unconscionable (Re Trustees of the Green Masjid and Madrasah [2013] UKUT 355 (LC); [2013] PLSCS 243). Such conduct would include deliberate breaches intended to make a profit (Millgate Developments Ltd v Alexander Devine Children’s Cancer Trust [2020] UKSC 45; [2021] EGLR 1).
The company’s failure to provide a witness statement was a notable omission which had hindered an examination of its motives. From this, the tribunal drew the inference that the company, an experienced developer, was aware of the restriction and that it was enforceable. It had gambled that its neighbours would not seek an injunction or resist an application to discharge made after the development had commenced. The applicant’s “build first and apply later” approach could be properly characterised as cynical. The tribunal declined to discharge or modify the covenant to sanction the development.
The objectors were entitled to enforce the covenant and seek demolition of the house or to claim damages.
Key points
- Once a ground for the discharge/modification of a restrictive covenant has been established, the tribunal must decide whether to exercise its discretion to do so
- An applicant’s conduct is relevant to the exercise of the discretion
Louise Clark is a property law consultant and mediator
