Restrictive covenant – Modification – Jurisdiction – Rule 54(1) of Tribunal Procedure (Upper Tribunal Lands Chamber) Rules 2010 – Section 84(1) of Law of Property Act 1925 – Objector applying to set aside order of tribunal modifying leasehold covenants – Order made without hearing in the absence of objection – Whether tribunal having jurisdiction to modify alienation and keep open covenants – Application granted in part
The objector local authority owned the freehold of The Black Horse, a public house in Southwark, London SE1. By 2011, a lease of the property (granted in 1996 for a term of 99 years) had been acquired by the applicant.
In May 2020, in its capacity as a local planning authority, the objector granted planning permission for the demolition of the pub and its replacement with a predominantly residential building of six storeys with commercial premises, including a new pub, on the ground floor.
In February 2022, the Upper Tribunal made a final order under section 84(1) of the Law of Property Act 1925 modifying covenants in the lease which prohibited alterations without consent, restricting assignment and subletting, and required the premises to be kept open and used as a public house. The tribunal’s order was made without a hearing as no objection had been received.
In November 2023, when the property had been converted into flats and let on new sub-leases, the objector became aware of the final order and applied to the tribunal to set it aside.
The objector argued, among other things, that clause 3(i) (the alienation covenant) was not a restriction “as to the user” of the property and clauses 3(n), (o) and (p) were positive covenants requiring the lessee to use the property as a public house, rather than simply to refrain from using it for other purposes. Accordingly, they were not “restrictions” within section 84(1).
Held: The application was granted in part.
(1) The tribunal’s jurisdiction under section 84(1) of the 1925 Act allowed the modification or discharge of a restriction affecting land where the restriction was “as to the user thereof or the building thereon”. The section as a whole was concerned with what might lawfully be done on land, and in that context both “user thereof” and “building thereon” appeared to be intended to refer directly to the activity being conducted on the land and for which it was being used. It was not sufficient to confer jurisdiction that the practical effect of a restriction might inhibit a particular type of use: Young Cammiade’s Application [2023] UKUT 96 (LC); [2023] PLSCS 75 applied.
The modification made by the tribunal’s order to clause 3(i), was to that part of the covenant which prohibited the assignment of “any part or parts (as opposed to the whole) of the demised premises”. A covenant in those terms was not a restriction as to the user of the land. Clause 3(i) was not a restriction which the tribunal had jurisdiction to modify.
(2) The objection to the modification of the covenants requiring the demised premises to be used as a licensed victualling house only and to be kept open as such so long as the necessary licences could be obtained (clause 3(n)), to use its best endeavours to obtain a renewal of all licences (clause 3(o)), and for so long as the demised premises were licensed, to use them as a bona fide refreshment house for supplying food and liquor to the public (clause 3(p)(i)), was that each of those stipulations imposed a positive obligation on the lessee. It was not in dispute that section 84(1) did not give the tribunal jurisdiction to discharge or vary positive covenants.
A keep open covenant was undoubtedly positive. Clause 3(n) contained different types of obligation. The opening was restrictive and prevented the use of the premises for any purpose other than as a licensed victualling house. But the remainder required the lessee positively to keep the premises open as a pub. The covenant also required the achievement of a positive outcome, namely, preserving “the character of the said premises with the licensing authorities and the public”. That could not be achieved except by causing the premises to be operated a pub: Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1997] 1 EGLR 52; [1998] AC 1 considered.
(3) To the extent that clause 3(n) was restrictive, the tribunal had jurisdiction to modify it. The introduction of new restrictions in clauses 3(n)(i) and (ii) preventing the use of the premises other than within the specified use classes were inconsistent with what remained of clause 3(n), ie, the positive obligation to trade and keep open as licensed premises. The tribunal had no jurisdiction to modify that part of the covenant and for that reason, or because the two halves could not exist side by side, the covenant should not have been modified in the way it was by the order.
The tribunal’s order purported to discharge clause 3(o) in its entirety. However, the tribunal had no jurisdiction to release the applicant from its positive obligation to use its best endeavours to obtain a renewal of all requisite licences and to appeal any refusal. The tribunal’s order made no modification to clause 3(p) so that no issue of jurisdiction arose.
(4) Rule 54 of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010 gave the tribunal power to set aside a decision which disposed of proceedings, or part of such a decision, and to remake it if the tribunal considered that it was in the interests of justice to do so and if one or more of the conditions in paragraph (2) of the rule was satisfied.
With the exception of the issue of jurisdiction, none of the grounds relied on disclosed a procedural irregularity within rule 54(2)(a) or (d). There was no power to set those parts of the order which were within the tribunal’s jurisdiction because the conditions in rule 54(2) were not met with respect to them.
The February order purported to change the parties’ relationship to a greater extent than parliament allowed. The order was inherently invalid. It bore the brand of invalidity on its forehead and was therefore always a nullity. Those parts of the order which the tribunal did not have jurisdiction to make would be set aside but the remainder would remain as modified by the final order: Nicholls v Kinsey [1994] 1 EGLR 131; [1994] QB 600 applied.
Jonathan Upton (instructed by Bryan O’Connor & Co) appeared for the applicant; Philip Rainey KC (instructed by Southwark Legal Services) appeared for the objector.
Eileen O’Grady is a barrister
