Restrictive covenant – Modification – Section 84(1)(aa) of Law of Property Act 1925 – Applicants wishing to extend terrace of houses – Covenant preventing alteration of external appearance of houses – Applicants applying to modify covenant – Neighbours objecting – Whether covenant securing practical benefits of substantial value or advantage – Application dismissed
The applicants owned 11 freehold houses on Ferry Street in Docklands, London E14. It formed part of the St David’s Square development, which was a mix of freehold houses and leasehold flats. The estate comprised nearly 500 residential units near Canary Wharf and was subject to a building scheme.
The original configuration of the houses comprised a kitchen/dining space at the rear of the floor with access to the garden, a single bedroom, a cloakroom with WC and a hallway. The first floor contained a living room with access to the balcony, a double bedroom and a shower room. The top floor had two double bedrooms and a bathroom.
The applicants operated the properties as houses in multiple occupation and the first floor living rooms were used as bedrooms. They wished to extend the living accommodation into the roof space and create full width dormer extensions and extend their ground floors.
Each house was burdened by a covenant which prohibited additions or alterations that substantially altered the external appearance of the properties on the estate. Therefore, the applicants applied to modify the covenant principally pursuant to section 84(1)(aa) of the Law of Property Act 1925.
The owners of the other properties in the development, who had the benefit of the covenant, objected. They argued, amongst other things, that: (i) if the application properties were altered, the neighbours’ view would be changed and out of keeping with the rest of the estate; (ii) allowing the modification would represent a breach in the building scheme and increase the risk of further development in the future.
Held: The application was dismissed.
(1) Section 84(1)(aa) was fulfilled where it was shown that the continued existence of the restriction would impede some reasonable use of the land for public or private purposes or that it would do so unless modified. By section 84(1A), where condition (aa) was relied on, the tribunal might discharge or modify the restriction if it was satisfied that, in impeding the suggested use, the restriction either secured “no practical benefits of substantial value or advantage” to the person with the benefit of the restriction, or was contrary to the public interest, and that money would provide adequate compensation for any loss or disadvantage from the discharge or modification.
The covenant was not to “add to or alter any building on the property in any way so as to affect substantially the external appearance thereof”. The proposed alterations would substantially change the external appearance of the application properties, by adding the kitchen extensions and by the creation of a row either of dormer windows with Juliet balconies or of Velux windows in the sloping roofs of the properties.
The prevention of that change was not in itself a benefit to the objectors. The original developer might have built the application properties with bigger kitchens and smaller gardens and might have built them all with dormers or Velux windows in the roof, and no-one would have minded. The issue was whether the proposed change would be out of character with, or out of keeping with, the rest of the estate.
(2) The objectors made the point that a modification of the covenant for all 11 properties was likely, without more, to lead to a haphazard pattern whereby work was done on some properties and not on others, or on all the properties but at different times. In response, the applicants offered a covenant to do all the work at once.
However, the tribunal was not persuaded that such a covenant would be effective to prevent the piecemeal alteration of the application properties, nor even to ensure that they would all even eventually be altered in a consistent way or at all.
A covenant to do all the work together would be difficult if not impossible to enforce by injunction (rather than by damages). So even if a covenant was given, the tribunal had no confidence in its effectiveness. And that meant that to modify the alterations covenant inevitably exposed the objectors to the likelihood of piecemeal changes in the appearance of the application properties. The prevention of that scenario was a practical benefit of substantial advantage. Accordingly, the tribunal had no jurisdiction to modify the covenant.
(3) As things stood, the estate had been unaltered, so far as was known, since its construction. All the property owners in the development had the benefit of section 84 of the 1925 Act and if they could meet the conditions set out therein they could have a covenant modified or discharged; it was not open to the objectors to argue that because this was a building scheme they should not have the opportunity of doing so. The prevention of the expense and stress of responding to future applications was not a practical benefit secured by a covenant of this nature, as the tribunal had made clear: Martin v Lipton [2020] UKUT 8 (LC) considered.
However, the modification of the covenant for all 11 application properties would enable a substantial change to the estate and a significant departure from its architectural unity. The risk in the present case was that after that big change, more would follow.
(4) The application properties were not the only ones that might be able to be extended. There had been other planning applications, and the possibility of future applications was not fanciful. In any future case the applicant would be able to say that the building scheme had already been breached and to argue that a small further change would make no difference. The change to just one more structure, following the large-scale changes to the Ferry Street terrace, might not make a lot of difference, but there would then be a cumulative effect which would further erode the visual and architectural unity of the estate, as well as making it more crowded with buildings and structures.
The avoidance of the “thin-end-of-the-wedge” effect, preventing even further erosion of the design and character of the estate, was a practical benefit of substantial advantage (and perhaps of some value, albeit difficult to quantify). Accordingly, the tribunal had no jurisdiction to modify the covenant: Morris v Brookmans Park Roads Ltd [2021] UKUT 125 (LC) considered.
Stephen Jourdan KC and Michael Ranson (instructed by Brethertons LLP) appeared for the applicants; Liam Spender appeared for the objectors.
Eileen O’Grady, barrister
Click here to read a transcript of Patel and others v Spender and others
