In Patel and others v Spender and others [2024] UKUT 62 (LC); [2024] PLSCS 56, the Upper Tribunal (Lands Chamber) has provided a timely reminder of both what is and what is not a benefit of substantial value or advantage protected by a restrictive covenant.
The development
The case concerned 11 three-storey freehold houses on Ferry Street on the Isle of Dogs in London, which formed part of the St David’s Square development, a mix of 40 freehold houses and 436 leasehold flats. The development occupied a site of around 7.5 acres formerly used for heavy industrial purposes and was constructed in the late 1990s. It had a noticeable architectural signage of yellow and darker brickwork, curved “waveform” roofs, pale coloured laminate panelling and roof slates which created a pleasing consistency.
The covenant
Each house was burdened by a covenant not to add to or alter it in any way which substantially affected its external appearance. Any rebuilding had to conform with the building it renewed or replaced as far as reasonably possible.
A building scheme operated across St David’s Square which meant that the alterations covenant was enforceable by the owners of the other houses and flats in the development. A total of 104 owners objected to the proposed building works, as did the freeholders of the leasehold estate.
The application
On the ground floor, the houses comprised a kitchen/dining space at the rear with access to the garden, a single bedroom, cloakroom with WC and a hallway. The first floor contained a living room with access to a balcony, a double bedroom and a shower room. The top floor had two double bedrooms and a bathroom.
Rakesh Patel owned seven of the houses and controlled another. All eight were used as houses in multiple occupation, with five occupants in each, although they were licensed for six.
The applicants wished to:
i) extend the kitchen/dining area to the rear of the ground floor by around three metres in depth and across the full width of each house; and
ii) convert the loft space to a habitable room with a shower room and WC with a dormer extension on the western slope of the roof with French doors and a Juliet balcony.
Planning permission to carry out the works was not required in most cases.
The applicants claimed that the proposed alterations were straightforward and would have a minimal impact on adjoining properties. Prior to the hearing they offered to carry out all the loft conversion works at the same time and made various fall-back alternative offers restricting the use of the loft rooms and the number of occupants of the properties; proposing conditions as to the conduct of the works; and substituting Velux windows for the French windows with balconies.
What benefits did the covenant secure?
The tribunal was satisfied that the covenant impeded a reasonable use of the applicants’ properties within the provisions of section 84(1)(aa) of the Law of Property Act 1925. The question was whether the covenant secured practical benefits to the objectors.
Many objections were misconceived. The freeholders’ principal concern was that they would not be able to enforce the alterations covenant if it was modified and they would be liable to other residents for failing to do so in accordance with Duval v 11-13 Randolph Crescent Ltd [2020] UKSC 18; [2020] EGLR 17.
However, Duval was irrelevant if the tribunal ordered modification of the covenant because the freeholders would not themselves have put it out of their power to enforce it. Covenants by the applicants to give the freeholders access or to redecorate the exteriors would operate, unchanged, in respect of the extended buildings.
The objectors felt very strongly about Patel’s houses in multiple occupation, which they perceived as a source of nuisance and antisocial behaviour. However, since the covenant did not prevent the use of any property as an HMO, preventing increased nuisance from the permitted occupants of those HMOs was not a benefit secured by the covenant.
Neither was preventing additional strain on estate services and the service charge by an increase in residents or damage to trees during the course of the works. Preventing additional overlooking from new balconies was also not a benefit of substantial value or advantage in what was a crowded and densely populated development.
External appearance
The works would, however, substantially change the external appearance of the application properties by adding the kitchen extensions and creating a row of dormer or Velux windows in the roofs. Were these proposed changes out of character or keeping with the rest of the estate (Martin v Lipton and others [2020] UKUT 8 (LC); [2020] PLSCS 7)?
The development was well-designed with a noticeable architectural theme and unity. The difficulties of planning and arranging for all the works to be done at once and ensuring that the houses were altered in a consistent way meant there was a likelihood of piecemeal changes in appearance which would be out of keeping with the rest of the estate and the surrounding street scene. A covenant to do all the work together would be practically impossible to enforce by injunction rather than by damages.
So modifying the covenant would be likely to lead to what was currently a well-thought-out development with a very unified appearance becoming incoherent and gappy. Preventing that scenario was a practical benefit of substantial advantage to the objectors, as was the avoidance of the thin-end-of-the-wedge argument, preventing even further erosion of the design and character of the estate. Consequently, the tribunal had no jurisdiction to modify the covenant.
Key points
- If the tribunal modifies a covenant, the freeholder is blameless
- Look to the covenant to identify its benefit
- Preventing incoherent changes to a cohesive development is a substantial benefit
- Louise Clark is a property law consultant and mediator
