Section 610 of the Housing Act 1985 enables a county court to vary restrictive covenants to enable landowners to convert single dwelling-houses into two or more flats if they have been granted planning permission to do so. The legislation affects leasehold and freehold properties, and empowers county courts to exercise their jurisdiction on such terms and conditions as they consider just.
In Lawntown Ltd v Camenzuli and another [2007] EWCA Civ 949; [2007] PLSCS 194 a property developer successfully invoked section 610 to vary restrictive covenants that were preventing it from converting a large semi-detached property into two self-contained flats. The Court of Appeal upheld the decision issuing valuable guidance as to how county courts should exercise their discretion in future cases.
bjections to the variation of the covenants were wide-ranging. The area in question already had a surplus of the type of property proposed by the development but lacked large family houses. The development would lead to traffic congestion and parking problems, and noise levels would increase. Residence would become more transient, social cohesion would be damaged and the locality would be adversely affected. The value of neighbouring properties would diminish and the development would set an adverse precedent for other similar schemes.
The Court of Appeal ruled that all these factors were relevant, as were public policy considerations that favoured more intensive use of land to deal with the acknowledged housing shortage. The courts had to weigh the benefits that would result from, and the harm that would be caused by, any variation. Issues that might be relevant to an application to the Lands Tribunal, under section 84 of the Law of Property Act 1925, for the modification or discharge of restrictive covenants, might also be relevant to applications under section 610 of the 1985Act. However, the regimes were, none the less, quite separate and distinct. Their lordships accepted that the conversion would set a precedent that would make it difficult to resist future applications for similar developments, but they were not convinced by arguments alleging that the value of properties in the neighbourhood would fall. They therefore concluded that the development served the wider public interest.
Were the owners of the properties with the benefit of the restrictive covenants entitled to compensation for the loss of the protection that the covenants conferred? The Court of Appeal ruled that the county court could require the payment of compensation in appropriate cases. It decided, however, that it would not be appropriate to compensate the adjoining landowners, because of the lack of any cogent evidence that the development would diminish the value of their properties.
This case is bound to attract widespread publicity. The company’s enterprising use of section 610 will surprise and energise developers, and could, in some cases, have a significant effect on the availability and cost of restrictive covenant indemnity insurance.
Allyson Colby is a property law consultant
