Restrictive covenant – Modification – Section 84(1)(aa) of Law of Property Act 1925 – Scheme of management administered by trust company under Leasehold Reform Act 1967 – Applicants obtaining planning permission for development of property in area governed by scheme – Restrictive covenant preventing alterations without consent of trust – Applicants applying for modification of restriction to permit development – Whether restriction securing substantial practical advantage to trust – Whether money adequate compensation for modification – Application refused
The applicants owned a detached house on an estate of 5,000 properties set in 800 acres. The estate had been developed according to a formal plan between 1907 and 1938 and was managed by a company (the trust) that had succeeded to the interests of the original developer. Its principal object was to maintain and preserve the character and amenities of the estates, pursuant to a scheme of management, established in the 1970s under the Leasehold Enfranchisement Act 1967, that extended to all enfranchised property on the estate.
The applicants obtained planning permission to construct a first-floor extension over their garage. The extension was prohibited by a restrictive covenant, contained both in a transfer of the freehold in 1979 and in the scheme of management, that required the consent of the trust, not to be unreasonably refused, for any alterations to the external appearance of any building on the estate. The applicants applied to modify or discharge the restrictive covenants, primarily on ground (aa) in section 84(1) of the Law of Property Act 1925, namely that the restriction impeded a reasonable use of the land, did not secure any practical benefits of substantial value or advantage to the persons entitled to its benefit and those persons would be adequately compensated by money for any loss or disadvantage that they suffered. They also relied on ground (c), namely that the modification would not injure the persons entitled to its benefit.
The trust objected to the application. It argued that the ability to prevent development that it considered was visually harmful to the estate was a practical benefit of substantial advantage and that money would not adequately compensate for its loss. The applicants argued that the trust’s power to prevent unsightly development could never be of advantage to it, since it did not have eyes, and it could not claim to be the guardian of the public interest in that regard because it was a company limited by guarantee not a statutory body; that role instead fell to the local planning authority, which had found the development to be acceptable.
Held: The application was refused.
The purpose of the restriction imposed by the transfer and scheme of management was to ensure the preservation of the estate’s amenities. Where the benefit of a restriction was held by an estate body in the general interest, the question of whether the modification would injure that body, and whether the restriction secured to it a practical benefit of substantial advantage, was to be tested by the extent of any damage to the amenities of the estate: Re Kalsi (1993) 66 P&CR 313 and Re Vertical Properties v New Hampstead Garden Suburb Trust Ltd LP/4/2007 [2010] UKUT 51 (LC); [2010] JPL 793 applied. It was therefore untenable to argue that the trust’s lack of eyes meant that its power to prevent unsightly development could not be of advantage to it.
The applicants’ proposed development would be harmful to the character of the area and would constitute an undesirable precedent for future applications. The power to prevent it constituted a practical benefit of substantial advantage to the trust such that ground (aa) was not made out; for the same reasons, ground (c) was also not made out.
Even if the applicants had been able to show that the damage to amenity and, hence, the advantage secured by the restriction, was not substantial, ground (aa) would still not be made out since money would not, within the second limb of ground (aa), be an adequate compensation for the modification. The trust’s interest was that of custodian of public interest. It had been given its management powers under the scheme of management because, pursuant to section 19(1) of the 1967 Act, the minister had been satisfied that this was necessary “for the purpose of ensuring the maintenance and preservation” of the estate. The fact that the trust was not a creature of statute was irrelevant. The nature of its interest in maintaining and preserving the suburb meant that money would not compensate it for any disadvantage caused by the modification. Accordingly, adverse effects on the amenities that the trust had the function of protecting would prevent ground (aa) from being made out: Re Martin and another’s Application [1989] 1 EGLR 193; [1989] 05 EG 85 and Re Willis’ Application [1997] 2 EGLR 185; [1997] 28 EG 137 applied; Vertical Properties distinguished.
Moreover, the trust had not unreasonably refused its consent to the modification in circumstances where planning permission had been granted for the proposed development. The grant of planning permission should not be determinative of the trust’s exercise of its discretion. Nor, as a matter of principle, should it be decisive of an application under section 84(1). The grant of planning permission was a significant matter but could not be conclusive. The degree of control that existed under the scheme of management and transfer was more finely grained than that which could exist under the planning regime; moreover, the expertise of the trustees and their knowledge of the estate gave considerable weight to any conclusion that they reached on a proposal such as that of the applicants’. The significance to be attached to the planning permission was greatly reduced by the fact that it appeared to have been granted in the absence of advice from conservation officers or consultation with the trust, and contrary to advice that it conflicted with adopted planning guidance for the area. That revealed a deficiency in the planning process and served to emphasise the important role played by the trust in exercising its powers under the scheme to control development on the estate.
Christiaan Zwart (instructed by RA Rosen & Co) appeared for the applicants; Tom Weekes (instructed by Lee Bolton Monier-Williams) appeared for the objector.
Sally Dobson, barrister
