Land – Restrictive covenant – Discharge or modification – Building scheme – Garden land having planning consent for additional residential dwelling – Restrictions preventing erection of new building without submitting plans and specifications to transferor and obtaining written approval – Whether restrictions impeding development – Whether restrictions having practical benefits of substantial value or advantage – Application granted
The applicant was the proprietor of 1 Cresswell Road, Chesham, Bucks, a three-bedroom house standing at the end of a 1960s terrace of houses. Unlike its neighbours, the property had a garden large enough for another house to be built there. In May 2015, the applicant obtained planning permission to do so but the property was subject to restrictive covenants, contained in a transfer of the property from the developer in 1967, two of which prevented the development. The first covenant required the approval of plans by the original developer of the estate. The second covenant permitted use of the plot as a dwelling house in the occupation of one family only.
The applicant applied for discharge of the first, and discharge or modification of the second. Of the fourteen property owners with the benefit of the covenants, the four respondents objected to the application. The applicant argued that the first of the two covenants was obsolete because of the dissolution of the developer and so should be discharged under section 84(1)(a) of the Law of Property Act 1925 or, alternatively, section 84(1)(aa) or (c). Further, the second covenant should be discharged or modified under section 84(1)(aa) and/or 84(1)(c).
Held: The application was granted.
(1) It was well-established that where a covenant required the owner of the property not to do something without the consent of the vendor, and that vendor no longer existed or (if a real person) had died, then either the restriction lapsed or it became absolute. Although some early cases found that such covenants became absolute, in Crest Nicholson Residential (South) Ltd v McAllister [2002] EWHC 2443 (Ch); [2003] 1 EGLR 165, the judge found that a covenant requiring plans to be submitted for approval to the vendor company was discharged when the company ceased to exist, and his decision was approved (obiter) by the Court of Appeal ([2004] EWCA Civ 410); [2004] PLSCS 81.
(2) In the present case, the intention of the parties to the 1967 transfer must have been for the covenant to enable the developer to exercise some control over the development of the properties in their early stages, while it was still selling them off and therefore had an interest in exercising that control. It was not their intention that when the developer ceased to exist there would be an absolute prohibition on listed works, of which most could be quite minor and for most of which consent would have been readily given. The circumstances were not dissimilar to those in Crest Nicholson and the tribunal had no hesitation in coming to the same conclusion. The covenant had ceased to have any effect because of a change of circumstances; it was obsolete, and therefore it would be discharged pursuant to section 84(1)(a) of the Law of Property Act 1925. Its discharge did not injure any of the respondents since it no longer had any effect and so it was equally liable to be discharged under section 84(1)(c).
(3) It was out of the question to discharge the second covenant. That would permit all sorts of development, subject to planning permission. It was not possible to modify that covenant under section 84(1)(c) as the construction work itself would inevitably cause some inconvenience to the other residents in the group of houses. On that ground alone para (c) was ruled out. Turning to section 84(1)(aa), the use of half of the property for an additional house would be a reasonable use of it. Although the location meant that that was not going to be an inexpensive house, housing was much needed and such use was perfectly reasonable. However, the applicant also had to show either that the particular covenant did not secure to the respondents any “practical benefits of substantial value or advantage” or, if it did, that the loss of those practical benefits, despite being of substantial value or advantage, could adequately be compensated in money. Accordingly, the tribunal had to bear in mind the statutory wording and the precise function of the covenant. If the covenant secured benefits which were not of substantial value or advantage, the covenant should be modified. The respondents had not claimed that the value of their properties would be diminished and so they could not resist modification unless they could demonstrate that the covenant gave them practical benefits which amounted to a substantial advantage and whose loss could not be compensated in money. The applicant had the burden of proof and in effect had to prove a negative in respect of each of the reasons put forward by the respondents for resisting modification. On the evidence, the covenant did not secure to the respondents any practical benefit of substantial value or advantage. The covenant should be modified to read: “Not to use the property hereby transferred or permit the same to be used for any other purpose than two private dwelling houses (with one garage) for the use and occupation of one family in each house and not to divide the same into flats”.
Toby Boncey (instructed by Saul Marine & Co, Solicitors) appeared for the applicant. The respondents appeared in person.
Eileen O’Grady, barrister
Click here to read a transcript of Veee Ltd v Barnard and others
