Restrictive covenants – Discharge or modification – Compensation – Objector selling golf course to applicant family company – Thirty-year covenants restricting residential development without consent – Applicant building three houses on part of site – Applicant applying to discharge or modify covenants – Objector having no retained land – Whether price for consent being practical benefit – Whether covenants causing no loss or disadvantage to objector – Application granted
The applicant family company was the freehold owner of Earls Colne Golf Course in Colchester, Essex. It was a site of around 125 acres, with a clubhouse, greenkeeper’s building, golf course and practice area. The site had been purchased from the objector, in 2001, as a going concern. Covenants were imposed prohibiting residential development without the transferor’s consent for a period of 30 years. But there was an exception for residential development and occupation by the transferee, its employees and their respective family members.
In 2006, Keeper’s Cottage was built for a family member so that no consent was required. The applicant subsequently sought to discharge the covenants, or modify them to permit occupation by persons other than its employees and their families, in respect of a small area on which stood Keeper’s Cottage and two new houses currently under construction following the grant of planning permission in 2019.
The application was made under section 84(1)(aa) of the Law of Property Act 1925 (the covenants impeded reasonable user and did not secure practical benefits of substantial value or advantage); and section 84(1)(c) (no injury to those entitled to the benefit of the restriction).
The objector retained no land that could benefit from the covenants. It was content for the covenants to be discharged provided that it received compensation in the form of a share of the development value of the land. Failing that, it argued that there was no jurisdiction to discharge or modify the covenants under section 84; or, if there was, the tribunal in its discretion should refuse the application; but if the covenants were discharged or modified then it should receive compensation.
Held: The application was granted.
(1) As regards ground (aa), it was well established that in determining whether there was jurisdiction to discharge the covenants the tribunal had to consider: whether the proposed use of the application land was reasonable; whether the covenants impeded that use; whether the impediment secured practical benefits to the objector; if so, whether those benefits were of substantial value or advantage; and, if not, whether money would be an adequate compensation.
The dispute in the present case was whether the proposed use of the land secured to the objector practical benefits of substantial value or advantage. It was well established that the right to demand a price for consent was not such a benefit. A practical benefit was an amenity – something practically useful or pleasant. Thus, the tribunal had jurisdiction under ground (aa): SJC Construction Co Ltd v Sutton London Borough Council [1975] 1 EGLR 105, Stockport Borough Council v Alwiyah Developments (1983) 52 P&CR 278 and Winter v Traditional & Contemporary Contracts Ltd [2008] 1 EGLR 80 considered.
The loss of the opportunity to demand a price for consent was not an injury for the purpose of section 84(1)(c). Accordingly, the tribunal also had jurisdiction under ground (c): Re Bennett’s and Tamarlin Ltd’s Applications (1987) 54 P&CR 378 followed.
(2) The tribunal had a discretion to discharge or modify the covenants. The objector had argued that the discharge or modification of the covenants in relation to the application land would make it more likely that an application under section 84 in relation to a proposed development of 53 houses on the practice ground would be successful. However, the precedent or “thin end of the wedge” argument had to be approached with care. Each application was considered afresh on its own facts and the tribunal would not be bound by a prior decision relating to nearby land.
In the present case, if there were any amenity loss to the objector as a result of a 53-house development then that loss would not be made proportionally smaller by an existing development of two new houses. As a matter of practicality there was no thin end of the wedge effect. If, as in this case, the covenants conferred no practical benefit on the objector, then the tribunal would have jurisdiction to discharge the covenants in any event. Whether it would do so would be a matter of discretion on the facts, which could not be predicted: Edgware Road (2015) Ltd v Church Commissioners for England [2020] UKUT 104 (LC); [2020] PLSCS 61 and Morris v Brookmans Park Roads Ltd [2021] UKUT 125 (LC) considered.
(3) The covenants were 20 years old. Much had changed in the intervening years, including the commercial needs of the applicant and the local planning context. The fact that these were short-term covenants did not make them less vulnerable to discharge. The argument that the applicant had only 10 years to wait, so might as well be obliged to sit it out, could not succeed where the covenants did not confer upon the objector any benefit that section 84 protected.
Accordingly, the tribunal had jurisdiction to discharge or modify the covenants, and there was no reason not to exercise its discretion to do so. Nor was there any reason to modify rather than discharge the covenants as they related to the land that was the subject of the application.
(4) Just as the “practical benefit” that section 84 protected was not the right to extract a negotiated share as the price for release, so the “loss or disadvantage” that could be compensated did not include such a negotiated share. The correct way to secure a negotiated share of development value would have been for the objector, in 2001, to impose an overage covenant. Such covenants, being positive covenants, were not vulnerable to section 84; and they had the advantage that the share payable was stated expressly at the outset, rather than having to be negotiated when the covenantee was in a position to demand a ransom.
The only possibility of compensation for the objector was for the tribunal to consider what effect, if any, the covenants had on the price of the application land, which was a very small part of the golf course, in 2001. On the evidence, the covenants had no effect upon the price paid. Therefore, no compensation was payable to the objector.
Philip Sissons (instructed by Ellisons Solicitors of Colchester) appeared for the applicant; Andrew Francis and Lina Mattsson (instructed by DMH Stallard LLP) appeared for the objector.
Eileen O’Grady, barrister
Click here to read a transcript of Father’s Field Developments Ltd v Namulas Pension Trustees Ltd
