Section 84 of the Law of Property Act 1925 empowers the Lands Tribunal (LT) to modify or discharge restrictive covenants. In Graham v Easington District Council [2008] EWCA Civ 1503; [2008] PLSCS 333, the Court of Appeal was asked to overturn a LT’s decision to discharge a restrictive covenant that prevented a landowner from using land for residential development.
The restrictive covenant was imposed in 2000 when the council sold the land for use as a coach depot. The landowner subsequently obtained planning permission for residential development and applied to the LT to have the restrictive covenant discharged.
The LT robustly rejected the suggestion that, by granting planning permission, the council had agreed, expressly or by implication, to the modification or discharge of the restrictive covenant. Local authorities have a multitude of functions, the exercise of which by one department should not imply acceptance of a decision in respect of another function.
None the less, the LT accepted that the Council had imposed the restrictive covenant for planning purposes, to safeguard a planning policy considered to be of strategic economic importance, and not to prevent a loss of amenity to the benefited land. The LT consequently discharged the covenant, holding that the grant of planning permission demonstrated that the practical benefits secured by the covenant were not of substantial advantage to the council and that it would suffer no loss or damage were the covenant to be discharged.
However, the LT ordered the landowner to compensate the council for the loss of the covenant. The council had sold the land for £39,000. The tribunal ruled that the land would have been worth £62,500 without the restrictive covenant and ordered the landowner to pay the difference – in the sum of £23,500 – to the council.
Many were surprised by the ruling, but the Court of Appeal has upheld the decision on the ground that the LT had been entitled to reach the decision that it did on the facts, and that the decision was neither perverse nor wrong in law.
The decision should not be taken as a signal that the grant of planning permission by a local authority will determine the outcome of an application for the release of restrictive covenants against development in favour of that authority. The separation of a local authority’s public and private roles is well established and local authorities are entitled, as landowners, to take a broader approach than they are required to take as planning authorities. Consequently, each case will be decided on its own particular facts and there will be many other cases in which the LT may take a different view.
None the less, it is useful to know that the grant of planning permission for development may indicate that the practical benefits secured by restrictive covenants are not of substantial value or advantage to a local authority in circumstances where its roles as a landowner and as a local planning authority coincide.
Allyson Colby is a property law consultant
