Restrictive covenants – Discharge or modification – Section 84(1) of Law of Property Act 1925 – Residential property on estate – Restrictive covenant in transfer of freehold containing restrictive covenant preventing construction of second house in rear garden – Whether applicant entitled to discharge or modification of restrictions to permit development to proceed – Whether restrictions securing practical benefits of substantial value or advantage to those entitled to their benefit – Whether compensation to be awarded to objectors on discharge or modification – Application allowed
The applicant was the freehold owner of a detached house which formed part of a large residential estate in Southend-on-Sea, Essex. The house had been built on 1960, at which time the property was held on a leasehold interest on terms that made the consent of the landlord a precondition for any new building, although the leasehold interest had merged into the freehold at the time of a 1989 transfer by which the applicant’s predecessor in title had acquired the freehold to the property from a company which, at that time, owned the freehold of the entire estate. That company, along with the current owners of two adjoining properties, objected to an application by the applicant, under section 84(1) of the Law of Property Act 1925 to discharge or modify certain restrictive covenants contained in the 1989 transfer to enable the applicant to carry out development on her property, pursuant to a planning permission granted in 2012, by constructing a second house and detached garage in the rear garden of the property, with vehicular access onto an adjoining road. That development was impeded by restrictions in the 1989 transfer which prohibited the use of the property other than as a private dwelling-house and required its surrounding land to be kept as gardens and grounds.
The applicant relied primarily on grounds: (a), that the restrictions were obsolete; and (aa) that they impeded a reasonable use of the land and did not secure any practical benefits of substantial value or advantage to those who were entitled to their benefit.
The company accepted that the grounds for discharge or modification were made out but sought compensation under section 84|(1)(ii) to the extent that the existence of the restrictions had reduced the consideration paid to it on the 1989 transfer. The other two objectors contended that the restriction should remain in place since the new house, if constructed, would be out of keeping with the surrounding properties, would cut out light and impede open views, would create an increased risk of noise from cars manoeuvring on the new property and would reduce the values of their properties.
Held: The application was allowed.
(1) The test of whether a restriction was obsolete for the purpose of section 84(1)(a) was whether it could still achieve its original purpose: Re Truman, Hanbury, Buxton & Co Ltd’s application [1956] 1 QB 261 applied. The purpose of the restrictions in the 1989 transfer was to maintain the character of the estate as an exclusive, high-class residential area by limiting the development of the land to a single house and preventing alternative forms of development such as flats. While it was still an exclusive residential area, the character of the neighbourhood was no longer defined by single houses on large plots, since most of the other properties on the applicant’s block had already been developed by the construction of two houses. The tone of the estate had been maintained despite that pattern of development. It was not a purpose of the restrictions to secure to the owners of the adjacent properties the specific benefit of an open aspect. In light of those matters, the purpose of the restrictions would still be achieved if a second house were built on the applicant’s property. Since the restriction could still achieve its original purpose, it was not obsolete and ground (a) in section 84(1) was not made out.
(2) It was nonetheless appropriate to allow the application on ground (aa). The proposed use was reasonable since it had planning permission and was in keeping with the surrounding development on the estate. The restrictions did not secure any practical benefits to the owners of the adjoining properties. The construction of a second house on the applicant’s land would not materially affect the setting, outlook or enjoyment of those properties and the enjoyment of an open aspect across the applicant’s land was not a benefit secured by the restrictions; nor did the restrictions secure the practical benefit of preventing an increase in domestic activity on the applicant’s land, given that this was already a developed residential area. The addition of a further house to the rear was in accordance with the general layout of the neighbourhood and would make no material difference. The mere existence of another neighbour did not cause any loss or disadvantage to the adjoining owners. Although the proposed development might result in a slight loss of amenity to one of the adjoining owners caused by the proximity of the new garage to their back garden, the prevention of that situation was not a benefit of substantial advantage to them and could be adequately compensated by an award of money under section 84(1)((i) in the sum of £2,500. There were no grounds for awarding compensation to the other adjoining owner.
(3) There was no merit in the company’s claim to compensation under section 84(1)(ii). There was no evidence that existence of the restrictions had affected the consideration paid to the company for the freehold in 1989. The leaseholder at that time was already entitled to build a second house, subject to the landlord’s consent, and there was no reason why he would have paid more to buy the freehold land free of the restrictions since that would have given him nothing more than he already had under his leases. While it seemed strange, under those circumstances, that the leaseholder should have accepted the imposition of the restrictions, it appeared that he had had no intention of developing a second house and had been content to leave the rear of the plot as undeveloped garden land.
Edward Denehan (instructed by Tolhurst Fisher LLP, of Southend-on-Sea) appeared for the applicant; Stephen Murch (instructed by Wallace LLP) appeared for the first objector; the second and third objectors appeared in person.
Sally Dobson, barrister
