Restrictive covenants – Discharge or modification – Public interest – Section 84(1)(aa) and 84(1A) of Law of Property Act 1925 – Application to modify restrictive covenants to permit construction of social housing – Housing already built by date of application – Whether appropriate to grant modification on ground that restriction contrary to public interest – Application allowed
The applicants obtained planning permission for a development of 23 social housing units on previously developed land within the green belt in Maidenhead, Berkshire. After commencing the development, they applied to the Upper Tribunal, under section 84 of the Law of Property Act 1925, to modify certain restrictive covenants that prohibited the use of part of the land for any purpose other than the parking of vehicles. By the time of the application, the applicants had already built nine houses and four bungalows on the land affected by the restriction, which was a disused former car park. They had also entered into a contract to sell the whole development to a registered provider of social housing. The land that was unaffected by the restriction had already been transferred and the 10 properties built on that land were occupied by tenants; however, the 13 units on the affected land remained vacant and the transfer of that land was conditional on the outcome of the application.
The applicants’ primary argument was that the restriction impeded a reasonable user of the land, within the meaning of section 84(1)(aa) of the 1925 Act, and that it should consequently be modified under either of the limbs of section 84(1A), namely that the restriction: (a) did not secure for those entitled to its benefit any practical benefits of substantial value or advantage; and/or (ii) was contrary to the public interest.
The objectors to the application included the trustees of a children’s cancer trust, who owned adjoining land on which they were in the process of building a hospice to provide end-of-life care for terminally ill children. They claimed that the carefully planned environment of the hospice and the outdoor amenities which they intended to provide there were seriously compromised by the presence of new housing so close to their boundary.
The applicants suggested that any concerns about the impact on the hospice could be addressed by planting a thick conifer hedge to screen along the boundary, at an estimated cost of £37,440 to £70,000. After the close of the hearing, it offered to pay £150,000 to the hospice trustees for their consent to the modification of the restriction, consisting of the cost of the hedge plus a sum for any residual impact from noise and disturbance. The trustees rejected that offer.
Held: The application was allowed.
(1) The restriction secured a practical benefit in protecting the privacy and seclusion of the hospice site. The presence of the houses on the boundary meant that families spending time together with their sick children, and children and young people enjoying time together with friends and siblings, would do so in a more urban, less private, less secluded and less attractive environment than would have been the case had the covenants been observed. What had been lost were practical benefits in the form of enhanced privacy and seclusion for the hospice land.
Those benefits were of substantial value or advantage to the objectors. The cost of immediately planting a sufficient screen to counteract overlooking and loss of privacy from the houses was in a bracket of £37,440 to £70,000. The solution proposed by the applicants was unrealistic, since it was contrary to the indicative planting scheme for which approval had been obtained from the local authority, which required the use of deciduous native species, and it would also be contrary to the trustees’ vision for the hospice, by creating an incongruous and unappealing green wall along one of its boundaries, which would do nothing to enhance the environment or contribute towards the beautiful grounds which the trustees sought to provide. Nonetheless, it could be taken as evidence of the cost of mitigation measures. A practical benefit the loss of which could be mitigated only by expenditure of that order was properly regarded as a benefit of substantial value or advantage. Accordingly, the tribunal had no power to modify the restriction under the first limb of section 84(1)(aa) and 84(1A).
(2) However, the tribunal did have power to modify the restriction under the second limb, on the ground that the restriction was contrary to the public interest. In considering that ground, the tribunal was balancing the public interest in efficient use of land and private rights over the same land. The approach that it should take was similar, in that respect, to that taken by the courts in cases of nuisance sanctioned by planning permission: Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798 and Lawrence v Coventry (t/a RDC Promotions) [2014] UKSC 13; [2014] AC 822; [2014] 1 EGLR 147; [2014] EGILR 57 considered.
The existence of planning permission for the use of the land for housing was a material consideration when considering whether a covenant, by impeding that proposed use, operated contrary to the public interest. The fact that planning permission had been granted did not mean that private rights could necessarily be overridden, but it did reflect an objective assessment of appropriate land use which fully took into account the public interest. The fact that the housing was social housing, intended for occupation by tenants who were likely to have been waiting for such accommodation for a very long time, was also a highly material consideration. The houses were attractive and well-built and were currently standing empty because of the restriction.
It was no answer to that wasteful state of affairs to say that the applicants could have built their allocation of affordable housing on other land. The question for the tribunal was whether, in impeding the occupation of the houses which now stood on the land, and which were otherwise immediately available to meet a pressing social need, the covenants operated in a way that was contrary to the public interest. They clearly did so, because it was not in the public interest for the houses to remain empty. The public interest in play was sufficiently important and immediate to justify the exercise of the tribunal’s power to override the objector’s private rights: Re Collins’ application (1975) 30 P&CR 527 applied.
(3) Before the tribunal had jurisdiction to make an order on that basis, it had first to be satisfied that money would be an adequate compensation for the loss or disadvantage that the trustees would suffer, as owners of the hospice land, as a result of a modification of the restriction to permit the retention and use of the houses. That requirement was met in the instant case. It was not suggested that the disadvantages experienced were incapable of monetary compensation.
(4) Where one of the grounds in section 84(1) was made out, the tribunal still had a discretion as to whether to order modification or discharge. A landowner who was in deliberate breach of covenant, but who could establish one of the statutory grounds, could not confidently assume that the tribunal’s discretion would be exercised in favour of modification or discharge. The tribunal should make clear that it was not inclined to reward parties who deliberately flouted their legal obligations in that way. Too great a readiness on the part of the tribunal to exercise its powers under section 84 in cases where a development had already taken place in breach of covenant would be liable to undermine the protection which restrictive covenants afforded: Re George Wimpey Bristol Ltd’s application [2011] UKUT 91 (LC); [2011] PLSCS 146 and Wrotham Park applied. Nonetheless, the discretion was to be exercised judicially, and not with a view simply to punishing a covenant breaker: Re Trustees of the Green Masjid and Madrasah’s application [2013] UKUT 355; [2013] PLSCS 243 applied.
In the instant case, the tribunal was influenced by the offer that he applicants had made to pay £150,000 in return for the trustees’ consent to the modification. That was a constructive proposal and it was regrettable that it had not elicited a positive response from the trustees. It was also relevant that the ground which the applicants had made out was the public interest ground, and that the tribunal’s decision would have an effect not only on the parties but also on 13 families or individuals who were waiting to be housed. It would be an unconscionable waste of resources for the houses to continue to remain empty. The public interest outweighed all other factors in this case and the tribunal should therefore exercise its discretion to grant modification.
(5) Compensation was awarded to the trustees in the sum of £150,000. Compensation under section 84(1) was compensation for the loss or disadvantage suffered by the trustees so far as the relevant practical benefit was concerned, and was not designed to transfer to them some share in the profit which the applicants might make as a result of the development of the land: Winter v Traditional & Contemporary Contracts Ltd [2007] EWCA Civ 1088; [2008] 1 EGLR 80 applied. When considering the just award of compensation, the tribunal was entitled to place weight on the figure that the applicants had been prepared to offer.
Michael Driscoll QC (instructed by DAC Beachcroft) appeared for the applicants; Emily Windsor (instructed by Key IP Ltd, business management consultants) appeared for the objectors.
Sally Dobson, barrister
Click here to read a transcript of Re Millgate Developments Ltd’s application
