Restrictive covenant – Modification – Applicants proposing to convert two barns into single dwelling-house – Applicants applying for modification of restrictive covenants – Whether practical benefits of substantial value or advantage – Whether restriction impeding reasonable user given existence of separate limitation on right of way to use access road to single dwelling-house – Application granted
The applicants purchased Tubney Manor Farm, Appleton near Abingdon, Oxfordshire in 2001 for £600,000 from Magdalen College, Oxford (the objector). They lived in the Grade II listed farmhouse which formed part of the farm. They had planning permission to convert, and link, two adjacent outbuildings (the “modern barn” and the “old barn”) to create a single residential dwelling, separate from the farmhouse. However, the farm was subject to a restrictive covenant in favour of the objector which prevented the applicants from using it other than as a single private dwelling-house. It was not disputed that the development would infringe the covenant. Accordingly, the applicants applied to the Upper Tribunal for the modification of the covenant under grounds (aa) and (c) of section 84(1) of the Law of Property Act 1925.
The objector opposed the modification contending that it would be injured by the relaxation of the covenant and that the benefits secured by it were substantial. Furthermore, it contended that modification of the covenant would not assist the applicants because of the legal rights of access to the farm gained from the public highway over an access road owned by the objector. The applicants had a right of way over the road. However, the use of that right of way was limited to “the permitted uses” of the farm which included use as a single private dwelling-house. The proposed development would create a second dwelling-house and the user would be excessive. Thus, even if the covenant were modified it would not be possible for the development to go ahead. It could not be said that the covenant impeded the reasonable user of the land, as the terms of the right of way constituted a second impediment, and there was therefore no jurisdiction under section 84(1)(aa) to modify the covenant.
Held: The application was granted.
(1) Under section 84(1B) of the 1925 Act, the Upper Tribunal was required to take into account the development plan and any declared or ascertainable pattern for the grant or refusal of planning permissions in the relevant areas, as well as the period at which and context in which the restriction was created or imposed and any other material circumstances. There was nothing in section 84(1)(aa) of the 1925 Act which stated that the covenant had to be the sole impediment to the reasonable user, or even the main impediment to such user. There was no reason to imply such a provision. It simply had to be an impediment. A second impediment might be relevant to the question of the discretion to accede to the application but that was not a matter going to jurisdiction under subsection (1)(aa). The applicants’ purposive approach was to be preferred. Modification of the covenant to allow the farmland to be used for two private dwellings would, as a matter of construction, also permit the right of way to be used for two private dwellings. It was unrealistic to suppose that the parties intended that user of the farmland could be lawfully changed without having a corresponding impact on the right of way enjoyed in connection with it. If the covenant was modified, it would be lawful for the applicants to use the access road for the modified use: Hotchkin v McDonald [2004] EWCA Civ 519; [2004] PLSCS 97 applied.
(2) The covenant secured practical benefits to the objector. However, the benefits were not substantial either individually or cumulatively. Any increase in the use of the access road would be very limited and would not create any significant conflict between the agricultural and domestic use of that road. The suggestion that the agricultural tenant might be able to negotiate a reduced rent was unrealistic, having regard to the other accesses to the retained land and the complete lack of any evidence of current problems. The precedent value of relaxation of the covenant was small. The position of the three neighbouring properties was very different to that of the farm. Their covenants were different. There were no buildings on the plots that were purchased in 2001. The likelihood of a grant of planning permission for development was small. There might well be further applications in respect of the buildings at the farm. However, they would be considered on their merits at the time and the tribunal would take into account the fact that there were already two dwelling-houses on the plot. It was possible that the dwelling-house next to the boundary might have a small effect on any future development by the objector. However, any such effect could be accommodated at the planning stage. Furthermore, the covenant as presently worded contained a proviso which would allow the applicants to use the modern barn for purposes ancillary to the residential use of the farmhouse in any event. The factors in favour of modifying the covenant substantially outweighed those against. The covenant would be modified to allow the applicants to develop the outbuildings in accordance with the permission granted.
(3) Compensation was to be assessed as a sum to make up for any effect which the restriction had, at the time when it was imposed, in reducing the consideration then received for the land affected by it. As the covenant and the right of way were interlinked, the restriction had the effect of reducing the consideration paid for the farm in 2001. Hope value for future residential development was likely to have been limited at that time to the possible conversion of the old barn into a separate dwelling. The presence of another dwelling in the curtilage of the farmland was likely to have affected the value of the existing farmhouse, although it would be unlikely to have been a significant reduction. The purchase price would have been 10% higher had the restriction on more than one dwelling not been imposed. Compensation would be assessed under section 84(1)(ii) at £60,000.
Martin Hutchings QC (instructed by IBB Law, of Uxbridge) appeared for the applicants; Adam Rosenthal (instructed by Loxley Solicitors Ltd, of Gloucestershire) appeared for the objector.
Eileen O’Grady, barrister
Click here to read a transcript of Re O’Byrne’s Application