The jurisdiction of the Upper Tribunal (Lands Chamber) to modify or discharge covenants in qualifying leases is the same as that for freehold covenants, which is limited under section 84(1) of the Law of Property Act 1925 to restrictions “as to the user thereof or the building thereon”.
The tribunal has considered the limitations on jurisdiction in Blackhorse Investments (Borough) Ltd v Southwark London Borough Council [2024] UKUT 33 (LC); [2024] PLSCS 30.
The case concerned the Black Horse, a 1960s purpose-built public house with accommodation above in Southwark. The freehold interest in the site and the larger parcel of land on which it was situated vested in the objector.
In 1966 the property had been let on a 99-year lease which contained covenants by the tenant which inter alia restricted assignment, underletting and alterations and required the property to be kept open and used as a pub.
The business failed in 2019 and the applicant obtained planning permission to redevelop the property to provide a six-storey predominantly residential building with commercial premises including a new pub on the ground floor. Negotiations between the parties for the sale of the freehold or surrender of the lease came to nothing.
The applicant applied to the tribunal to vary the leasehold covenants under section 84 of the Law of Property Act 1925 to enable the planning permission to be implemented. The application personally served on Southwark Council in September 2021 did not come to its attention until March 2022. Consequently, it failed to file a notice of objection and the successful application was dealt with by the tribunal on paper. Southwark sought to set aside the order owing to procedural irregularity under rule 54 of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010.
The only strand of Southwark’s application which was of substance was that parts of the tribunal’s order were made without jurisdiction. The tribunal’s jurisdiction under section 84(12) of the 1925 Act in relation to covenants in leases of more than 40 years where 25 years have expired, is the same as that relating to freehold covenants and limited to restrictions “as to the user thereof or the building thereon”.
The alterations clause was a restriction on user but the alienation covenant was not. Covenants to keep the premises open, to use best endeavours to renew or transfer licences or to use premises as a “bona fide refreshment house” were positive covenants which the tribunal had no jurisdiction to modify. The tribunal set aside those parts of the order made without jurisdiction.
Louise Clark is a property law consultant and mediator
