Section 84(1) of the Law of Property Act 1925 empowers tribunals to discharge or modify restrictive covenants. Ground (aa) applies where a restriction impedes some reasonable use of land and does not secure to those entitled to the benefit of it any practical benefits of substantial value or advantage, or if it is contrary to the public interest, if a monetary payment will provide adequate compensation for the discharge or modification of the covenant.
James Hall and Company (Property) Ltd v Maugham [2017] UKUT 240 (LC) concerned a public house in Durham. It had a loyal clientele, but profits had been falling. As a result, the brewery that owned it had tried to sell it to another pub company. However, lack of interest forced it to consider other uses. There was just one snag. The property was subject to covenants prohibiting the use of the land or any building on it “for the purpose of any shop trade or business or profession or manufactory” and requiring the property to be used only “for the carrying on of the business of hotelier and licensed victualler”.
The company wanted to turn the property into a community convenience store employing around 34 full and part-time staff. It did not need planning permission because a change of use from use class A4 (public house) to A1(retail) constituted permitted development under the Town and Country Planning (General Permitted Development) (England) Order 2015. In addition, it did not envisage any major internal or external works of conversion.
In Re Hextall’s Application (1998) 79 P&CR 382, the Lands Tribunal was persuaded that a use was reasonable because the local planning authority had resolved to grant planning permission for it. This case was different, because the merits of the proposed new use had not been considered as part of the planning process. Even so, the tribunal accepted that use as a convenience store would be reasonable and that the restrictive covenants would impede that user.
Did the covenants secure practical benefits to the objectors? The words “practical benefits” were to be given a wide meaning: Gilbert v Spoor [1983] Ch 27. The problem was that the objectors were seeking to use the covenants to keep the public house trading, even though the brewery could close the pub without breaching the restrictions. Furthermore, the evidence suggested that it was more likely than not that this would have to happen in the foreseeable future. Consequently, such practical benefits as there might be in keeping the pub trading were not benefits secured by the covenants. And so the application succeeded.
However, there was no documentary evidence indicating what the buyer intended to do with the building. And, in the light of the fact that the proposed change of use did not require planning permission, the tribunal was reluctant to discharge the covenants, leaving the property susceptible to any manner of development. The correct course of action was to modify the covenants to accommodate the existing operation of the pub and the proposed convenience store – which is what the judge did.
Allyson Colby is a property law consultant
