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The applicants had purchased a farmhouse and surrounding buildings and land which was subject to a restrictive covenant imposed by a 1980 conveyance which prohibited the use of the property other than for agricultural use or as a Riding School and Livery Stable. Prior to purchasing the property, the applicants wrote to the objector (who owned neighbouring Green Belt land and enjoyed the benefit of the covenant) to say that they were considering buying the farm and asking whether the objector would consider releasing the covenant. The objector replied to say that it would be prepared to remove
the restrictive covenant in return for a payment of £100,000. The applicants subsequently acquired the property.
Planning permission was granted to the applicants to create 4 dwellings on their property. The objector was part of a large house-building group in the area and there was a reasonable likelihood that it would be permitted to undertake a residential development on some of its land near to the applicants (with the remainder to be dedicated as a country park) some time from 2015.
The Tribunal concluded that the only practical benefit of a restrictive covenant was that it enabled the objector to demand a monetary payment in return for allowing a profitable development of the applicants’ site to go ahead. The Tribunal held that this was not the type of benefit contemplated by s.84(1)(aa) and that the Tribunal was therefore entitled to exercise its discretion to modify/discharge the restrictive covenant.
The issues to be decided were:
It was agreed that the proposed use of the property was reasonable and that the continued existence of the restrictive covenant would prevent the proposed development.
The objector’s expert witness had expressed concern that the objector company's ongoing negotiations with the local planning authority might be adversely affected if one of the proposed houses to be erected on the applicants’ property were to be purchased by an individual who objected strongly to the principle of development on Green Belt land. The Tribunal rejected this as a practical benefit of substantial value or advantage; it was felt that any person who had a strong objection to residential development in the Green Belt would make enquiries as to the local planning authority's attitude to such development in the vicinity of the property and then turn his attentions elsewhere, to other sites near the Green Belt which were likely to remain undisturbed by residential development.
The objector also suggested that four additional houses on the applicants’ site would lead to an increase in the section 106 obligations which the objector would be required to accept in due course in order to secure residential planning permission on its land. The Tribunal was not persuaded that this was a practical benefit of substantial value or advantage, noting that the four dwellings on the application site would represent only 3% of the number of units proposed for the objector’s site.
In the view of the Tribunal, the only practical benefit of the restrictive covenant to the objector was that it enabled it to demand a monetary payment in order for allowing a profitable development of the applicants’ property to go ahead. The Tribunal held that this was not the type of benefit contemplated by s.84(1)(aa) and that the applicants had therefore established ground s.84(1)(aa), allowing the Tribunal to exercise its discretion to modify/discharge the restrictive covenant. It held that it was therefore unnecessary for the Tribunal to consider the public interest issue.
The Tribunal found that there was a “positive case” in favour of exercising its discretion for the applicants by finding that the restriction should be discharged, since the objector had not give it any “sufficient reason” not to do so.
With regard to the compensation to be awarded, the Tribunal felt that since the restriction was held to be of no practical benefit to the objector, the question of compensation under s.84(1) (ie for loss/disadvantage suffered as a result of the discharge) did not arise. As to compensation under subsection (ie for any reduction in the value of the land when it was sold as a result of the imposition of the covenant), the objector was not able to provide evidence to demonstrate the effect which the restriction had had in reducing the consideration it had received for the applicants’ property when it sold it to the applicants’ predecessor-in-title. The Tribunal accepted the applicants’ expert witness’ submission that any price reduction to reflect the restriction would have been in the region of £1,000 which, adjusted to reflect changes in the RPI in the intervening period was equal to approximately £3,000 in today's money.
A formal order discharging the restriction was made on the condition that a payment of £3,000 was to be made by the applicants to the objector.
For more information please contact Emma Humphreys, Partner
T: +44 (0)20 7203 5326