Q&A: Wrestling with restrictive covenants

Question

The management company of our building has received an application for its consent as freeholder to the erection of a new house on adjoining land under a restrictive covenant, which requires the company’s prior approval to the plans, not to be unreasonably withheld. Can the company refuse consent on the basis that we, as the leaseholders of the flats in the building, object to the appearance of the proposed exterior?

Answer

Potentially, yes, provided that a reasonable person with the benefit of the covenant might also refuse on that ground and so long as the refusal will not sterilise development of the neighbouring site entirely. Whether consent has been unreasonably refused in any given case will depend on the individual facts.

Explanation

Similar facts arose in 89 Holland Park Management Ltd v Hicks [2020] EWCA Civ 758; [2020] EGLR 28. The Court of Appeal held that the freeholder could, in principle, rely on the aesthetic objections of the long leaseholders of the flats, who also benefited from the covenant, in refusing to approve the plans. This was held to be so even though the freeholder was a company, and the proposed development would neither diminish the value of its reversion nor affect the structural integrity of the building.

The case was remitted back to the High Court for a determination as to whether the company’s refusal to approve the plans for a contemporary dwelling proposed by architect Sophie Hicks was reasonable on the facts. In Hicks v 89 Holland Park (Management) Ltd [2021] EWHC 930 (Comm); [2021] PLSCS 83, it was held that the refusal, so far as grounded on objections to both the “uncompromisingly contemporary” design of the glass entrance and the extension of subterranean development beyond the rear building line, was justified as others in the same position as the company might reasonably have objected on those grounds.

It was held that, had implementing the proposed design been the only option for developing the adjoining site, approval could not reasonably have been withheld on the basis that the detriment to the burdened owner in not being able to develop the site would have been out of all proportion to the detriment to the beneficiaries of the covenant in having to tolerate a building whose design they objected to. However, on the facts, an amended design omitting the offending features would have been likely to have been acceptable in planning terms.

Question

I have planning permission to convert an outbuilding on my land into a residential property. However, there is a covenant prohibiting this type of development, and so I intend to apply to discharge or modify it under section 84(1)(aa) of the Law of Property Act 1925. Given that I have planning consent for the development, will this automatically satisfy the tribunal that my proposed conversion is reasonable?

Answer

The grant of planning permission for a development does not automatically mean that the proposed use will be accepted by the Upper Tribunal (Lands Chamber) as “reasonable” for the purposes of section 84(1)(aa). You should ensure that you have suitable evidence to satisfy this part of the criteria, and you may also want to consider whether any other grounds under section 84(1) might be available.

Explanation

Section 84(1)(aa) allows the discharge or modification of a restrictive covenant where it impedes some reasonable user of the land for public or private purposes. Where that first hurdle is overcome, the UT will then consider whether the circumstances meet the tests set out in section 84(1A) of the 1925 Act.

The existence of planning consent for a proposed development does not guarantee that an application under section 84(1) will succeed, or that it will even overcome the first hurdle of satisfying the tribunal that the covenant is impeding a reasonable use. This has been shown in a number of cases, including the Court of Appeal decision in Re Martin and another’s application [1989] 1 EGLR 193 more than 30 years ago.

More recently, the UT in Thomson and another v Collins and another [2020] UKUT 330 (LC) rejected an application made under section 84(1)(aa), even though the proposed residential conversion had planning consent. The tribunal found that the planning permission was not in line with any ascertainable pattern of permissions in the area. Moreover, it was so limited in scope and supporting detail that its existence was insufficient to satisfy the tribunal as to the reasonableness of the intended use. From its inspection on the ground, it concluded that residential use in the proposed location would not be reasonable.

To reduce the risk of a similar outcome, you should ensure that your evidence satisfies all aspects of the relevant criteria in section 84(1)(aa), including demonstrating the reasonableness of the proposed residential use. You should also consider whether any other grounds within section 84(1) might be included within your application.

This article was originally published in the June 2021 edition of Estates Gazette. Camilla Lamont is a barrister at Landmark Chambers and Emma Humphreys is a partner at Charles Russell Speechlys LLP.