Q&A: Modifying Restrictive Covenants

I am the landlord of a long lease, and my tenant has obtained planning permission to change the unit from its existing offices into residential flats. The lease contains restrictive covenants regulating use and/or development of the site, and these may impede the tenant’s proposed redevelopment notwithstanding planning permission. I do own other properties in the vicinity. I do not have any objections; however, I do require a premium. How likely is it that my tenant would succeed with an application under section 84 of the Law of Property Act 1925 to modify or discharge leasehold restrictive covenants?

The core question under section 84(1)(aa) is whether the restriction “does not secure… any practical benefits of substantial value or advantage”. The leasehold jurisdiction engages only if section 84(12) is satisfied: ie where there is a term of more than 40 years, and after 25 years of the term have expired.

In Great Jackson Street Estates Ltd v The Council of the City of Manchester [2025] EWCA Civ 652; [2025] EGCS 86, the covenants required the council’s consent for changes to the demised premises. The application was brought under section 84(1)(aa) of the Law of Property Act 1925. The Court of Appeal’s focus was the meaning and scope of “practical benefits” in the leasehold context. This is the test which will be applied in any application to modify or discharge leasehold restrictive covenants by your tenant. Whether your tenant will be successful will ultimately turn on the terms of your lease, the relevant leasehold covenants and the relevant evidence.

Importantly, section 84 is not a mechanism to preserve leverage to extract a payment. The Upper Tribunal can order compensation to you if it modifies or discharges a covenant, but only to reflect loss flowing from the change; it will not uphold a covenant merely because it enables the landlord to charge a premium for consent. In other words, if the covenant secures no substantial practical benefit beyond bargaining power, the tribunal may modify or discharge it and award compensation assessed on loss, not on a negotiated premium.

Explanation

Applying the principles of Great Jackson Street, the court there identified a practical benefit on the facts: the ability to refuse consent until the council’s concerns about timely and orderly development were mitigated. It was material that the landlord had a legitimate strategy to influence and secure appropriate development on the city centre fringe, reflecting its role in that decision as local planning authority.

Ultimately, Great Jackson Street turned on evidence. The council demonstrated a genuine objective – to ensure the site was developed as proposed – and specific risks which the covenants helped to mitigate. Whether you can rely on a similar practical benefit will depend on clear, specific evidence showing why compliance with the restriction secures a practical benefit to you.

A significant strand of the Upper Tribunal’s reasoning emphasised the landlord’s public role and duties to ensure orderly development for the benefit of the city, and how the covenants furthered its strategy for the wider area. They enabled the council to prevent uncontrolled development and mitigate the risk that the scheme would not be commenced, progressed in a timely fashion, or completed.

You may be able to demonstrate similar benefits. However, it may depend on whether you have an integrated estate and/or an overarching plan and whether the relevant covenants in your lease secure orderly, phased or coordinated development that materially protects your estate interests. Conversely, the smaller your nearby holdings, the harder it will be to show a substantial practical benefit rather than mere control.

It therefore seems that there is a spectrum. The dividing line is fact-sensitive and evidence-driven. In response to an application to modify or discharge restrictive covenants, you should articulate and substantiate practical, non-pecuniary advantages flowing from the covenant’s continued operation, not from its release.

If modification or discharge is granted, the tribunal may award compensation to reflect any quantifiable loss to you; but it will not preserve a right to demand a premium purely for consent where the covenant serves no substantial practical benefit.

Since the Court of Appeal determined Great Jackson Street, an application for permission to appeal to the Supreme Court was refused. This is a significant development as it signals that the Court of Appeal’s approach is both conventional and likely to guide future cases: practical benefit is a broad, real-world concept; consent mechanisms frequently deliver substantial advantages; and section 84 is not a shortcut to rewrite negotiated control provisions in long leases, or to uphold covenants solely to secure bargaining power or a premium.

In summary, the Court of Appeal reaffirmed that: (i) benefits must be practical and not merely provide leverage to extract money; (ii) they must flow from compliance with the covenant; (iii) “mere control” via enforcement is not enough; and (iv) a wide range of real practical benefits can qualify if they arise from the covenant’s continued operation.

If you can identify real, non-financial benefits from keeping the covenant in place – such as protecting the value and amenity of your nearby holdings – the tenant’s prospects are reduced. If the covenant mainly serves as leverage to obtain a premium, the tribunal may modify or discharge it and instead award compensation for any proven loss.

Chandni Pandya is an associate at Charles Russell Speechlys LLP and Peter Sibley is a barrister at Landmark Chambers.

This article was originally published on the Estates Gazette website on 10 February, 2026.