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26 February 2016

Restrictive covenants - modification under s84 of the Law of Property Act 1925

Stevens v Ismail [2016] UKUT 43 (LC)

Summary

The Upper Tribunal rejected two challenges to its jurisdiction to rule on the modification of restrictive covenants under section 84 LPA 1925. The Tribunal rejected arguments that a surrender and re-grant of the relevant lease had taken place and that the covenant concerned was positive, rather than restrictive, in nature.

Facts

The applicants were the owners of two separate leasehold flats within the same building (known as the "garden floor flat" and the "hall floor flat"). Their leases were granted in 1980 for a term of 999 years from 24 March 1979. At some point between 1980 and 1998, the garden floor flat was extended onto land which had not been included in the 1980 lease. It was unclear if and when this extension had been approved by the freeholder.

In August 1998, the freeholder of the garden floor flat entered into a deed of variation with the lessees of the flat at that time. The deed granted a new right in favour of the lessees to park a motor vehicle in an area marked on a plan attached to the deed. The deed stated that this plan was to replace the plan attached to the garden floor flat lease. This new plan included the land onto which the garden floor flat had been extended.

The applicants sought to connect their two flats internally, to allow them to be used together as a single dwelling. The applicants applied to the Upper Tribunal for the modification of two leasehold covenants, which prevented them from doing so:

  1. a covenant in both leases to "...not knowingly permit any new window light opening doorway path passage or drain or other encroachment or easement to be made or acquired into against or upon the demised premises..."
  2. a covenant in the hall floor flat lease "to use and occupy the demised premises solely and exclusively as a self-contained residential flat."

The objector (Mr Ismail) was the leasehold owner of a separate flat within the same building. He challenged the Tribunal's jurisdiction to modify the covenants on two grounds:

  1. By including the additional land onto which the garden floor flat had been extended in the deed of variation, a surrender and regrant of the garden floor flat lease had occurred, bringing into existence a new tenancy. As section 84(12) LPA 1925 only permits the Tribunal to modify covenants affecting leasehold land where the term created by the lease is for more than 40 years and 25 years of that term have expired, the objector argued that the time requirements laid down by section 84(12) were therefore not satisfied.
  2. The covenant in the hall floor flat lease to "use and occupy the demised premises solely and exclusively as a self-contained residential flat" was in fact positive in nature and therefore fell outside the scope of section 84.

Issues

  1. Whether a surrender and regrant of the garden floor flat lease had occurred by virtue of the deed of variation, taking the lease was in fact positive in nature and therefore fell outside the scope of section 84.
  2. Whether the covenant in the hall floor flat lease was in fact positive in nature and therefore fell outside the scope of section 84.

Decision

  1. The language within the deed of variation indicated no intention by the parties to effect any change in the boundaries of the garden floor flat demised by the 1980 lease. The deed was simply designed to add a right to park on the land at the front of the building over which the lessee had previously enjoyed only a right of way on foot. The fact that the plan also showed the extended area merely recorded the boundaries of the flat as they stood on the ground in 1998. The deed was not therefore sufficient to terminate the term created by the 1980 lease and cause there to come into existence a new term by the legal fiction of a surrender and re-grant. For that reason, the Tribunal was satisfied that more than 25 years of the term of the lease had elapsed and that the Tribunal therefore did have jurisdiction in relation to the covenants in the lease of the garden floor flat.
  2. The Tribunal disagreed with the objector's argument that the covenant "to use and occupy the demised premises solely and exclusively as a self-contained residential flat" was not merely restrictive in nature and positively required that it be used and occupied as a self-contained flat. The Tribunal commented that it would be most unusual to find a positive obligation in an otherwise unexceptional lease of a residential flat requiring that it be kept and used for the purpose for which it was designed. Such a covenant would be so unusual and potentially onerous that one would expect the language of the covenant to be far more emphatic and unambiguous. The Tribunal therefore found that the covenant in the hall floor flat lease was restrictive in nature and fell within the scope of section 84.

This article was written by Emma Humphreys with assistance from Dan Shutt. For more information please contact Emma on +44 (0)20 7203 5326 or emma.humphreys@crsblaw.com

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