Modification of restrictive covenant unlocks land for development
Michael Higgin considers a recent decision of the Upper Tribunal to modify a restrictive covenant under a rarely successful statutory ground.
In the recent case of Derreb Ltd v Blackheath Cator Estate Residents Ltd, a developer successfully persuaded the Upper Tribunal to modify a restrictive covenant that would otherwise have obstructed its proposed development of a private estate.
The case concerned a former sportsground known as the Huntsman, located within a large private estate near Blackheath. The land was subject to a 1956 conveyance requiring the land to be used as a sportsground or for the erection of detached houses for use as private residences only. The land had not been used as a sportsground since the late 90s and was vacant, derelict and overgrown.
The developer, Derreb Limited, had purchased the land and proposed to construct around 130 residential properties comprising detached houses, terraced houses, flats and apartments.
Derreb sought modification of the restrictive covenant and relied on two grounds of section 84 of the Law of Property Act 1925, namely that:
– the character of the property or neighbourhood had changed rendering the restriction obsolete (ground (a)); and
– unless modified, the continued existence of the restriction would impede the reasonable user of the land (ground (aa)).
The objectors to the application cited concerns that, amongst other things, should the restrictive covenant be discharged, the tranquil and private character of the estate would be disturbed, there would be a substantial increase in traffic through the estate and their properties would be overlooked.
The Tribunal’s decision
The Tribunal agreed with the developer that the character of the land had changed and there was no prospect that the Huntsman would ever be used as a sportsground again (in fact the land was even zoned for residential development in the local planning policy). Therefore the requirement that the land be used as a sportsground was rendered obsolete and that part of the restriction was discharged under ground (a).
With regards the detached houses restriction, the Tribunal was unwilling to discharge that element of the covenant in its entirety, but was satisfied that the restriction could be modified under ground (aa) as the proposed development was a reasonable use of the land and the continued existence of the restriction would impede that reasonable use.
In making their decision the Tribunal noted that if the restriction was left unmodified, the Huntsman land would remain derelict which was contrary to all parties’ interests and indeed by the end of the hearing the objectors had conceded that the development should proceed. However in order to strike a balance between the developer’s interests and the objectors’ concerns, the Tribunal imposed certain conditions on the developer including requirements as to the location of balconies on the properties, limiting the total number of properties to be built and restricting vehicular access to and from the site.
Whilst the success of the developer’s claim that part of the restrictive covenant was obsolete is somewhat unusual, the Tribunal’s decision will most certainly be considered a victory amongst developers.
The case demonstrates that developers may be able to persuade the Tribunal to modify restrictive covenants, which would otherwise hinder their development plans, where there has been a substantial change in the character of a property or neighbourhood and especially where otherwise the land would remain derelict.
It is important to remember that this is an unusual decision and that, even if an application is successful, the Tribunal has the power to impose conditions on the applicant in order to address the concerns of those who object to the application.