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Shaviram Normandy Ltd recently made a successful application to modify a restrictive covenant on a building in Basingstoke, despite opposition from the freeholder, lending hope for property developers in similar situations.
The application to modify
However, Shaviram Normandy proposed to convert the building into flats. Under the lease the tenant, Shaviram Normandy, was obliged to use 'its best endeavours' to keep the property fully let. The tribunal interpreted this as obliging the tenant to go beyond mere repair of the interior and to extend to significant upgrading and refurbishment where such was reasonable (as here) to maximise the prospect of letting the building.
The local authority opposed the application relying on the restrictive covenant in the headlease. Shaviram Normandy applied to the Upper Tribunal for variation of the restrictive covenant on the basis that expert evidence showed the building would be easier to let for residential use.
The decision to modify
Normandy House had been let by the council in 1985 on a 150-year lease which restricted the use of the building to offices only. As the lease was for more than 40 years and the application was made 33 years after the original lease had been granted, Section 84 of the Law of Property Act 1925 could therefore be relied upon to modify the user covenant.
The Upper Tribunal held the restrictive covenant could be modified.
The implications for property developers
This case is helpful for property owners/developer wishing to convert from offices to residential flats. There is a restriction, where the long lease originally granted is over 40 years, the first 25 must have passed before a covenant can be varied.
There are various remedies that developers can consider with regard to restrictive covenants. Find out about the benefit rule, other requirements and remedies available to modify restrictive covenants in our Legal Hub article: Real Estate: Restrictive Covenants Affecting Land.
This article was written by Stephen Eccles, Partner in the Commercial Property Litigation Team at Pinney Talfourd LLP Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of January 2020.