There has been a significant development in the law relating to the modification of Covenants in the case of Derreb Limited -v- Blackheath Cator Estate Residents Limited and Others.
Under Section 84 of the Law of Property Act 1925, an Order can be made discharging or modifying restrictions imposed on a property by way of Restrictive Covenant.
In brief, Section 84 enables the Upper Tribunal to discharge or modify restrictive covenants where:
A sum of money to make up for any loss or disadvantage can be awarded where the Upper Tribunal does modify or discharge such a restriction.
Development was blocked by restrictive covenants
The Upper Tribunal (Lands Chamber) recently heard the case of Derreb Limited v Blackheath Cator Estate Residents Limited and Others where there was a sports ground (the Huntsman Sports Club) which has not been used as such since 1999. The land lay within the private Cator Estate which comprises about 1,500 dwellings south of Blackheath Village. Derreb Limited had purchased the land and was seeking to develop it for residential use.
There was a restriction on the land which was in two parts:
Derreb Limited had carefully negotiated with the Local Authority (The Royal Borough of Greenwich) and it seemed likely Planning Permission would be granted for a residential development, but that it would comprise of a mixed range of detached houses, semi detached houses, terraces and blocks of flats.
Such a development would be in breach of the Restrictive Covenant and the Blackheath Cator Estate Residents Limited and Others objected to the Applicant's application to the Upper Tribunal to discharge the Restrictive Covenants. Derreb Limited needed the Restrictive Covenants to be discharged or modified so it could proceed.
Restrictive covenants modified
His Honour Judge Hoskinson, in a decision dated 26 October 2018, found, as a matter of fact, that the sports ground was overgrown and derelict since it fell out of use and that there was no prospect of it being used as a sports ground in the future.
The Upper Tribunal further found that the restriction to detached houses was not one that could be deemed obsolete, so the question then arose, could it be modified?It was found that the continuing existence of the restriction, unless modified, would impede reasonable use of the sports ground.The Tribunal then had to determine whether those with the benefit of the restriction derived any material benefit from the restriction.It was determined that subject to conditions of use in relation to the Estate roads, the Blackheath Cator Estate Residents Limited did not derive any substantial benefit.
Accordingly, the Upper Tribunal decided to exercise its discretion to discharge the restriction relating to use as a sports ground and to modify the restriction as regards the building only of detached houses, so as to allow the proposed scheme to proceed.
Important factors in the Upper Tribunal reaching this decision included:
The case is an important one as there have been very few successful challenges to Restrictive Covenants.The case does provide a very helpful framework of matters that must be established in order for a Restrictive Covenant to be discharged or modified.
The case is of particular interest to developers seeking to develop land which is the subject of a Restrictive Covenant.
There is a continuing aspect of the case in the High Court relating to conditions imposed on the developers so this may not be the final decision in this particular case.
Our Commercial Property Litigation Team represent clients in the Upper Tribunal (Lands Chamber) and are able to advise developers on any aspect of the Property Act 1925.
Please contact a member of the team for more information.