Most land in the UK, be it leasehold or freehold, will have some form of restrictive covenant. The basic characteristic of a restrictive covenant is that it will consist of an agreement in a deed that one party will restrict the use of its land in some way for the benefit of another’s land. A restrictive covenant may be enforceable between future owners of the land, as well as between the original contracting parties.
Restrictive covenants can be hampering, or even damaging, to the value of a piece of land. For example, if a developer wishes to convert a field into a collection of houses, but there is a restriction preventing this, the restrictions will need to be engaged with.
Normally, the easiest way to deal with the restriction is to take out insurance or obtain the express consent/release from the party with the benefit of the restriction. But what if both options are not available?
For most property developers it is fairly well known that if there is a restrictive covenant affecting your freehold title, and you are unable to get the person with the benefit to release the land, you can apply to the Upper Tribunal of the Lands Chamber for the covenants to be modified or removed. This power is statutory, and is contained in Section 84(1) of the Law of Property Act (1925).
The Upper Tribunal would review the covenants and, if it can be shown that they prevent some reasonable use of the land and aren’t of any practical benefit or of substantial value to the person with the benefit of the restriction, the Upper Tribunal may vary or remove the restriction.
What is slightly less well known is that those rights of discharge and modification apply equally to leasehold property. This is set out in Section 84(12) of the Law of Property Act (1925). However, these rights only apply if the lease was granted for a fixed term of 40 years or more and at least 25 years have expired.
This can be a very valuable right. The Upper Tribunal would look closely at whether the landlord would suffer a material disadvantage, but recent case law suggests that they may not infer that disadvantage lightly and that the Upper Tribunal are undoubtedly prepared to exercise their rights to modify in appropriate cases.
In the recent case of Shaviram Normandy Ltd v Basingstoke and Deane Borough Council, the Upper Tribunal decided that a restrictive covenant in a long lease, limiting the use to offices, could be modified under Section 84(12) of the Law of Property Act (1925) to allow residential use. This use of the Upper Tribunals powers allowed for a derelict office building to be converted into around 114 flats, which was of great utility to the developer (Shaviram Normandy Ltd).
The bottom line is this; never say die. If you come across seemingly insurmountable covenants in a long lease, there may be way(s) around them. Do not let an old lease or old covenant deter your plans.
At Bishop & Sewell, we have 40 years’ experience in conveyancing, with a particular focus on Landlord & Tenant law. We know what to expect from other solicitors, but we always treat our clients as individuals with their own particular needs and concerns.
Charlie Davidson is a Solicitor in our Property team, dealing with both residential and commercial property.
If you are thinking of taking a new lease, or have questions about your existing leasehold property, please call 020 7631 4141 and ask for a member of the Property team or email email@example.com.
This article is intended as a general summary on the law – no reliance should be placed on it.