Restrictive covenants: can a local authority enforce a covenant preventing development for which it has granted planning permission?

A transfer of land in 2000 between Easington District Council and a private individual contained a covenant not to use the property other than as a coach depot and associated bungalow for residential use.

In 2005, planning permission was granted by Easington District Council to develop the site for residential housing. The owner applied to the Lands Tribunal under section 84 Law of Property Act 1925 for the discharge or modification of the restrictive covenant.

Under section 84, a covenant may be discharged or modified on a number of grounds:

• That by reason of changes in the character of the property or the neighbourhood, the restriction ought to be deemed obsolete; or
• That the continued existence of the covenant would impede some reasonable use of the land, money would be adequate compensation to the person entitled to the benefit of the covenant and either the covenant secures no practical benefit or it is contrary to the public interest; or
• That the person with the benefit of the covenant consents to its modification; or
• That the proposed discharge or modification will not injure the person with the benefit of the covenant.

It was agreed between the parties that residential development would be a reasonable use of the property. The question was therefore whether the restriction secured a practical benefit of substantial value or advantage to the council. In this case the covenant was not, as is more common, imposed to prevent a loss of amenity to the benefited land. Instead, the council wanted the ability to control the development and use of the burdened land and prevent complaints from future householders that would curtail the existing and future use of the surrounding industrial estate.

The Lands Tribunal held that, under the circumstances, there was a close coincidence between the council's role as landowner and as local planning authority. The grant of planning permission showed that the practical benefits secured by the restriction were not of substantial advantage to the council. Those benefits were considered by the council in the light of the planning application and were overridden in favour of residential development. The Tribunal therefore concluded that there was no loss of value or amenity arising from the discharge or modification of the restriction, nor would the council be disadvantaged by it.

Having reached a conclusion on that ground, the Tribunal also found that the final ground (that the proposed discharge would not injure the council) was made out. However, it did not find that the third ground set out above was satisfied. The applicant had tried to argue that the grant of planning permission constituted an implied consent to the modification or discharge of the covenant. The Tribunal held that the council, as a local authority, fulfilled multiple functions and that the exercise of one of those functions by one department did not imply acceptance of that decision in relation to another function. Nor could it be said that the failure of the estates department at the council to object to the planning application constituted an agreement by omission.

Things to consider

The Lands Tribunal has the power, under section 84, to order the applicant to pay compensation to the person entitled to the benefit of the restriction which has been modified or discharged. Compensation can be paid under either, but not both, of the following heads:

• a sum to make up for any loss or disadvantage suffered by that person in consequence of the discharge or modification; or
• a sum to make up for any effect which the restriction had, at the time when it was imposed, in reducing the consideration then received for the land affected by it.

In this case, having concluded that the council would not suffer any loss or disadvantage, the Tribunal awarded compensation under the second head, taking into account the hope value of the land being used for residential development.

Re Alisha House, Lands Tribunal LP/83/2005

This analysis was written by Sarah Allen, associate in Wragge & Co's Real Estate group.

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