Don’t Let Restrictive Covenants Inhibit Your Development Potential
Private restrictive covenants are among the challenges facing developers on many historic or previously developed sites, restricting the use of land which inhibits its development potential. For example, a covenant might restrict the use of land to residential purposes, or restrict the number of units that can be built on a plot of land.
The law heavily favours the courts enforcing such private covenants by injunction if a remedy is sought quickly. Insurance is sometimes available against this risk, but this just leaves you with an insurance claim to rely upon and does not help realise the development potential of the property.
In such circumstances, you may be able to make use of S84 of the Law of Property Act 1925 which provides a mechanism for such covenants to be modified or removed altogether on application to the Upper Lands Tribunal.
The Upper Tribunal can discharge or modify the restriction if satisfied that one of the following grounds applies:
- The covenant is obsolete (section 84(1)(a), LPA 1925).
- The covenant impedes some reasonable use of the land (section 84(1)(aa), LPA 1925).
- The beneficiaries expressly or impliedly agree (section 84(1)(b), LPA 1925).
- No injury will be caused (section 84(1)(c), LPA 1925).
The legislation is permissive in nature and the existence of current planning permission is prima facie evidence of the reasonableness of the proposed use. Therefore, in those circumstances an application to modify or remove a restrictive covenant, if properly handled, has a good chance of success.
GL’s experience is that such cases, if pursued, often settle before reaching a hearing. The Tribunal also has the power to grant compensation when granting modification. The levels of compensation commonly granted, are unlikely to be an inhibition to potentially profitable development.
If you think you might benefit from such an application please contact our Real Estate and Development team