The case related to a parcel of development land situated at the former air base site of RAF Swinderby in Lincolnshire, which has been heavily developed in the years since it was decommissioned, and is now known as the village of Witham St Hughs.
The land in question was sold in 2019, subject to a restrictive covenant that no more than two private dwellings would be built on it. The price paid, £75,000, was reflective of the limitations imposed by the covenant.
Those two dwellings were constructed, and each was sold on separately to third parties. This left a remaining parcel of undeveloped land subject to the covenant, which was transferred to the Applicant in 2023. The Applicant sought planning permission for a third dwelling on the land, and this was granted by the local authority in February 2025.
The Applicant, aware of the covenant, applied to the Upper Tribunal (Lands Chamber) to modify the it pursuant to grounds (a), (aa), and (c) of Section 84(1) Law of Property Act 1925. For those not familiar, those grounds are:
(a) that by reason of changes in the character of the property or the neighbourhood or other circumstances of the case which the Upper Tribunal may deem material, the restriction ought to be deemed obsolete;
(aa) that the continued existence thereof would impede some reasonable user of the land for public or private purposes. . . or, as the case may be, would unless modified so impede such user;
(c) that the proposed discharge or modification will not injure the persons entitled to the benefit of the restriction.
The success of an application under Ground (aa) above is further subject to the Tribunal being satisfied that the covenant in question either:
- does not secure to persons entitled to the benefit of it any practical benefits of substantial value or advantage to them; or
- is contrary to the public interest;
and that money will be an adequate compensation for the loss or disadvantage (if any) which any such person will suffer from the discharge or modification.
The Respondent, Mr Morgan, who was the owner of one of the original two properties built on the land, objected. He was not however, a beneficiary of the covenant, instead owning land which was still burdened by it. His evidence in the case was therefore largely disregarded.
The beneficiary of the covenant, which was the company that had first sold the land as a whole parcel in 2019 and imposed the covenant, did not object. It did however, by way of a letter to the Tribunal, ask for financial compensation for the modification of the covenant, given that the price it had sold the land for Tribunal reflected the limitation that the covenant imposed.
The Tribunal commented that ‘It is not the Tribunal’s practice to exercise its discretion under section 84(1) simply because no one with the benefit of the restriction has chosen actively to participate in the proceedings’.
Nonetheless, the Tribunal found that grounds (aa) and (c) were made out. It accepted that the proposed modification would result in one modest additional dwelling which would ‘finish off the development’, and was thus deemed reasonable; and that the land with the benefit of the covenant would not suffer.
The question of money came next. Whilst the beneficiary had not objected to the application and was not a party to the case, its letter to the Tribunal was considered, which included information about discussions between the parties over the value of the land with the capability to include a third house on it. The letter indicated that it been discussed that this would be worth an additional £37,500. In the absence of any conflicting evidence as to valuation, that is what the Tribunal ordered must be paid to the beneficiary.
So what are the key takeaways from the case? Firstly, never assume that a restrictive covenant is meaningless or unenforceable just because the beneficiary takes a neutral stance upon an application to the Tribunal. The Tribunal will still need to come to its own decision on the facts. Resultingly, the most certain way to discharge or modify a covenant is to agree it directly with the other party and enter into a Deed of Release/Variation.
Secondly, don’t underestimate the Tribunal’s focus on granting an equitable outcome for all parties. Here, despite the beneficiary’s neutral stance and the resulting position of it not being a party to the proceedings, the Tribunal still ordered that compensation was payable to it upon granting the modification. The Tribunal judge commented that, ‘There is force in…(the)point that if modification were ordered with no or minimal compensation, the applicant would benefit from a windfall which they would not be able to achieve through negotiation’.
This lends further weight to the argument that a negotiated agreement between the parties is preferable if at all possible, saving the time and cost of an application to the Tribunal, and the subsequent procedural steps and hearing. In this particular case, the application allowed the Respondent, who had no interest in the covenant, to object – had the Applicant made an agreement directly with the beneficiary, the Respondent would not have had the opportunity to become involved at all.
If you have a restrictive covenant issue and need help with interpretation, enforcement or negotiating a discharge or modification, we can help. Contact DTM Legal’s Property Litigation team to discuss your position and the options available.