The case of Patel & Ors v Spender & Ors [2024] UKUT 62 (LC) (15 March 2024) is a warning to aspiring developers wishing to discharge or modify restrictive covenants to get their 'ducks in a row’.
The developer applicants did not succeed with an application under s. 84 of the Law of Property Act 1925 to modify covenants affecting their land. Their argument that the covenants no longer secured practical benefits of substantial advantage failed because:
- they lacked an agreed plan between them to undertake the works at the same time; and
- they did not demonstrate that each of them could immediately fund their respective part of the development; and
- given the above, any future remedy for injunctive relief would not have any ‘teeth’.
The Tribunal considered the risk that a ‘gap toothed’ and ‘piecemeal’ development might arise, which would be inconsistent with the architecture of the estate and street scene. On this basis (and on a thin-edge of the wedge argument not considered in this article) the Tribunal did not consider that it had jurisdiction to modify the covenants.
Background
The five applicants owned a run of 11 terraced properties in St. David’s Square, London. The Square comprises numerous blocks of flats, bounded to the south by the Thames and to the north and east by terraced housing. The development has a particular architectural style of brickwork and patterns which runs through not just the terraced housing, but also the blocks of flats.
The applicants wished to undertake two sets of alterations to the premises. To extend the ground floor kitchen/dining areas to the rear, and to convert the loft space of the properties to habitable rooms with shower facilities (creating four bedrooms where there had been three).
The properties are burdened by restrictive covenants against additions or alterations. These covenants form part of a building scheme across the whole square and, as a consequence, any one of the 104 other flats or houses in the development could object to the application.
The decision
An application to modify the covenants and allow the proposed development was brought under s. 84(1) of the Law of Property Act 1925 on grounds (aa) and (c), these being respectively that:
- the covenants continued existence would impede a reasonable use of the land for public or private purposes; and
- that the proposed modification would cause no injury to the persons entitled to the benefit.
The Tribunal was concerned that the five applicants may not all immediately be in a position to undertake the works in ‘one go’. The costs per property were estimated to be in the order of £50,000.00, and with various applicants of varying financial means and who might do the works at different times, there was a high chance of a ‘gap toothed’ form of development arising that would be at odds with the existing uniformity of the estate.
The applicants did offer a covenant that they would undertake all of the works at once, but the Tribunal was not persuaded (for the reasons set out above) that this would be effective. Enforcing this would be difficult with so many parties and factors that could not be controlled.
The warning to developers here is to make sure your plans are in order (beyond simply obtaining a planning permission), before applying to the Tribunal. In assessing whether covenants secure benefits of substantial advantage the Tribunal will consider the risks and realities of the development, and a hypothetical development scenario that may arise from those risks. To that end, being able to demonstrate that scheme is deliverable assumes considerable importance, especially when there are multiple applicants.
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