Restrictive covenants: Naidu & Anor v Morton & Ors [2023] UKUT 185 (LC) (01 August 2023)
Modification or discharge of covenants under Section 84 of the Law of Property Act 1925 to allow the applicant to alter the external plan or elevation of the building (the “building restriction”) and change its use for business purposes (the “business restriction”).
Case name, reference and Bailii link:
Naidu & Anor v Morton & Ors [2023] UKUT 185 (LC) (01 August 2023)
Summary
In Naidu & Anor v Morton & Ors [2023] UKUT 185 (LC) an application was made to the Tribunal to discharge or modify restrictive covenants under Section 84 of the Law of Property Act 1925 (“Section 84”).
The covenants prevent the applicant from erecting a three-storey side extension (the building restriction) and changing the use of their property (the business restriction).
The Tribunal found that Ground (a) of Section 84 had not been satisfied in relation to the building restriction because there was no change in the character of the neighbourhood.
The Tribunal found that Ground (aa) of Section 84 had been satisfied in relation to the building restriction. The modification would cause no permanent loss or disadvantage to a neighbour to require monetary compensation, nor does it secure any practical benefit of value or advantage to anyone so entitled to benefit.
The Tribunal found that Ground (aa) had not been satisfied in relation to the business restriction as the application was lacking the required detail needed for the Tribunal to properly consider it.
Facts
The applicants own a three-storey town house within the private development, known as Beechcroft Manor.
A previous application to the Tribunal was heard on 1 June 2022 in Naidu & Anor v Morton & Ors [2022] UKUT 172 (LC), in which the applicants applied to the Tribunal to discharge or modify restrictive covenants.
The relevant restrictions to this previous application were contained in a transfer and read as follows:
"(a)(i) Not without the previous written consent of the Vendor to alter the external plan or elevation of any building standing upon the Transferred Property nor without the like permission to erect any building thereon save those erected or in the course of erection at the date hereof
(b) Not to use the Transferred Property at any time for any purposes other than that of a single private dwellinghouse and so that no trade business or manufacture whatsoever shall be carried on..."
Restriction (a)(i) is referred to as the building restriction. Restriction (b) is referred to as the business restriction.
The proposed extension that the applicants sought permission for in the previous application of June 2022 encompassed the following:
- A new bedroom, shower room and utility room on the ground floor, that would enable the converted garage to become a second study/office.
- The new area of the first floor would be a living room with windows to the rear and side.
- Additional space on the second floor would be used to provide a large new bedroom with en-suite bathroom, and a dressing room and larger en-suite bathroom for the existing master bedroom.
- The side elevation would have two full size windows at first floor and an additional window at second floor.
- Part of the garden would need to be taken back and a new retaining wall would need to be built. There would need to be regrading at the entrance. The construction period is expected to be at least six months.
In the previous application, in relation to the business restriction, it was decided that the proposed uses of the applicant, to work from home or run a business from home, were not impeded by the restriction, and so the Judge had no jurisdiction to modify that covenant.
The Judge had jurisdiction under Ground (aa) of Section 84(1) to modify the building restriction, which impeded a reasonable use of the Property, and did not award practical benefits of substantial value or advantage to those who would be so entitled to it.
The Tribunal decided that on the condition that planning permission was obtained, the applicants could renew their application for modification. They also had the option of engaging with the objectors to see whether their objections have been dealt with by the planning permission and its conditions.
In summary, they objected on the grounds that:
- The restrictions were not obsolete because there has been no change in the neighbourhood since they were imposed, and the restrictions protect the nature of the original development.
- If the business restriction was modified to allow business use, this would be detrimental to a residential neighbourhood and would cause access and parking problems.
Planning permission for the side extension was granted 16 September 2022. The applicants wrote to their neighbours on 24 September 2022 to discuss the remaining matters of concern. One of the objectors had a surveyor look at the site and approved plans, and the surveyor subsequently confirmed that the works should not affect their property.
However, the neighbours still objected, and a new application was made to the Tribunal on 25 November 2022.
In this application to the Tribunal, the relevant covenants are from the Third Schedule in the 1986 transfer which provide the following:
"Transferee’s Covenants
2. Not to increase the external dimensions of any approved building erected on the property.
5. Not to use the Property for any business purposes..."
The relevant restriction in the Third Schedule to the 1989 transfer provides the following:
"(a)(i) Not without the previous written consent of the Vendor to alter the external plan or elevation of any building standing upon the Transferred Property nor without the like permission to erect any building thereon save those erected or in the course of erection at the date hereof
(b) Not to use the Transferred Property at any time for any purposes other than that of a single private dwellinghouse and so that no trade business or manufacture whatsoever shall be carried on..."
The applicant sought to modify or discharge the covenants to enable them to carry out their development under Section 84 of the Law of Property Act 1925.
Issues
The Tribunal had to decide whether grounds (a) and (aa) applied in deciding whether to discharge or modify the restrictions.
The restrictions were twofold:
- The building restriction, in (2) of the 1986 transfer and (a)(i) of the 1989 transfer prevent the applicants from being able to carry out work on the external plan of the property, preventing them from being able to carry out their proposed extensions.
- The business restriction, in (5) of the 1986 transfer and (b) of the 1989 transfer, prevent the applicants from using the property as anything other than a single private dwellinghouse, preventing them from being able to work from home or run a business from home.
In reaching its decision in regard to the building restrictions, the Tribunal considered the following submissions made by the applicant:
- The restriction is obsolete under Section 84(1) Ground (a) due to a change in the character of the neighbourhood since the restriction was imposed. This change arose from the implementation of the prior approval in March 2022 for an additional storey to be constructed on each block of flats in Beechwood Manor.
- The restriction secures no practical benefits of substantial value or advantage to those with the benefit of the restriction.
In reaching its decision in regard to the business restriction, the Tribunal considered the applicant’s submission that the restriction should be varied to be covered by the policies of their employer and to allow flexibility for future self-employment. They wished to broaden the business restrictions in the 1986 transfer and 1989 transfer to include planning permission.
First instance (where relevant)
In relation to Section 84, Ground (a) for the building restriction:
- The Tribunal were not satisfied that this ground was made out, because there is no change in the character of the neighbourhood arising from implementation of the prior approval, there is also nothing else to suggest that the restriction is obsolete.
In relation to Section 84, Ground (aa) for the building restriction:
- The Tribunal were satisfied that they now had jurisdiction to modify the building restriction to allow the applicants to construct their side extension in accordance with the planning permission.
- The Tribunal were satisfied that the modification would cause no permanent loss or disadvantage to any neighbour to require monetary compensation, nor does it secure any practical benefit of value or advantage to anyone so entitled to benefit.
In relation to Section 84, ground (aa) for the business restriction:
- The Tribunal were not satisfied that this ground had been made out, the application is lacking the required detail needed to consider whether the statutory grounds are satisfied to modify the business restriction for a limited purpose. The applicants are aware that the objectors do not oppose to them working from home as they have been doing.
This article was originally published in Property Law in November 2023.
