Property developers – applying to discharge restrictive covenants

A shortage of land for building means developers are increasingly looking at sites that may be considered less suitable, such as sites subject to a restrictive covenant prohibiting development. However, two recent cases show that it is possible for developers to successfully apply for covenants to be discharged or modified.

Henry Russell (pictured), a property litigation solicitor at national law firm Clarke Willmott, says the recent Upper Tribunal decision in Moskofian v Foster & Ors [2021] is a case in point. In this case, the Tribunal modified covenants affecting a Victorian townhouse to allow a developer to extend it and convert it into flats, despite objections from the owners of neighbouring properties.

In Moskofian v Foster & Ors, the Tribunal recognised that the development would have some impact on the objectors’ properties – including creating a less attractive outlook and an increase in pedestrians and delivery vehicles – but held that preventing this impact was not a “substantial” advantage.

The Tribunal accepted there would be some reduction in the value of the objectors’ properties – ranging from 1% to 4.8% - and required the applicant to pay compensation accordingly.

In a second decision, Father’s Field Developments Ltd v Namulas Pension Trustees Ltd [2021], the Tribunal discharged a covenant requiring the applicant to obtain the objector’s consent where the objector had no land in the vicinity.

The Tribunal held that the opportunity to demand a price for giving consent was not a benefit of substantial value or advantage.

While the Tribunal allowed modification or discharge in these cases, each Tribunal decision turns on its individual facts, and it is clear from other decisions this year that the Tribunal continues to take a broad approach to what amounts to a “practical benefit of substantial value or advantage” which, if found, will usually prevent the Tribunal discharging or modifying a covenant where a developer’s application is contested.

There will be many cases in which those with the benefit of a covenant will not have the inclination or resources to object to an application. There will also be many cases which are settled before a final hearing at the Tribunal.

The Upper Tribunal has the power to discharge or modify restrictive covenants affecting freehold land and in some long leases. The applicant must rely on one or more of the grounds set out in 84 of the Law of Property Act 1925.