11 Jul 2018

The recent case of Lamble v Buttaci [2018] UKUT 175 (LC) concerned an application to the Upper Tribunal (Lands Chamber) by Mr Lamble for the modification of restrictive covenants that bound his land and prevented him from replacing his "modest bungalow" with a five-bedroom two storey dwelling, a garage and a summerhouse.

The covenants in question prevented Mr Lamble from erecting any new or replacement buildings on his land without first obtaining the consent of his neighbours – Mr and Mrs Buttaci – who could withhold consent, provided it was reasonable for them to do so.  

Mr Lamble sought consent, but the Buttacis refused it.  Instead of applying to the Courts for a declaration that the refusal was unreasonable, Mr Lamble took his case to the Tribunal and sought a discharge of the covenants completely.

This case is of interest because of the Tribunal's views on Mr Lamble's decision to apply to the Tribunal for a relaxation of the covenants rather than pursuing a declaration from the Courts that the refusal to grant consent was unreasonable, and also because of the Tribunal's approach to determining what constituted a reasonable use of the land.

Section 84(1)(aa)

Mr Lamble relied on section 84(1)(aa) of the Law of Property Act 1925 which allows for the discharge or modification of restrictive covenants in circumstances where:

  1. the covenants impede some reasonable use of the affected land;
  2. the covenants do not secure any practical benefits of substantial value or advantage; and
  3. money will be adequate compensation for the loss resulting from the modification or discharge of the covenants.

Reasonable use of the affected land

The Tribunal found that the proposed new house and garage would constitute a reasonable use of the land, but that it would not be a reasonable use of the land to build a new summerhouse on the site as well.

In reaching this conclusion, the Tribunal had regard to the fact that planning permission for the development had been granted, as well as national planning policy. The final form of planning permission allowed for the erection of all three buildings. However, after a detailed consideration of the planning process, the Tribunal concluded that the planning authority should not in fact have consented to three buildings and eventually formed its own view as to what constituted a 'reasonable use' of the land, while acknowledging that it was obliged (as a matter of law) to take into account the grant of planning permission.

Impeding reasonable use

It then held that the covenants did impede the proposed use. On one analysis, only a reasonable refusal to grant consent would have actually impeded the development. However, the Tribunal found that it did not matter whether the Buttacis' consent had been unreasonably withheld or not. The mere requirement that Mr Lamble needed their consent before he could proceed was still an impediment to the development.  

Counsel for the Buttacis also argued that if the covenants were an impediment to the development, on the assumption that the Buttacis' withholding of consent was indeed reasonable, the covenants must also have secured the Buttacis practical benefits of substantial value and therefore were not capable of being modified or discharged by the Tribunal. However, the Tribunal rejected this line of argument and said that the questions of whether the refusal was reasonable, and whether the covenants secured practical benefits of substantial value, were entirely separate. 

Practical benefits of substantial value or advantage

The Tribunal accepted that the covenants secured practical benefits – namely, a "sense of seclusion by the preservation of views of the surrounding countryside" and a "sense of isolation [from] immediate neighbours".  

However, the Tribunal did not find that the practical benefits were of substantial value or advantage in respect of preventing the building of the house and garage, and that money was an adequate compensation for the loss of any insubstantial benefit. Thus the Tribunal agreed to modify the covenants to allow the house and garage to be built (but not the summerhouse, as this did not pass the test of being a reasonable use of the land).

In passing, the Tribunal noted that "objective standards" should be applied when considering whether a benefit was of substantial value or advantage and not the standards of a "hyper-sensitive individual" (which Mr Buttaci was not in any event).

Compensation

The Tribunal, having found that the loss of the benefit of the covenants in respect of the house and garage could be adequately compensated for by money, then had to assess compensation. In this particular case, the Buttacis, whose property was valued at £2.25million, were awarded £50,000 in compensation, based on the likely diminution in value to their property as a result of the proposed development.  

It should be noted that questions of compensation will always be very fact sensitive and can only be determined after a careful inspection of the property in question.

Conclusion

There are other grounds on which restrictive covenants can be discharged, but section 84(1)(aa) remains the ground under which successful applications are most commonly made. That being said, applicants still have a number of significant hurdles to get over and it is worth noting that just because an applicant has planning permission for its development, it does not mean that the Tribunal will necessarily find that their proposed use of the land is reasonable.