The recent case of Patel and others v Spender and others (2024 UKUT 62 LC) provides an interesting insight into what the Upper Tribunal does and does not consider to be a practical benefit of substantial value or advantage when considering whether to modify a restrictive covenant over land. Here, the covenants prevented the risk of further development (the thin end of the wedge’ and protected against an ‘incoherent and gappy’ development.

The application in this case was to modify a covenant that burdened 11 freehold houses on Ferry Street in London's Docklands. The property was part of the St David’s Square development, a mixture of freehold and leasehold properties. The applicant wished to extend the living accommodation into the roof space and create full width dormer extensions facing west looking into the development and to extend the ground floors.

The property was burdened by a covenant ‘not to… add or alter any building on the Property in any way so as to effect substantially the external appearance thereof and in the event of any rebuilding it shall so far as reasonably possible be in conformity with the building which it renews or replaces’.

The applicant’s properties were a terrace of eleven, three-story houses on the west side of Ferry Street. The development, constructed in the 1990s, had a noticeable architectural signature going beyond the uniformity of the yellow brick work, with stripes of dark brickwork on the ground floor of the houses echoed on the blocks of flats and creating an interesting theme said by the Tribunal to create ‘a pleasing consistency’. The applicant, Mr Patel, and his company had used the properties as houses in multiple occupation (HMOs).

The applicant’s case

The application was brought in the main under Section 84(1)(aa) of the Law of Property Act 1925, that is, the covenant impeded reasonable use of the land unless modified. It is necessary in such an application to establish the covenant secures no ‘practical benefits of substantial value or advantage’ to the person with the benefit of the covenant, and that money will provide adequate compensation for any loss or disadvantage of the modification.

Interestingly, in this case, the applicants had made an open offer (distinct from the ‘without prejudice’ communications that often take place without the Tribunal being aware). They sought to address the concerns of the objectors by proposing certain conditions on any modification with assurances not to create any additional bedrooms in the properties in the loft space (when used as HMOs).

The objections

There were over 100 objectors in this case. They argued that the covenant did provide practical benefits of substantial value or advantage as follows; they prevented:

• increased future nuisance from HMOs,

• strain on estate services,

• damage to trees,

• from been overlooked from new balconies,

• changes to the architecture of the development, breaches of the building scheme, and

• the ‘thin end of the wedge’ leading to further development, and

• disturbance by work done.

There was an interesting discussion in the judgment (paragraphs 42-43, and paragraphs 47-96). For the purposes of brevity within this article I will summarise as follows:

What the Tribunal did not consider to be practical benefits of substantial value or advantage:

The Tribunal held, on the facts of this case, that the prevention of increased nuisance from occupants of HMOs was not such a benefit. The covenant did not prevent use of a property as an HMO and that was controlled by the terms of the HMO licence.

As to the service charge this was apportioned on a per property basis. Again, the covenant did not protect against an unfair apportioning which could happen in any event.

The covenant did not protect damage to trees which ‘can be cut down tomorrow without breaching it’. There were however other covenants not to ‘remove or destroy any tree or shrub planted on the property’ which was not subject to the application.

The overlooking complaint was minimal (paragraph 71) in the context where in this development ‘no one's space is entirely in visible to anyone else’ and this was ‘not of substantial value or advantage’.

As to disturbance from the work done to carry out the proposed projects, this was not a benefit of significant value or advantage because the covenant was not specifically designed to prevent it and this could be compensated by compensation.

What the Tribunal did consider to be practical benefits of substantial value or advantage:

In this case, the Tribunal held that the changes to architecture of the development were matters which the covenants were expressly designed to protect against.

This was a well-designed development with a noticeable architectural theme and unity (paragraph 74). The Tribunal placed weight (paragraph 79) on the expert Mr Adams-Cairns that ‘a modification of the covenant for all 11 properties is likely, without more, to lead to a haphazard pattern whereby work is done on some properties and not on others’.

Even though the applicants had offered a covenant to do all the work at once, the Tribunal said that it was not persuaded this would be effective. In conclusion the Tribunal held that paragraph 84 that ‘what is currently a well thought out development with a very unified appearance would become incoherent and gappy’ – protecting against this was a substantial advantage to the benefiting party.

The Tribunal also held that the risk of further development, the ‘thin end of the wedge’ principle was engaged. The Tribunal referred to itself in Morris v. Brookmans Park Road Limited (2021 UK UT125 LC) and quoted paragraphs 101-103 of that judgment. The Tribunal held, at paragraph 89, that the present application would be a big change and would enable a substantial change to the estate and this gave rise to a risk that after that big change, more would follow.

Having decided that i) the architectural freeing would be altered and ii) the risk of further development would be the ‘thin end of the wedge’ and these were practical benefits of substantial advantage, the Tribunal lacked discretion to modify the covenant so the application failed.

The decision was handed down 15 March 2024 and the Writer does not know whether an appeal was made or for permission to appeal to the Court of Appeal.

Conclusion

What does and does not constitute a practical benefit of substantial value or advantage will turn on the facts of each individual case. This decision is helpful when considering the ‘thin end of the wedge’ argument, and ‘alterations’ covenants designed to protect the character an amenity of land.

The team at Allan Janes are experienced in dealing with modifying, discharging or seeking to uphold covenants over land. For any enquiries contact Toby Walker on 01494 521301.