Developers will welcome recent guidance on the modification of restrictive covenants. In the case of Derreb Ltd v Blackheath Cator Estate Residents Ltd & Ors, Re Manor Way  UKUT 209 (LC), the developer, Derreb Ltd, successfully argued that a restrictive covenant should be modified on the grounds of section 84(1)(a) and (aa) of the Law of Property Act 1925. This states that:
“The Upper Tribunal shall … have power … to discharge or modify any such restriction … on being satisfied … (a) that by reason of changes in the character of the property or the neighbourhood … the restriction ought to be deemed obsolete, or … (aa) the continued existence … would impede some reasonable user of the land …”
The developer, Derreb Ltd, bought land in the Cator Estate in Blackheath. Prior to 1999, the land had been used as a sports club but had not been used at all since then. The developer had plans to convert the land to residential use by building various different types of housing including semi-detached houses, terraced houses and blocks of flats. The land, however, was subject to a restrictive covenant restricting its use to either a sports ground or to residential detached housing only.
The developer sought the discharge or modification of the restrictive covenant. It argued that the character of the property had changed and that there was no realistic prospect that the property would ever again be used as a sports ground. The developer also put forward policy documents showing that the area was zoned for residential development of significant population density, discouraging detached housing.
Although at trial, the developer did not yet have planning permission for development, it submitted expert evidence to show that planning permission was highly likely. The expert also testified that it was likely the council would refuse planning permission if the development consisted only of detached housing.
The objectors put forward a number of arguments against the modification of the restrictive covenant including that the application should be refused because the planned development would change the tranquil, spacious and private character of the Cator estate.
The Tribunal granted the application to modify the restrictive covenant on a number of grounds including that there was no realistic prospect of the land ever being used as a sport ground again. The Tribunal also stated that the requirement that the land could be used for detached housing only should be modified as, based on the evidence put forward, the restrictive covenant would impede the reasonable use of the land. Further, the Tribunal stated that without modification, the restrictive covenant would result in the land remaining derelict and this was against public policy.
This case provides welcome clarification on the issues that are likely to persuade a Tribunal to modify a restrictive covenant that would otherwise block a proposed development. Developers can be encouraged to pursue a modification of a restrictive covenant in circumstances where the public policy interest is in having the land developed and a proposed development is in accordance with the policy plans for the area.
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