In the absence of planning legislation before 1948, control over development was largely exercised by the use of restrictive covenants. As a matter of imposition by private landowners and developers, restrictive covenant schemes were, and remain, a useful method of retaining high standards of development and maintenance, as well as preserving the local character of a neighbourhood. However, the system lacks that element of wider circumspection that falls to planning authorities under the Town and Country Planning Acts, which focus on a broader range of issues, as well as considering the public interest. Control by private restrictive covenants is of much narrower focus.

Section 84 of the Law of Property Act 1925

This provision was originally enacted to meet the need for flexibility that the law relating to restrictive covenants and their enforcement lacked and prevented. The section applies only to restrictive covenants and not to easements. Atightly drawn restrictive covenant or scheme of covenants could, with the passage of time, prevent needed development in thoroughly altered circumstances (changes in the character of the property, or the neighbourhood or other circumstances would render the restriction obsolete).

In addition, it was recognised that pointless insistence on the unmodified retention of covenants by the landowners with the benefit of the restrictions (dominant owners) would prevent freedom to the owner of the burdened land (servient owner), where the intended ‘infringement’ would result in no injury to the interest of the owner of the dominant land. Accordingly, the section gave power to the Lands Tribunal (the Tribunal) on application by the servient owner, to discharge or modify restrictive covenants and discretion to order the payment of compensation for doing so.

Even so, these powers were not considered wide enough after the effects of World War II and the introduction of the Town and Country Planning Acts. The grant of planning permission, however, does not of itself deprive restrictive covenants of their efficacy. Following a Law Commission Report, s84 was modified by the Law of Property Act 1969, which added a further ground for discharge or modification. The restriction may be discharged or modified if:

… it impedes some reasonable user of land for public or private purposes, if it does not secure to the dominant owner any practical benefits of substantial value or advantage to them, or is contrary to the public interest.

In such cases, the Tribunal must also take into account the local development plan and any declared or ascertainable pattern for the grant or refusal of planning permission. In practice, it would seem that the Tribunal is most frequently called on to consider applications for discharge or modification of restrictions on these added grounds.

Jurisdiction of the Tribunal and the courts

It is the function of the Tribunal to use its jurisdiction in this area of specialism. The applications involve a judgement on the part of the Tribunal on questions of fact and degree within the framework provided by s84. It follows that any one decision does not create a binding precedent, but consistency of approach is required so far as is practicable.

Once the Tribunal has made a decision, an appeal lies to the courts on a point of law. If the Tribunal has kept within the limits of s84, has acted fairly and has properly taken into account the issues raised by the application, the courts will not interfere with its finding and, indeed, has no power to do so. Where the Tribunal has erred in principle, has not taken an issue properly into account or there has been some defect in the handling of the application, the courts will normally remit the matter for further hearing with proper directions on the matters on which the Tribunal has erred.

The Tribunal generally acts with meticulous care. Applications to it from servient owners are usually met with a full panoply of arguments by dominant owners. Cases that come before the Court of Appeal are therefore usually instructive to practitioners, providing good examples of a consideration of the relevant issues, and the approach to them. The decision in Shephard & ors v Turner & anr [2006] is a case in point.

Shephard v Turner

The facts are relevant only as a background to the arguments that were raised on appeal to the Court of Appeal. This followed a decision by the Lands Tribunal to modify the restrictive covenants affecting the servient property so as to allow the development for which planning permission had been given (itself on appeal).

The application concerned Orchard Close, Ottery St Mary, which contained seven detached dwellinghouses plus an eighth house. All the houses were of similar construction, with pitched roofs and rendered elevations on two storeys, but were of different layouts and sizes. The development was characterised by simple dwellings linked by garages and curtain walls to form a largely unbroken façade. Nos 3 and 4 at the head of the Close had larger site areas than the other houses. The architect of this early 1950s development was awarded a Housing Medal by the Ministry of Housing and Local Government for the merit of the design.

The houses were all subject to restrictive covenants requiring that:

• they should be used only as private dwellinghouses;

• the owners should not to do anything which would be, or could become, a nuisance or annoyance to the owners and occupiers of the adjoining premises, and

• no temporary or permanent building should be built or caravan on wheels be placed on any portion of the land.

The applicant had obtained planning permission on appeal for the erection of an additional house at the rear of No 4. The development would involve creating an accessway to connect with the existing driveway into Orchard Close and the demolition of the garage of No 4, which was attached to the garage of No 3, to form a single structure. A gateway would be cut into the boundary wall and a replacement garage, of smaller dimensions, built.

Not surprisingly, the neighbours objected and applied to Exeter County Court for an injunction for clear intended breaches of the restrictions. The judge stayed the proceedings to enable the present application to be made by the servient owner to the Lands Tribunal for modification of the restrictions to enable the development to take place. The Tribunal considered the application and dealt with all of the arguments before ordering modification and awarding small sums by way of compensation to the neighbours. The neighbours appealed to the Court of Appeal.

Grounds of appeal

These may be summarised as follows:

‘Thin end of the wedge’

The Tribunal, it was claimed, had applied the wrong legal test when considering the ‘thin end of the wedge’ argument.

Overall benefits

Having regard to the effects of the proposals in terms of visual impact, loss of privacy and noise, no reasonable Tribunal could have concluded that the overall benefits secured by the covenants were not of substantial value.

The new access way

The Tribunal had erred in law when disregarding the adverse effect of the accessway to the new garage, and accepting that it would not of itself infringe the restrictions, as there was no specific restriction dealing with this. Construction disturbance The Tribunal failed to evaluate the conflicting evidence as to the extent of disturbance arising from the construction works and reached an unreasonable conclusion.

Examining the various arguments

Meaning of ‘substantial benefit’

Section 84, as amended, allows for modification for some reasonable user of the servient land if the restriction does not secure to the dominant owner any practical benefit of substantial value or advantage.

Arguments were raised in Shephard as to the meaning of ‘substantial’. Clearly this is a matter of fact and degree in each case. The Court of Appeal held that no precise definition could be given, particularly where parliament required the matter to be left to the Tribunal. However, the Court tended to disagree with the view given in an earlier Tribunal case that ‘substantial’ in this context covered all benefits to the covenantee (or dominant owner) from the restriction, except those advantages of so little weight as to have no real importance. The Court of Appeal felt that ‘substantial’ should be regarded as ‘considerable, solid, big’ but not so big as only to omit or not encompass matters of such little weight as to have no real importance. The Court concluded that there should be uniformity of approach to the application of the section in a common-sense way.

‘Thin end of the wedge’

This argument frequently comes up in relation to objections to applications for planning permission and the arguments on the subject here are therefore of particular importance. It is often the case that the extent of a proposed development may of itself be innocuous or insignificant, but may open the way for further developments that, taken together, will undermine the efficacy of the protection afforded by the covenants. The parallel with planning applications is plain. A statement of principle by the president of the Tribunal in Re Snaith and Dolding’s Application [1995] is regarded as a proper guide. In dealing with an application to allow the construction of a second house on a single plot, he acknowledged that each case must be dealt with on its merits and the Tribunal could not bind itself by a decision in any one case. However, he stated the principle (which is paraphrased here) that:

… it is legitimate, in considering a particular application, to have regard to the scheme of covenants as a whole and to assess the importance to the beneficiaries of maintaining the integrity of the scheme. The Tribunal had frequently adopted this approach. In so far as that an application would have the effect, if granted, of opening a breach in a carefully maintained and successful scheme of development, to grant the application would [in relation to that application] deprive the objectors of a substantial practical benefit, namely the assurance of the integrity of the building scheme. Furthermore, [the president could see in that case] the force of the argument that erection of the proposed house could materially alter the context in which possible future applications would be considered.

It is noteworthy that this statement of the significance of the argument has been adopted in a Privy Council decision, McMorris v Brown [1999]. Although in Shephard the Tribunal took this guidance into account, it was of the opinion that it was a special case because of the larger size of Nos 3 and 4 and their position away from the main part of the close.

The Court of Appeal was unable to find that the Tribunal had applied the wrong legal test. The argument was relevant but the issues raised were ones of fact and not of law. The Court was therefore not able to allow the challenge on that ground. The Tribunal had considered the argument and decided that it was not applicable in the circumstances of this case.

Overall benefits

Although the objectors pressed the argument of the adverse effect on the overall benefit of the restrictions, and that they were ‘substantial’, the Tribunal had considered them and concluded that these particular breaches would not be substantial. No issue of law was raised and it was reasonably open to the Tribunal to come to that conclusion.

In another case before the Tribunal, the test had been considered in this way. It was not to be judged by considering the worst-case scenario that could be achieved without breaching the restrictions and comparing it with what the proposed modification was intended to permit. What was in issue was that the restriction secured practical benefits to the objectors, but if other development could be carried out without breaching the restrictions, the practical benefits might not be of substantial value or advantage. Whether they were or not would be likely to depend on the degree of probability of such other development being carried out and how bad, in relation to the appellant’s scheme, the effects of the development would be.

The new accessway

The Tribunal had commented that the removal of part of the front wall to form the access was not of itself a breach of any of the covenants, as there was no specific prohibition against doing so. It was argued that that was a misunderstanding of the relevant test, which is to be judged by the nature and effects of the ‘reasonable user’ that is impeded by the restriction. But here again, although the comment had been made, it was in the context of making an overall judgement of the issue. The correct significance to be given to this part of the development, which was not of itself in breach of the restrictions, was its relationship with the overall scheme of the restrictions that would be breached by the proposals as a whole. The correct approach to this part of the statutory ground was explained by the Privy Council in Stannard v Issa [1987], where the relevant test to apply was not ‘what was the original intention of the restrictions and are they still being achieved?’, but ‘do the restrictions achieve some practical benefit, and if so, is it a benefit of sufficient weight to justify the continuance of the restrictions without modification?’

The Court of Appeal summarised the position in this application in this way:

The purpose of the present restrictions is also apparent on their face; in summary, to preserve the character and environment of the Close by limiting density, preventing disturbing activity and restricting building and other clutter in the garden areas in front of the houses. Notably absent is any restriction designed to protect the continuity of the facades. The ‘largely unbroken façade’ may be an attractive feature of the Close, but its protection is not part of the contractual scheme of which the restrictions form part. At most, it can only be an incidental and uncovenanted benefit of the achievement of the other contractual objectives. That does not mean that such a benefit is irrelevant. It does however mean that it is a factor which the Tribunal is entitled to give less weight in the overall judgement of substantiality.

Again, the Court of Appeal was unable to find that the Tribunal had not given proper consideration to the issue. There had been no error of law.

Disturbance during construction

There would, obviously, be some disturbance during construction. The relevant restriction generally restrained activity causing nuisance and annoyance. The Tribunal had noted this but had held that it would not be substantial and could effectively be dealt with by the award of compensation. The Tribunal has made such general statements in a number of cases, although it has been at pains not to set out inflexible guidelines. These statements have been assessed in the light of whether covenants not to do anything that would create nuisance and annoyance are of substantial value or advantage to neighbours. The approach is to consider the long-term benefits of the covenant rather than short-term advantage during a period of construction.

It may be that a covenant will be directed particularly towards prevention of construction nuisance. In general, however, such a covenant, while relevant, will usually be of less weight in relation to short-term nuisance from construction when considering the overall effect of reasonable user and whether the restriction secures practical benefit of a substantial nature. ‘Nuisance’ is not to be equated with the tort of nuisance.

The Tribunal, in its decision in Shephard, did not go through the evidence on this aspect, but did not appear not to have taken the arguments into account. There had been no error of law.

Comment

It seems, from reading between the lines of the report of this case, that the Court of Appeal would not have come to the conclusion reached by Norman Rose FRICS of the Lands Tribunal if it had had the jurisdiction to consider the application for modification on its merits. Nonetheless, there had been no error of law and so the Court was not empowered to intervene – the restrictions have effectively been modified to enable the proposed development to take place.

Perhaps the comments made by the judges in this case will have an effect on future treatment of similar applications made to the Lands Tribunal. The jurisdiction of the courts allows them to intervene when there has been a misapplication of the relevant parts of s84. This may be either by overlooking any of its requirements or by misinterpretation, or in some defective handling of the application – such as failure to deal with the arguments, disregarding crucial evidence, coming to a conclusion that the evidence could not reasonably support or reaching a conclusion that no Tribunal could reasonably reach within the parameters set by the section. None of these grounds was present in Shephard. This is a difficult area of practice. In assessing what to do and advise, practitioners are faced with the fact that the Lands Tribunal will exercise its judgment on questions of fact and degree, and consequently so much depends on the personal evaluation of the Tribunal member.

The case is important also in respect of the statements made relating to arguments such as ‘the thin end of the wedge’ and ‘substantial interference’ which are so frequently raised by objectors to planning applications – all matters of fact in the circumstances but which were thoroughly reviewed on lines of principle. © Property Law Journal