The Upper Tribunal (UT) has confirmed, in Blackhorse Investments (Borough) Limited v The London Borough of Southwark [2024] UKUT 33 (LC) that its jurisdiction does not extend to the power to modify all covenants contained in a lease.
Southwark was both the landlord of the Black Horse Pub and the local planning authority and had granted planning permission for the pub, which had closed down, to be demolished and replaced with a mixed-use building.
Blackhorse Investments, as leaseholder, had applied to the UT to modify the covenants in the pub lease prohibiting alterations without consent, restricting alienation and requiring the property to be kept open as a public house. There was also an obligation that the leaseholder use best endeavours to obtain a liquor licence.
The application was made under section 84 of the Law of Property 1985 which allows the UT to modify or discharge leasehold covenants in certain circumstances. Crucially, the covenants must be restrictive in nature.
The application was served at Southwark's offices but was not received by the correct department and so no objection was ever filed. An order was made by the UT, without a hearing, in the form sought by Blackhorse Investments.
Construction at the property began, at which point Southwark became aware of the order and applied to set it aside under Rule 54 of the Tribunal Procedure (Upper Tribunal) (Lands Chamber) Rules 2010.
Southwark's application was made on a number of grounds, which centred around the idea that the covenants could not be modified as they were positive in nature, and so went beyond the UT's jurisdiction.
Pursuant to Rule 54, the UT held that:
- It had no jurisdiction to modify the alienation covenant as any covenant which prohibits assignment is not a restriction as to the user of the land, rather one around ownership of the proprietary interest;
- It could not modify the covenant that the premises must be kept open as a pub as this was positive in nature; and
- The best endeavours obligation was positive in nature and so the UT had no jurisdiction to modify this.
Martin Rodger KC said in his judgment, "This is not a case of an order of a court (or tribunal) which must be obeyed. It is an order which purports to change the parties' relationship to a greater extent than Parliament has allowed. Moreover, that defect is clear on the face of the order."
It is worth noting that Southwark did not challenge the validity of the order to modify the alterations covenant, as this fell within the UT's jurisdiction.
This case is a reminder to ensure that any application for modification or discharge pursuant to section 84 is made solely in respect of covenants that are restrictive of user of land. Applications that seek to go further than this will be rejected by the UT.
