Applications to the Upper Tribunal to discharge or modify restrictive covenants continue to keep both lawyers and the Tribunal busy. The recent case of Coven Care Homes v Hockney and others [2024] UKUT 384 LC is a good example of the Tribunal going about its section 84 work in a thorough and sensible manner.
A small residential estate was built in 1988 with mutually enforceable covenants, including a covenant against running a business from any property. In 2023 a three bedroom house was let to Coven Care Homes for the purpose of housing two vulnerable children. Each child would have a room, with carers using the third. No extra parking was needed, nor would a casual passer by see that the house was anything but a residential unit. Despite that, 15 of the adjoining residential owners objected to this arrangement. The care home owners therefore applied to the Tribunal for modification to allow this specific business use.
To recap, section 84 of the Law of Property Act 1925 gives the Upper Tribunal the power to discharge or to modify a covenant if any of a small number of grounds are made out. The two grounds that were relied on here were as follows:
- Section 84(1)(aa) which states that the covenant can be modified or discharged where it impedes some reasonable use of the land for public or private purposes and the Tribunal is satisfied it secures no practical benefits of substantial value or advantage to the person with the benefit of the covenant, or that it is contrary to the public interest. The Tribunal must also be satisfied that money will provide adequate compensation for any loss or disadvantage which the beneficiary of the restriction will suffer from the proposed discharge or modification.
- Section 84(1)(c) under which the applicant must demonstrate that the proposed modification of the covenant would not cause injury to those entitled to the benefit of it.
The Deputy Chamber President went methodically through the statutory requirements. First would the modification sought injure the neighbours? Here "injury" means any adverse impact on their properties. The neighbours did not assert that their properties had been reduced in value because of the business use. Their concerns about car parking difficulties were described by the judge as "illusory".
As for a "slippery slope" argument, namely that if this modification were allowed, far more serious ones might follow, this too was dismissed. Such future applications were the right of all covenantees granted by section 84 of the 1925 Act, and were to be judged on their own merit, not all business uses are the same and this particular business use was very close in feel to the use of the house as a home. Further, anyone who wished to use the premises as secure accommodation for children or young people, e.g. a place of detention or custody centre would require separate planning permission.
Having decided that the applicant succeeded on ground (c), the Tribunal said that it would also have succeeded on grounds (aa) because the two grounds centred around the same kind of issues.
Being able to satisfy the ground for modification had been made out is not enough. The Tribunal also has to be persuaded to exercise its discretion in favour of the applicant. Here, several reasons were given in favour of the applicant, the most noteworthy being:
- That this is not a case of an applicant seeking to gain an advantage by changing the facts on the ground in breach of covenant, such as happened in the case of Alexander Devine Cancer Trust v Millgate (2020 UKSC 45) where the applicant continued to build a development in the face of opposition. If the use were to be immediately discontinued there would be no visible evidence that the covenant had ever been broken.
- Weighing very much in the applicant's favour was the common good that this modification of the covenant would enable – "the availability of supported accommodation for vulnerable young people who need to live apart from their own families is one aspect of a civilised and compassionate society", as the judge put it.
Having regard to the power to modify the covenant only to the degree necessary, the Tribunal therefore ordered that the covenant be modified by specifically permitting the use of the premises for the business of a care home for up to two children under the age of 18.
What we see here is a good example of the meticulous consideration of all of the many elements required to succeed under section 84 to modify or discharge a covenant. Even in a case as seemingly obvious as this one, there are a significant number of hurdles that the applicant must overcome before getting the outcome that they want.
