Restrictive covenant modification also widens easement

The Upper Tribunal (Lands Chamber) has held that the modification of a restrictive user covenant authorised a corresponding change in the permitted use of a right of way.

Facts

Mr & Mrs O’Byrne bought their property in Oxfordshire in 2001 from Magdalen College, Oxford (the College). It comprised a farmhouse – their home - plus two barns and 6 acres of farmland. In 2017 they were granted planning permission to convert the two barns into a separate house, intending to later sell the farmhouse.

The property was subject to a restrictive covenant in favour of the College however, that prevented the O’Byrnes from using it other than as a single private dwelling house.

The O’Byrnes therefore applied to the Upper Tribunal to modify the covenant under two of the available grounds in section 84(1) of the Law of Property Act 1925. These provisions state that the Tribunal can wholly or partially discharge or modify a restriction if it is satisfied:

• ‘(aa) that…the continued existence [of the restriction] would impede some reasonable user of the land for public or private purposes … or, as the case may be, would unless modified so impede such user; or
• (c) that the proposed discharge or modification will not injure the persons entitled to the benefit of the restriction.’

In the case of ground (aa), a modification is permitted if no practical benefit of substantial value or advantage is conferred by the covenant or if it is not in the public interest.

The College had sold other properties to neighbouring occupiers in 2001, also with restrictive covenants, but retained surrounding agricultural land and its access road.

The College objected to the application saying that it would be injured by the relaxation of the covenant, and its benefits were substantial. It also argued that modifying the covenant would not enable the O’Byrnes to use the developed property anyway, because of the nature of their right of way over the access road. This was limited to the ‘permitted use’ of the property, defined as use as a single private house. Building a second house would result in unauthorised use of the road and so, even if the restrictive covenant were modified, the development could not proceed.

The College protested that a successful application would result in three adjacent properties also applying to modify covenants in order to build houses on their plots; their retained land being affected due to increased use of the access road impeding agricultural tenants, resulting in conflicts between road users that the College would be dragged into; and adding a potential objector to any future redevelopment plans.

Decision

The application under ground (c) was unsuccessful, but this was immaterial to the overall outcome as the O’Byrnes succeeded under ground (aa).

The Tribunal found the increased use of the access road would have a very small effect on any benefit enjoyed by the College as the road owner, and would not create any significant conflict between road users.

Both the position of the neighbouring properties and their covenants were different. There was no realistic prospect of them obtaining planning permission to build new houses on what is green belt land before 2031, when the current planning policy framework expires. Conversion of existing buildings, on the other hand, was permitted by the framework, which explained why the O’Byrnes had been granted planning permission. This permission meant the proposed development would be reasonable under ground (aa).

The Tribunal considered the College’s argument that the right of way allowed use by one house only, meaning that the O’Byrnes would need the right of way wording modified too. Their counsel suggested that section 84 allows modification of a right of way, but this was not pursued. The prevailing view is that section 84 does not extend to the modification of easements. The Law Commission suggested in its report on easements and covenants in 2011 that the Tribunal should be given this jurisdiction.

The Tribunal held that once the covenant was modified to allow use of the property for two houses then, as a matter of construction, the right of way would be read so as to allow that use too. This was in accordance with the decision in Hotchkin v McDonald [2004] EWCA Civ 519 in which the Court of Appeal held that, when it was granted, a right of way in connection with the use of a house is always subject to the possibility of modification under section 84. Where the uses of the house and the road were inextricably linked, it was unrealistic for the parties to have intended that the use of the house could be lawfully changed, without having a corresponding change to the right of way with it. By analogy, if the O’Byrnes’ restrictive covenant was modified, it would be lawful for them to use the access road for the modified use.

Ground (aa) allows the Tribunal to modify a covenant only where it is satisfied that money is adequate compensation for its relaxation. The O’Byrnes had paid £600,000 for the property in 2001. On the evidence, the Tribunal held that, had the covenant been modified then, the purchase price would have been 10% higher. The O’Byrnes were therefore ordered to pay the College £60,000 in compensation.

Comment

This case is a useful illustration of the Court of Appeal’s decision in Hotchkin v McDonald that modification by the Tribunal of a restrictive covenant affecting a property can impliedly modify the terms of an easement that benefits the property. Each case will turn on its own facts however, and it is not safe to assume that this will always be the case.

The case also continues the trend of the Tribunal over the last few years to modify a covenant where the beneficiary cannot show sufficient practical benefit.

In the matter of an application under section 84 of the Law of Property Act 1925 by (1) Michael Anthony O’Byrne (2) Erla Rafns-O’Byrne [2018] UKUT 395 (LC), see here.