Developer bids to take dispute with council over covenants in lease to Supreme Court

The appellant, Great Jackson St Estates, is seeking discharge of the covenants to allow a 1,000-home high-rise development to go ahead.

The Supreme Court said the issues are:

1. Do restrictive covenants in a lease which prevent land being developed without the landlord’s consent provide the landlord with “practical benefits of substantial advantage” for the purposes of sections 84(1)(aa) and 84(1A) of the Law of Property Act 1925 (“LPA”) so that the Upper Tribunal (Lands Chamber) has no jurisdiction to consider their modification?
2. Did the Upper Tribunal (Lands Chamber) make an error of law in stating that, even if it had jurisdiction to modify the restrictions, it would refuse to do so?

The background to the dispute – as set out by the Supreme Court – is that Great Jackson St Estates is the holder of a lease in Manchester containing two warehouses. The lease contains various restrictions and covenants on the appellant’s use of the site.

The respondent, Manchester City Council, is the owner of the site and the relevant planning authority for the area.

The two warehouses are located in an area which is rapidly being developed with housing.

Great Jackson St Estates wishes to develop two 56-storey tower blocks of flats on the site and has since obtained planning permission from the the council to do so.

However, the underlying lease contains certain covenants (most notably a restriction on the potential uses of the site) which prevent the appellant from carrying out the development without the respondent’s consent.

Whilst both parties want the redevelopment of the site to occur, the city council is not willing provide its consent under the existing lease.

It has proposed that a new long lease of 250 years should be entered into. This would include development milestones and forfeiture provisions, in part to address concerns regarding the viability of the development. Negotiations concerning this new long lease failed.

Great Jackson St Estates applied to the Upper Tribunal (Lands Chamber) seeking modification of the existing lease to permit the proposed development.

Section 84 of the LPA gives the Upper Tribunal (Lands Chamber) a discretionary power to modify or discharge covenants restricting the use of land if the facts fall within one of five grounds.

The Upper Tribunal (Lands Chamber) dismissed the application.

Great Jackson St Estates appealed their decision on the ground that the restrictive covenants in question do not provide the council with “practical benefits of substantial advantage” for the purposes of sections 84(1)(aa) and 84(1A) of the LPA in circumstances where they provide the respondent with the ability to control the development’s parameters.

The Court of Appeal dismissed the developer’s appeal.  Lady Justice Asplin found that the Upper Tribunal was entitled to decide that the covenants afford the council practical benefits of substantial advantage to it and that the tribunal's decision revealed no error of law.