Q: My land is subject to an old restrictive covenant which was imposed some 50 years ago. I believe that it will affect the value of my land on a possible re-sale. Is there any way that I can get it removed?
A. There are four possible ways in which you may be able to deal with the restrictive covenant.
- The party with the benefit of the covenant may agree to give an express release by entering into a Deed of Release which is then sent to the Land Registry. The land must be clearly identified and all the parties having an interest would need to join into the Deed of Release. The Land Registry would note the Deed on the title although may not remove the actual covenant unless you can show that all those parties with the benefit have joined in the deed.
- Depending on the nature of the covenant, you may wish to obtain restrictive covenant indemnity insurance. This will usually be available where the party having the benefit of the covenant cannot be identified, which may well be the case here as you say that your covenant is very old and may be for the benefit of a particular party or estate which no longer exists. Under this method insurance monies will be paid out if the covenant is subsequently enforced.
- One of the most well-known ways of dealing with unwanted restrictive covenants is through an application to the Lands Tribunal1. The Lands Tribunal has the power to discharge or modify restrictive covenants in whole or in part. You must establish one of four key grounds before the Lands Tribunal will exercise this discretion2.
These include showing that the restriction has become obsolete due to “changes in the character of the property or the neighbourhood”. If your covenant states, for example, that you can only use the land for residential purposes and the surrounding area has come into business or mixed use, you may well be able to establish this ground;
Second, you may be able to show that the covenant impedes a reasonable use of the land and has no practical benefit/is contrary to the public interest and that money would be adequate compensation for the loss suffered if it were discharged;
Further you may be able to establish that those entitled to the benefit of the covenant have agreed “by their acts or omissions” to the discharge or modification; and finally
You may succeed if you can establish that the proposed discharge or modification will not adversely affect those entitled to the benefit of the covenant.
The Lands Tribunal will look at the development plan for your area and they will also look at any pattern for the grant or refusal of planning permission in the area. It may well require compensation to be paid to any party that has the benefit of the covenant if it is discharged or modified.
- Finally, an application can be made to the court for a declaration that the covenant is no longer effective.
To advise you further we would need to look at the exact wording of the covenant, when and why it was imposed, whom (if anyone) is benefitting from it now and whether the character of the site and the surrounding area has changed. It may well be possible to have it removed or modified.
As an application to the Lands Tribunal or the court could prove both time-consuming and expensive, it may be simpler to opt for restrictive covenant indemnity insurance, depending on the covenant’s nature.
Q: I am a landlord letting a single retail unit within a residential/commercial mixed-use building. The commercial tenant insists that I serve notices under the Landlord & Tenant Act 1987 on all of the residential tenants offering them a pre-emption right before entering into the new lease. Is this really necessary?
A. Under the 1987 Act, a landlord is guilty of a criminal offence if, without reasonable excuse, the landlord makes a “disposal” (which would include a letting) without first having complied with the requirement to serve “Offer Notices” on qualifying tenants of the residential flats in the building.
The Act applies to premises where two or more flats in the building are held by qualifying tenants, and where the number of flats held by the qualifying tenants exceeds 50% of the total number of flats in the building. A person is a qualifying tenant if he is the tenant of a flat under a tenancy although various exceptions apply under the Act. Whilst the Act does not apply to wholly commercial premises it does apply to mixed use buildings where the commercial elements account for less than 50% of the total floor area. So, for example, high street premises where the ground floor is a retail unit and the upper levels comprise residential flats may be caught by the Act3.
Although the criminal sanctions only apply to the landlord, the retail tenant is justified in insisting on service of the notices before it signs up to the new lease. If the retail letting were to go ahead without the notices having been served, the residential tenants would have the following rights against the tenant (and any of its successors in title):
- the right for a requisite majority of tenants (i.e those qualifying tenants who have more than 50% of the available votes) to obtain information about the disposal from the tenant by way of an “information notice”.
- the requisite majority of tenants may also serve a “purchase notice” to appoint a nominated purchaser to step into the retail tenant’s shoes under the lease. The retail lease will then have effect as if it had been entered into with the person nominated by them, and not with the retail tenant.
Where a prospective tenant is taking on a new or an existing lease and is in doubt about whether the landlord has complied with the Offer Notice provisions on the original letting, it should serve on those tenants an “Information Notice” asking the tenants to confirm:
- whether the landlord has served the Offer Notice,
- whether the tenants know of any reason why they would not be entitled to an Offer Notice, and
- whether they would serve a “Purchase Notice” if such an Offer Notice were to be served on them.
If less than 50% of the tenants respond within two months, or if more than 50% of the tenants do respond stating that they are not entitled to a notice or else would not respond positively to such a notice, then the purchaser can proceed on the basis that the premises will be treated as if the 1987 Act did not apply to them and the tenants will lose their pre-emption rights under the 1987 Act.
As has been expressed in the legal press, previously there was a view that disposing of the commercial element (or part of it) within a mixed use building to which the Act applied did not amount to a relevant disposal for the purposes of the Act provided that it did not include any common parts which the residential tenants had the right to use. However, in the Dartmouth4 case the judge appears to have accepted a proposition that the disposal of a retail unit within an affected building would in fact be caught by the Act5. As such, it pays to tread very carefully in this area.