Key points

  • The benefit of a covenant may be vested in the National Trust notwithstanding that it does not own any land which is capable of being benefited by the covenant
  • It may be possible to make an application for the discharge or modification of a restrictive covenant where a previous such application has failed. However, the applicant will usually need to show that there has been a change in circumstances
  • It may be more difficult to show that money will be adequate compensation for the modification or discharge of a covenant where the beneficiary of the covenant is a custodian of the public interest

Background

The usual rule, for a restrictive covenant to be enforceable, is that there has to be land which is benefited, as well as land which is burdened, by the covenant. Special statutory rules apply however to the National Trust, which can enter into enforceable covenants with landowners which restrict the use of their land, notwithstanding that the Trust may not own any benefiting land nearby.

This is just what had been done in Re Thames Valley Holdings Ltd. The land in question lay opposite a 15th century manor house. The National Trust had the benefit of covenants, entered into in 1945, preventing the development of the land without its consent. The landowner (a residential developer) applied to modify the covenants pursuant to section 84 of the Law of Property Act 1925.

Two previous such applications, in 1979 and 1991, had failed. In a preliminary hearing, the National Trust argued that the present application was therefore an abuse of process. It also raised a point in relation to one of the developer's grounds for modification, that, because of the nature of the Trust's interests, it was not capable of being compensated in money (one of the conditions of modification on this ground).

Abuse of process

The National Trust argued that there had been no material change in circumstances since the two prior applications, and that the developer's application should therefore be automatically struck out as an abuse of process.

The developer argued that the need for housing (including affordable housing) had increased substantially in the 30 years or so since the first application. The site was not in the green belt and was not at risk of flooding, unlike many of the other potential housing sites in the local authority's area. In addition, trees had been planted over the years since the previous applications, which had now become mature and formed a screen between the application land and the manor house.

The Lands Chamber of the Upper Tribunal (the tribunal) noted that it had the power to strike out a case where there was no reasonable prospect of it succeeding. It held that it would be appropriate to strike out an application where an earlier application had been determined on the same grounds and there was no realistic prospect of showing that circumstances had changed to an extent that might lead the tribunal to reach a different decision.

However, it was not satisfied that this was the case here. One of the grounds for modification under section 84 is that the covenant impedes a reasonable use of the land and is contrary to the public interest (ground (aa)). The developer's public interest case was based on planning need, and the tribunal thought that it is the nature of an assessment of planning need that it changes over time.

The other aspect of the public interest was, of course, the setting of the manor. The changes which had occurred in this regard (e.g. the tree screen) would need to be addressed so that the impact of the development could be weighed against the housing need considerations.

Ground (aa), public interest and compensation in money

In order for a developer to rely on ground (aa), it must also show that money will be adequate compensation for the loss which may be suffered by the person objecting to the modification. The National Trust argued that the covenant was of value to it in its capacity as custodian of the public interest, and that an injury to the public interest could not be compensated in money.

The developer contended that money paid to the Trust could constitute adequate compensation, because it could be applied towards the protection of heritage in other ways to offset any detriment suffered as a result of the modification.

The tribunal ruled that there was no principle of law in section 84 that, where the interest sought to be protected by the covenant is the interest of a body in its capacity as a custodian of the public interest, money can never be adequate compensation. It thought that this could only be determined on a case-by-case basis, as a question of fact. It acknowledged that, if the benefit of the restriction lies solely in the beneficiary's ability to enforce it, the mere payment of money to that person will do nothing to alleviate the loss of the benefit.

However, the tribunal thought that the developer should be entitled to argue that the Trust would use any money awarded to derive a commensurate benefit which could then be set against the disadvantage caused by the modification.

The tribunal therefore refused to strike out the developer's claim.

Things to consider

There are relatively few reported cases involving covenants given to the National Trust, and so this case is notable on that point alone. If the Trust's argument about money never being adequate compensation succeeds at the full trial, there will only be very limited grounds on which an application to modify a covenant, the benefit of which is vested in the National Trust or similar body, could succeed.

The case will also be interesting for developers who have previously made applications to modify covenants which have been rejected. Landowners in this situation may wish to review whether circumstances have changed to the extent that a fresh application may now properly be made.