Modifying a restrictive covenant
Covenants that restrict the use of land (known as restrictive covenants) can be discharged or modified if they have ceased to serve a useful purpose and are of no real benefit to local people.
The case of James Hall and Company (Property) Limited v Maughan & Ors [2017] proved this point, as the Upper Tribunal (UT) opened the way for the conversion of a hotel and pub into a convenience store.
The pub’s title deeds contained a restrictive covenant, dated 1966, which stated that the site could only be used as a hotel or licensed victualler. However, its brewery owners took the view that it was unviable as a business and had agreed to sell it to a developer who wished to turn it into a shop.
Completion of the sale was dependent on the covenant either being erased or modified and the developer applied to the UT with that objective in mind. A number of local residents objected on the basis that the pub had a loyal clientele and was an essential community hub, particularly for elderly and frail locals.
The developer, however, pointed to the pub’s high overheads and very modest profits. Despite having had eight different landlords in recent years, none of them had managed to make it an economic success.
The objections were largely based on nostalgic recollections of the pub in its heyday and, if the conversion proposals were blocked, the likelihood was that it would be closed and boarded up.
In modifying the covenant to enable the pub’s transformation into a shop, the UT found on the evidence that the restriction on the land’s use did not secure any practical benefits for the objectors.
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