Restrictive covenants are a form of private law imposing restrictions on freeholders and long leaseholders on what they can do on their land. Many of these covenants were imposed decades ago and are out of date. There is a process (known as the Section 84 procedure) to modify or discharge these covenants but it requires the freeholder or long leaseholder to show that the covenant in question is now obsolete or that it impedes some reasonable user of the land. The reasonable user of the land option is further qualified by the requirement to show that the covenant does not secure any “practical benefits” of substantial value or advantage to the person holding the covenant.
What does the phrase “practical benefits” mean?
Many of these disputes are fact specific and they rarely come before the higher courts – but recently the Court of Appeal considered the meaning of the phrase “practical benefits”.
In the case, a developer was the long leaseholder of two redundant warehouses in Manchester. It wanted to demolish the warehouses and replace them with two 56 storey blocks containing 1037 flats. Its landlord was Manchester City Council who was also the relevant planning authority.
The developer’s lease had 61 years to run and it contained a number of restrictive covenants prohibiting development works on the site without MCC’s consent and giving MCC qualified control over the use and development of the site.
There were discussions between the developer and MCC over the proposal and MCC offered the developer a new 250 year building lease permitting the development on stringent conditions. The developer refused and instead applied to the Tribunal to modify or discharge the covenants so that it could proceed with its development.
After failing in the Tribunal, the developer appealed. The Court of Appeal concluded that the Tribunal was entitled to decide that the covenants afforded MCC practical benefits of substantial advantage to it. MCC had a legitimate strategy in continuing to influence the use of the site and secure its orderly and appropriate development.
The practical benefit arose from MCC’s ability to refuse consent to the development until its concerns were mitigated. As these had not been satisfied, the developer’s application was dismissed.
Great Jackson ST Estates Ltd v Manchester City Council [2025] EWCA Civ 652
