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Modification of restrictive covenants

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Circumstances where restrictive covenants in leases may be discharged or modified.

The background

In Re Holden [2018], an application was made to the Upper Tribunal to discharge restrictive covenants in a lease preventing a domestic garage being used by the applicant for a dog grooming business. The application was not opposed.

The application considered whether the restriction was obsolete on the grounds of changes in the character of the property or neighbourhood, and whether the proposed discharge or modification would injure the beneficiaries of the restrictive covenant. The applicant had been using the premises in breach of the restrictive covenant for a time, but had made his application in order to formalise the arrangement.

The decision

The Upper Tribunal decided to modify rather than discharge the restrictions. Given that the applicant had agreed to the restrictions less than four years previously, the restrictive covenant couldn’t be regarded as obsolete and there had been no significant changes to the character of the property or neighbourhood.

As no objections had been received to the application, this suggested that no injury would be caused by modifying or discharging the restrictions. The applicant’s use of the property in breach was not held to be a deliberate attempt to gain any tactical advantage in his application, and this did not prevent a successful application. The Upper Tribunal exercised its discretion, deciding not to discharge the restrictions as originally requested by the application, but to modify them sufficiently to allow the applicant’s use of the property to continue and to make the modification of restriction personal only to the applicant.

Advice and action for landlords

Landlords should be aware of the circumstances where an application to discharge or modify restrictions may be made, and where the Tribunals may be prepared to decide in favour of an applicant. Landlords should be aware of any applications made and be prepared to oppose them where necessary in order to protect the covenant.

The decision in this case is fair; the modification of the covenant will last only for as long as the applicant is in occupation of the property, and the integrity of the covenant remains by the Tribunal’s refusal to discharge it entirely. It is reassuring for landlords that, particularly where covenants were entered into recently, the Tribunal will look to protect them where it is reasonable to do so.

As the restrictions had been agreed to recently, and with no significant changes to the character of the area, the Upper Tribunal decided to modify rather than discharge the restrictive covenant.

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