Supreme Court declines to hear appeal from developer over covenants in lease benefitting city council

A three-justice panel comprising Lord Hodge, Lord Leggatt and Lady Simler decided that Great Jackson St Estates’ application did not raise an arguable point of law.

Great Jackson St Estates, which has been seeking discharge of the covenants to allow a 1,000-home development to go ahead, had identified there were two issues at stake:

1. Do restrictive covenants in a lease which prevent land being developed without the landlord’s consent provide the landlord with “practical benefits of substantial advantage” for the purposes of sections 84(1)(aa) and 84(1A) of the Law of Property Act 1925 (“LPA”) so that the Upper Tribunal (Lands Chamber) has no jurisdiction to consider their modification?
2. Did the Upper Tribunal (Lands Chamber) make an error of law in stating that, even if it had jurisdiction to modify the restrictions, it would refuse to do so?

Great Jackson St Estates is the holder of a lease in Manchester containing two warehouses. The lease contains various restrictions and covenants on its use of the site.

The city council is the owner of the site and the relevant planning authority for the area.

The two warehouses are located in an area which is rapidly being developed with housing and Great Jackson St Estates wishes to develop two 56-storey tower blocks of flats on the site.

It has obtained planning permission from the council as planning authority to do so.

However, the underlying lease contains certain covenants (most notably a restriction on the potential uses of the site) which prevent Great Jackson St Estates from carrying out the development without the council’s consent.

Whilst both parties want the redevelopment of the site to occur, the council is said to be unwilling to provide its consent under the existing lease.

Rather, it proposed that a new long lease of 250 years should be entered into. This would include development milestones and forfeiture provisions, in part to address the council’s concerns regarding the viability of the development.

Negotiations concerning this new long lease failed.

Great Jackson St Estates applied to the Upper Tribunal (Lands Chamber) seeking modification of the existing lease to permit the proposed development.

Section 84 of the LPA gives the Upper Tribunal (Lands Chamber) a discretionary power to modify or discharge covenants restricting the use of land if the facts fall within one of five grounds.

The Upper Tribunal (Lands Chamber) dismissed the application.

Great Jackson St Estates appealed the Upper Tribunal’s decision on the ground that the restrictive covenants in question do not provide the city council with “practical benefits of substantial advantage” for the purposes of sections 84(1)(aa) and 84(1A) of the LPA in circumstances where they provide the council with the ability to control the development’s parameters.

The Court of Appeal dismissed the developer’s appeal.  Lady Justice Asplin found that the Upper Tribunal was entitled to decide that the covenants afford the council practical benefits of substantial advantage to it and that the tribunal's decision revealed no error of law.

The Supreme Court panel refused Great Jackson St Estates’ application for permission to appeal on 30 October.