Section 84 of the Law of Property Act 1925 deals with the possibility of the discharge or modification of restrictive covenants. It can apply either to the covenants imposed by one piece of freehold land on another piece of freehold land or restrictive covenants in a long lease.
In some cases, valuation issues are addressed. The relevant extract from the section is as follows:
84 Power to discharge or modify restrictive covenants affecting land.
(1) The Upper Tribunal shall … have power from time to time … wholly or partially to discharge or modify any … restriction … on being satisfied —
(a) that by reason of changes in the character of the property or the neighbourhood or other circumstances of the case which the Upper Tribunal may deem material, the restriction ought to be deemed obsolete, or
(aa) that in a case falling within subsection (1A) below the continued existence thereof would impede some reasonable user of the land for public or private purposes or, as the case may be, would unless modified so impede such user; or
(c) that the proposed discharge or modification will not injure the persons entitled to the benefit of the restriction:
and an order discharging or modifying a restriction under this subsection may direct the applicant to pay to any person entitled to the benefit of the restriction such sum by way of consideration as the Tribunal may think it just to award …
- a sum to make up for any loss or disadvantage suffered by that person in consequence of the discharge or modification; …
(1A) Subsection (1)(aa) above authorises the discharge or modification of a restriction by reference to its impeding some reasonable user of land in any case in which the Upper Tribunal is satisfied that the restriction, in impeding that user, either —
(a) does not secure to persons entitled to the benefit of it any practical benefits of substantial value or advantage to them; or
(b) is contrary to the public interest; and that money will be an adequate compensation for the loss or disadvantage (if any) which any such person will suffer from the discharge or modification]
(1B) In determining whether a case is one falling within subsection (1A) above, and in determining whether (in any such case or otherwise) a restriction ought to be discharged or modified, the Upper Tribunal shall take into account the development plan and any declared or ascertainable pattern for the grant or refusal of planning permissions in the relevant areas …
Valuation is required where the Upper Tribunal (Lands Chamber) decides that a covenant should be discharged or modified, and that money will be sufficient compensation for the owner of the land which benefits from those covenants. The present state of the law is that that sum of money is most likely to be determined by the Tribunal as the diminution in the value of the land which is losing the benefit of the covenants. The Court of Appeal has expressed some mild dismay at this idea. There are some situations in which it would seem that this has the effect of taking the benefit of the covenant – a property right, after all – from the person who owns it, and giving it to someone else at the very moment at which its value is crystallised. However, as we understand it, that is the present state of the law.
Diminution in value is a concept very familiar to us from our work in dilapidations and, to a lesser extent, our work in leasehold enfranchisement. It represents a third major subject for what we think of as a forensic or analytical valuation.