Stephen Jourdan KC and Michael Ranson appear in s.84 application
On 15 March 2024 the Upper Tribunal published its decision in Patel v Spender [2024] UKUT 62 (LC). Stephen Jourdan KC and Michael Ranson appeared for the Applicants, instructed by Roger Hardwick and Emma Bush of Brethertons.
The case concerned an application to modify covenants preventing external alterations to 11 houses on a Docklands estate. The estate comprised nearly 500 residential units near Canary Wharf. The estate was subject to a building scheme. This included a covenant which prohibited additions or alterations which substantially altered the external appearance of the properties on the estate.
The applicants were the freehold owners of 11 houses at one end of the estate. They sought an order modifying the covenant to enable them to carry out ground floor extensions and loft conversions. They relied on the limited benefit ground in s.84. The application was opposed by the freeholders and by 104 owners of flats and houses on the estate.
There were numerous objections, of which two were held by the Tribunal to be valid:
The freeholders said that they were obliged to the leaseholders of the flats to enforce the building scheme covenants. If the covenants were modified they could not enforce them and so would be in breach of covenant. They relied on Duval v 11-13 Randolph Crescent Ltd.
Rejected – if the Tribunal ordered the modification of the alterations covenant, the freeholders will not themselves have put it out of their power to enforce the original covenant, and Duval has no relevance.
The freeholders said that if the Application Properties were altered they would not be able to provide various estate services, carry out certain decoration obligations or exercise rights to lay cables and other conduits.
Rejected – modification of the covenant and alteration of the Application Properties would not affect various access rights and covenants enjoyed by the freeholders.
The freeholders said that if the Application Properties were extended they would be more likely to be used as HMOs and that would be a breach of a covenant to use the Application Properties as private dwellinghouses.
Rejected – the argument was incorrect as a matter of law following C & G Homes Ltd v Secretary of State for Health [1991] Ch 365 and in any event the alterations covenant which the Applicants sought to modify did not prevent HMO use.
The resident objectors said that if the Application Properties were extended, occupied by more people and potentially used as HMOs there would be increased levels of nuisance on the estate.
Rejected – some of the Application Properties were already HMOs and, in any event, the covenant which the Applicants sought to modify did not give the objectors the practical benefit of preventing intensification of use of the houses.
The freeholders and the resident objectors said that if the Application Properties were extended this would put a strain on various estate services. This in turn, the resident objectors said, would lead to increased service charges which would fall disproportionately on them and not the Applicants.
Rejected – as set out above, the covenant did not prevent intensification of use. The large size of the estate and comparatively small size of various facilities on it – such as a swimming pool – meant that increased occupation of the Application Properties would have no discernible effect on their use. The service charge mechanism on the estate was operated on a per-property basis and, even though some of the resident objectors considered that unfair, preventing greater occupation of the Application Properties was not a practical benefit secured by the relevant covenant.
The resident objectors said that certain of the works to the Application Properties – in particular the creation of Juliette balconies – would cause their flats to be overlooked, or overlooked to a greater extent than they currently were.
Rejected – the alterations covenant did prevent additional overlooking but the nature of the estate was such that there was already a degree of overlooking in respect of the Objectors’ flats. In those circumstances there was no practical benefit or only a minimal practical benefit secured by the covenant.
Certain resident objectors whose flats overlooked the Application Properties said that if the Application Properties were altered their view would be changed in a way that was out of keeping with the rest of the estate. This would particularly be so if only some of the 11 Application Properties had loft extensions carried out.
Upheld – notwithstanding the Applicants’ offer to covenant to do all the work to all the Application Properties at the same time the Upper Tribunal held that the ability under the alterations covenant to prevent piecemeal changes – in the words of the decision to take a ‘well thought-out development with a very unified appearance’ and in its place have something ‘incoherent and gappy’ – was a benefit of substantial advantage. As a result the Tribunal did not have jurisdiction to modify the covenant.
The resident objectors said that allowing this modification would represent the thin end of the wedge, or have a ratchet effect, on the building scheme and increase the prospect of future applications under s.84 being successful. The Objectors noted that to date the building scheme had worked well.
Upheld in part – following Martin v Lipton [2020] UKUT 8 (LC) the prevention of the expense and stress of resisting future s.84 applications is not a practical benefit. Nevertheless, the Tribunal found that there was scope for future s.84 applications on the estate and, given that this case concerned a large number of properties, those future applicants may be able to point to the success of this application as meaning that a further small change in the estate would make no difference. While one successful future application along those lines may not make much difference, there was a practical benefit of substantial advantage and perhaps substantial value in preventing further cumulative erosion of the building scheme. It follows that the Tribunal did not have jurisdiction to modify the covenant.
The resident objectors said that the construction works to the Application Properties would cause a significant amount of disturbance.
Rejected – the alteration covenant was not designed to prevent disturbance from construction works and would not, for instance, prevent works which did not affect the external appearance of the Application Properties. Following Shephard v Turner [2006] EWCA Civ 8 the ability to prevent construction disturbance, absent a covenant specifically designed to do so, was not a practical benefit of significant value or advantage.
A copy of the decision can be downloaded here.
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