O'Callaghan & Anor v Middleton & Ors (Restrictive Covenants - Modification)

Factual and Procedural Background

This opinion concerns an application under section 84(1) of the Law of Property Act 1925 for the discharge or modification of a restrictive covenant contained in a freehold Transfer dated 20 May 2016. The applicants, hereafter referred to as the Plaintiff, acquired a newly completed five-bedroom house with a detached garage on a residential estate developed by Company A. The covenant restricts alterations to the dwelling without the consent of Company A, the original developer and covenantee, who refused consent to the Plaintiff's proposed enlargement of the garage and creation of additional accommodation above it.

The Plaintiff applied to the Tribunal to modify or discharge the covenant to permit the enlargement. The covenant had been imposed only three years before the application. The application was opposed by Company A and three neighbouring property owners on the estate, collectively referred to as the Objectors.

At the hearing, the Plaintiff was represented by Attorney Barrow and the Objectors by Attorney Duckworth. Oral evidence was heard from the Plaintiff, two neighbouring owners, and the Legal Director of Company A. The Tribunal examined estate plans and photographs but did not conduct a site inspection.

Legal Issues Presented

1. Whether the proposed use of the land for the extended garage with additional accommodation is a reasonable use.
2. Whether the restriction secures any practical benefit of substantial value or advantage to the Objectors by impeding the proposed use.
3. Whether monetary compensation would adequately compensate the Objectors for any loss or disadvantage resulting from modification or discharge of the restriction.
4. Whether the proposed modification would cause no injury to the Objectors.
5. Whether the Tribunal should exercise its discretion to discharge or modify the restriction if the statutory grounds are met.

Arguments of the Parties

Plaintiff's Arguments

• The Plaintiff sought to enlarge the garage to accommodate more vehicles and create additional accommodation, described as a "granny flat" or gym space, which was permitted by planning permission.
• The Plaintiff argued that refusal of consent by Company A was unreasonable and contrasted it with consents granted to neighbouring properties for extensions.
• They contended that the enlargement would improve parking arrangements and reduce the need to park vehicles on estate roads, which had caused neighbour disputes.
• The Plaintiff applied for modification or discharge of the covenant under grounds (aa) and (c) of section 84(1), aiming primarily to permit construction of the approved garage extension.

Objectors' Arguments

• The Objectors maintained that the covenant impeded a reasonable use of the land by preventing the proposed enlargement.
• They contended that the restriction secured practical benefits including preservation of the estate's character, population density, and prevention of increased noise, traffic, and parking issues.
• Company A emphasized the importance of the covenant in protecting its business interests during ongoing development of a second phase of the estate with 100 new homes.
• The Objectors argued that the proposed upper floor accommodation could exacerbate parking and neighbour disputes, and that the covenant's enforcement would be compromised if modification were granted.
• They submitted that even if the injury caused by modification was small, it was not non-existent, and thus ground (c) was not satisfied.

Table of Precedents Cited

Court's Reasoning and Analysis

The Tribunal analysed the application under grounds (aa) and (c) of section 84(1) of the Law of Property Act 1925. It first considered whether the proposed use was reasonable. Although parking and garage extension are generally reasonable, the addition of a first-floor "granny flat" or gym space conflicted with a separate covenant restricting the garage's use solely for parking and domestic storage. This created a significant risk of breach and future disputes, especially given the Plaintiff's demonstrated disregard for parking obligations.

The Tribunal then evaluated whether the restriction secured practical benefits to the Objectors. It found that the covenant preserved the estate’s character and uniformity, but the limited duration of the restriction and the narrow scope of the modification reduced the weight of these benefits. The risk of increased parking or noise was considered minimal while the Plaintiff remained owner.

On financial compensation, the Tribunal held that any loss to Objectors could be adequately compensated monetarily given the limited nature and duration of the covenant.

Regarding ground (c), the Tribunal found that the modification would cause some injury, notably by complicating enforcement of the garage use covenant and weakening the overall scheme of covenants.

Finally, the Tribunal exercised its discretion. It emphasized the unusual nature of the application by original covenantors so soon after covenant imposition without any material change of circumstances. It highlighted the importance of upholding the parties' original bargain and the ongoing protection of the estate's appearance during development. The risk of future breaches and neighbour disputes weighed heavily against modification.

Holding and Implications

The Tribunal REFUSED the Plaintiff’s application to modify or discharge the restrictive covenant.

The decision means that the Plaintiff must comply with the covenant prohibiting alterations without Company A's consent. The proposed garage enlargement, particularly the addition of an upper floor for accommodation, is not permitted under the covenant and the application to modify it was denied. The ruling preserves the integrity of the covenant scheme and the original parties’ intentions during the initial development phase. No new legal precedent was established beyond the application of existing principles regarding original covenantor applications and the exercise of discretion under section 84.