Great Jackson St Estates Ltd v Council of the City of Manchester

Factual and Procedural Background

The Appellant, Company A, is the tenant of two redundant warehouses located in a rapidly developing area of The City ("the Site"). The Respondent, Company B, is the freehold owner of the Site and the relevant planning authority. The warehouses were constructed pursuant to a lease originally granted for 99 years, with approximately 60 years remaining at the time of the hearing. The Site is designated in the local development plan for high-quality residential use, and Company A proposes to demolish the warehouses and replace them with two tower blocks containing over 1,000 flats, consistent with planning consent granted subject to a section 106 agreement.

Company A faces obstacles in redeveloping the Site due to restrictive covenants in the existing lease requiring Company B’s consent for development, which consent may be withheld. Negotiations for a new long lease incorporating stringent development conditions have failed. Company A sought Company B's consent under the existing lease but was refused. Subsequently, Company A applied to the Upper Tribunal under section 84 of the Law of Property Act 1925 for modification or discharge of eleven restrictive covenants to enable redevelopment without a new lease.

The Upper Tribunal considered the statutory grounds for modification, the nature of the restrictive covenants, and the practical benefits these covenants confer upon Company B as landlord and planning authority. The Tribunal ultimately refused the application, finding that the covenants secured practical benefits of substantial value to Company B, particularly in controlling the orderly and timely development of the Site.

Legal Issues Presented

1. Whether the restrictive covenants in the lease provide Company B, as lessor and planning authority, with practical benefits of substantial value or advantage under section 84(1)(aa) and section 84(1A) of the Law of Property Act 1925, by enabling it to prevent uncontrolled development of the Site.
2. Whether the Upper Tribunal erred in law by concluding that the covenants secured practical benefits to Company B.
3. Whether the Upper Tribunal was correct in its discretionary decision not to modify the covenants even if it had jurisdiction to do so.
4. Whether Company A satisfied the threshold requirement under section 84(1)(aa) that the covenants impede a reasonable user of the land.
5. Whether monetary compensation would be adequate for any loss or disadvantage to Company B if the covenants were modified or discharged.

Arguments of the Parties

Appellant's Arguments

• "Practical benefits" under section 84(1)(aa) must be benefits enjoyed as a result of the covenant being complied with, i.e., the proposed reasonable user being prevented.
• The ability to prevent reasonable user unless the applicant agrees to a new lease is not a "practical benefit" but a financial bargaining position.
• The Council's refusal to consent was essentially a tactic to force entry into a new lease and thus does not constitute a practical benefit under the statute.
• If the Council wished to impose conditions on the development, it should have accepted the Tribunal’s jurisdiction to impose such conditions under section 84(1C) rather than relying on the covenants as a control mechanism.
• Company A contended that the Tribunal erred in law by upholding the practical benefit and discretionary refusals.

Respondent's Arguments

• The restrictive covenants confer a practical benefit by enabling Company B to mitigate risks relating to the viability and timely completion of the development, which is part of a wider city development strategy.
• The covenants are more than a negotiating tool; they provide significant control over the use and development of the Site consistent with the local development plan.
• The Upper Tribunal’s evaluative judgment on practical benefits and discretion contained no error of law and should not be disturbed.
• It was too late for Company A to rely on section 84(1C) to impose conditions, as this was not pursued before the Tribunal in detail.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Caledonian Associated Properties Ltd v East Kilbride DC (1985) 49 P&CR 410	Distinction between land use reasonableness and practical considerations such as deliverability in assessing section 84(1)(aa).	Distinguished on facts; practical deliverability considered relevant only at discretion stage, not for jurisdictional ground (aa).
Stockport Metropolitan Borough Council v Alwiyah Developments (1986) 52 P&CR 278	"Practical benefits" must be practical rather than pecuniary; bargaining power is not a practical benefit under section 84(1)(aa).	Supported the proposition that financial bargaining positions do not constitute practical benefits; applied in rejecting appellant’s argument.
Gilbert v Spoor [1983] Ch 27	The phrase "any practical benefits" is wide and should be interpreted broadly in assessing section 84(1A)(a).	Confirmed the broad scope of practical benefits; supported the Tribunal’s wide evaluative approach.
Edgware Road (2015) Ltd v Church Commissioners for England [2020] L&TR 13	A covenant securing control over land use can constitute a practical benefit of substantial advantage.	Used as precedent to uphold that control over land use restrictions can amount to practical benefit, analogous to the present case.
Alexander Devine Children's Cancer Trust v Housing Solutions Ltd [2020] UKSC 45	Section 84 confers discretionary power to modify or discharge covenants once jurisdictional grounds are satisfied.	Confirmed the discretionary nature of the Tribunal’s powers; the court upheld the Tribunal’s discretion in this case.
Shephard v Turner [2006] 2 P&CR 28	Explanation of legislative amendments to section 84(1)(aa) and the broad scope of practical benefits.	Provided legislative context and interpretative guidance for the Tribunal’s analysis.
Singh v Dass [2019] EWCA Civ 360	Procedural considerations regarding raising new points at a late stage and remitting matters to the Tribunal.	Referenced in rejecting late reliance on section 84(1C) conditions by the appellant.

Court's Reasoning and Analysis

The court analysed the statutory framework under section 84 of the Law of Property Act 1925, focusing on whether the restrictive covenants impede a reasonable user of the land and whether they secure practical benefits of substantial value or advantage to Company B. The court accepted the Upper Tribunal’s evaluative approach, which considered the legitimate strategic interest of Company B in ensuring orderly development and completion of the Site as part of the wider city plan.

The court distinguished between mere control by enforcement and control that secures a substantial practical benefit. It found that the covenants do more than provide bargaining power or financial advantage; they afford Company B a meaningful ability to influence the timing and manner of development, mitigating risks that the Site might remain undeveloped or incomplete. This practical benefit arises from compliance with the covenants rather than their discharge.

The court rejected the appellant’s argument that the ability to withhold consent unless a new lease is granted cannot be a practical benefit. It clarified that the Tribunal did not find the covenants were being used to force a new lease but rather to ensure that development proceeds with appropriate safeguards. The court also rejected the appellant’s late reliance on section 84(1C) powers to impose conditions, noting that these were not meaningfully pursued before the Tribunal and would not address Company B’s concerns as currently formulated.

The court endorsed the Upper Tribunal’s discretionary decision not to modify the covenants, emphasizing the importance of respecting the local authority’s strategic development objectives and the ongoing commercial negotiations. The court found no error of law or procedural unfairness in the Tribunal’s reasoning or conclusions.

Holding and Implications

The court DISMISSED THE APPEAL.

The decision confirms that restrictive covenants which enable a landlord and planning authority to control the timing and manner of development can constitute practical benefits of substantial value under section 84(1)(aa) and (1A) of the Law of Property Act 1925. The ruling upholds the discretion of the Upper Tribunal to refuse modification of such covenants where they serve legitimate strategic and public interests in land development. The judgment clarifies that practical benefits must flow from compliance with the covenant and not merely from financial bargaining positions. The court’s analysis emphasizes the importance of allowing local authorities to use leasehold covenants as tools to ensure orderly urban development consistent with planning policies. No new precedent was created beyond these established principles; the ruling primarily affirms the correctness of the Tribunal’s evaluative judgment and discretion in this case.