The Court of Appeal recognises the "practical benefit" and "substantial advantage" of restrictive covenants in a long lease.
In its recent decision in Great Jackson Street Estates Limited v The Council of the City of Manchester [2025] EWCA Civ 652, the Court of Appeal dismissed a tenant's appeal against the Upper Tribunal's refusal to discharge or modify restrictive covenants contained in a long lease.
The tenant, Great Jackson Street Estates Limited, holds a long lease from the Council in respect of two redundant warehouses, with approximately 60 years remaining. It had obtained planning permission from the Council to demolish the warehouses and build two residential tower blocks containing over 1000 flats. The lease prohibits alterations or redevelopment without the Council's, in its capacity as landlord, consent.
In its capacity as local planning authority the Council consented to the development, but opposed it in its capacity as landlord.
The tenant applied to the Upper Tribunal under section 84 of the Law of Property Act 1925 for the covenants to be modified. The tenant argued that the covenants were obsolete (ground (a)), prevented reasonable use of the land and provided no practical benefit (ground (aa)), and that the removal would not injure the Council (ground (c)).
The Upper Tribunal, in its 2023 decision refused the application on all grounds, stating that although the area had undergone substantial change since the lease was entered into, the covenants still protected legitimate strategic and practical benefits to the Council, including securing orderly and appropriate development. The Upper Tribunal's refusal highlighted the importance of allowing the Council to retain its private rights as well as its public role as local planning authority.
The tenant appealed. The Court of Appeal unanimously dismissed the appeal, agreeing with the Upper Tribunal's assessment, holding that the "covenants afford the council practical benefits of substantial advantage".
The Council as landlord had an interest in ensuring viable and timely development, particularly in a context where the lease in question had decades remaining, and it was appropriate for this to be protected by the covenants in the lease.
Furthermore, the Court agreed with the Upper Tribunal's refusal to exercise its discretion, noting that courts and tribunals should be slow to interfere with decisions of local authority landlords with responsibility for managing significant and complex regeneration schemes. The fact that the Council wore two hats was legitimate – perhaps even to be expected – and not improper.
The decision sends a clear message that leasehold restrictive covenants will not be easily overridden where they have a practical benefit, even where tenants have secured planning permission for redevelopment.
