Great Jackson St Estates Limited v The Council of The City of Manchester

The Court of Appeal dismissed the appellant's challenge to the Upper Tribunal's decision refusing to modify or discharge leasehold restrictive covenants under section 84(1)(aa) and (1A) of the Law of Property Act 1925. The court upheld the Upper Tribunal's central finding that the covenants secured practical benefits of substantial value and advantage to the landlord (which was also the planning authority) because they allowed the landlord to withhold consent to redevelopment until it was satisfied the development could be delivered in an orderly and timely fashion.

The court confirmed that practical benefits must flow from continued compliance with the restriction and need not be limited to purely physical amenities; they may include estate-management benefits where the restriction materially enables the landowner to protect wider development objectives. The Court rejected the submission that the landlord's negotiating position or insistence on a new lease necessarily precluded a finding of practical benefit. The court also held that it was unnecessary and inappropriate to exercise powers under section 84(1C) to impose the appellant's proposed clause in the appellate proceedings.

Background and procedural posture: The tenant, Great Jackson St Estates Limited, applied to the Upper Tribunal (Lands Chamber) under section 84 of the Law of Property Act 1925 to modify or discharge eleven covenants in a 99-year lease (with c.60 years unexpired) so as to permit redevelopment of two warehouses into high-density residential towers in accordance with the development plan. The freehold landlord, the Council of the City of Manchester, which was also the planning authority, refused consent under the existing lease and sought instead to secure a new 250-year building lease containing detailed development milestones, forfeiture and step-in rights. The Upper Tribunal refused the application on grounds including that the covenants secured practical benefits of substantial value to the Council. The tenant appealed to the Court of Appeal.

Nature of the application:

• (i) The relief sought: modification or discharge of restrictive covenants in the lease to allow the proposed redevelopment to proceed under the existing lease terms;
• (ii) Issues framed: whether the covenants impede a reasonable user; whether they secure practical benefits of substantial value or advantage for the purposes of s.84(1)(aa) and (1A); whether obsolescence or lack of injury (s.84(1)(a) and (c)) were made out; whether money would be adequate compensation; and whether the Upper Tribunal should, alternatively, impose conditions under s.84(1C).

Court's reasoning and conclusions:

• The Court treated the Upper Tribunal's evaluation as discretionary and evaluative and found no error of law in its approach. The Upper Tribunal had accepted that the proposed residential use was a reasonable use consistent with the development plan but concluded that, in impeding that use, the covenants secured a practical benefit to the Council because they enabled the Council to withhold consent until satisfied that the development could be delivered and completed in a timely and orderly manner.
• The Court confirmed established principles: practical benefits must flow from compliance with the covenant (not merely from its discharge) and need be practical rather than merely pecuniary. However, practical benefits are to be given a broad meaning and may include estate-management and strategic planning advantages available to a landlord who is also a public authority.
• The Court rejected the appellant's contention that the Council's negotiating stance (seeking a new lease) negated any practical benefit conferred by the existing covenants. The Upper Tribunal had found that the covenants were being used for their intended purpose and that the power to withhold consent until delivery risks were mitigated was more than a peripheral benefit. The Court declined to exercise s.84(1C) powers itself or to remand to impose the appellant's proposed Clause X because the proposed clause did not address the Council's concerns about viability, timing and completion.

Subsidiary findings: The Upper Tribunal had found faults in the applicant's evidence on deliverability and noted the parties' protracted, unsuccessful negotiations over a new lease; it did not hear detailed evidence about those negotiations and did not decide whether any party had acted unreasonably in negotiations. The Court considered these factual findings and the evaluative judgment to be unimpeachable on appeal.

The appeal is dismissed. The Court concluded that the Upper Tribunal was entitled to find that the restrictive covenants secured practical benefits of substantial value to the Council because they enabled it, as landlord (and planning authority), to withhold consent until it was satisfied the proposed development could be delivered and completed in an orderly and timely way. The Court found no error in the Tribunal’s evaluative approach, and it was unnecessary and inappropriate to impose conditions under s.84(1C) in the appellate proceedings.

On appeal from the Upper Tribunal (Lands Chamber), Martin Rodger KC and Peter D McCrea [2023] UKUT 189 (LC).