MDM Civil Engineering Limited v Scott Morgan

An application to modify a restrictive covenant under the Law of Property Act 1925 involves two stages: establishing a statutory ground, then deciding whether and how to exercise the Tribunal’s discretion. Under ground (aa), practical benefit is assessed for the person entitled to the covenant’s benefit. Planning permission is persuasive, but not conclusive, evidence that a proposed use is reasonable. A recent covenant and the applicant’s connection to its original covenantor weigh against modification but do not bar it. The Tribunal must balance those circumstances against the benefits of the development and may require compensation reflecting the covenant’s effect on the original price.

MDM Civil Engineering Limited owned land subject to a 2019 transfer covenant restricting its use to two private dwellinghouses. With planning permission for a third dwelling, it applied to modify the covenant under grounds (a), (aa) and (c) of section 84(1) of the Law of Property Act 1925.

Scott Morgan, owner of one of the existing houses, objected. His title carried the burden of the covenant, not its benefit. Rysa Lodge Residential Properties Limited, the transferor and person entitled to the benefit, did not formally participate, but sent a letter opposing modification and seeking compensation. The central questions were whether a statutory ground was established, whether the Tribunal should exercise its discretion to modify the covenant, and what compensation should be paid.

1. Disposition. Grounds (aa) and (c) were established; ground (a) was not. The Tribunal ordered modification to permit the third dwelling specified by the planning permission, subject to MDM accepting the modification and paying £37,500 to Rysa within three months.
2. Procedure and the statutory stages. The Tribunal applied the jurisdictional and discretionary stages described in Alexander Devine Children's Cancer Trust v Housing Solutions Ltd [2020] UKSC 45. Admission of Mr Morgan as a party, where MDM had not contested his entitlement to participate, was procedural and did not establish that he had the covenant’s benefit. His evidence about the effect on his property was irrelevant to whether the covenant secured a practical benefit for its actual beneficiary. He remained entitled to make submissions, and relevant facts could inform the Tribunal’s consideration. The absence of active participation by a beneficiary did not itself justify modification or relieve the applicant of proving a ground and persuading the Tribunal to exercise its discretion.
3. Ground (a). Development elsewhere on the estate had not materially changed the character of the application land or the essential character of the neighbourhood. The covenant, entered into less than seven years before the application, was not obsolete.
4. Ground (aa). The proposed dwelling was a reasonable use impeded by the covenant. Planning permission was not a guarantee of success, but was a persuasive indicator, as illustrated by Re The University of Chester’s Application [2016] UKUT 0457 (LC). The relevant benefit was that of Rysa, not Mr Morgan. On the limited evidence, there was no indication that Rysa’s remaining properties would be adversely affected, and the covenant secured no practical benefit of substantial value to Rysa.
5. Ground (c) and discretion. The Tribunal accepted that losing the opportunity to demand a price for release was not, by itself, an injury for ground (c), applying Bennett’s and Tamarlin Ltd’s Application [1987] 54 P&CR 378. At the discretionary stage, the covenant’s recent origin and the connection between the original covenantor and the applicant weighed against modification. The Tribunal treated those matters as factors, not an automatic bar, applying the approach in Re Barter’s Application [2017] UKUT 451 and Re O’Callaghan’s Application [2020] UKUT 077 (LC). It explained the earlier language in Cresswell v Proctor [1968] 1 WLR 906 in light of the more temperate approach described in Jones v Rhys-Jones (1974) 30 P&CR 451. The development’s benefit, including completing the site, outweighed the factors against modification. The Tribunal also considered its earlier decision in Butler v Flagship Housing Group [2026] UKUT 0182 (LC).
6. Compensation and final order. The evidence supported the conclusion that the covenant had reduced the 2019 purchase price. The Tribunal ordered £37,500 to make up for that reduction. The modification would take effect on MDM’s acceptance and proof of payment within three months; if Rysa would not accept payment, MDM could apply to have the condition reconsidered. Costs were reserved for submissions.

not stated in the judgment.