At Ives & Co Solicitors, we specialise in commercial conveyancing, advising developers, investors and business owners on complex property matters. One issue that regularly arises in commercial transactions is the impact of restrictive covenants — particularly when they limit development potential or future use of land.
A recent update in the Law Society Gazette has highlighted important points around the modification of restrictive covenants and how the Upper Tribunal approaches these applications.
Here’s what commercial property owners need to know.
Modification of Restrictive Covenants: What It Means for Commercial Property
Restrictive covenants can significantly affect the value and usability of commercial land. Where a covenant prevents intended development or use, an application may be made to modify or discharge it under section 84 of the Law of Property Act 1925.
However, success is never guaranteed.
1. What Is a Restrictive Covenant?
A restrictive covenant is a legal obligation registered against land that limits how it can be used.
Common examples include:
Restrictions on building height
Limitations on commercial use
Prohibitions on certain types of business activity
Requirements to preserve character or layout
These obligations bind future owners, not just the original parties.
2. When Can a Covenant Be Modified?
An application to modify or discharge a covenant is made to the Upper Tribunal (Lands Chamber). The Tribunal may consider modification where:
The covenant is obsolete
It impedes reasonable use of the land
It provides no practical benefit to beneficiaries
The proposed modification will not cause substantial injury
Each case turns on its specific facts.
3. Reasonable Use Is a Key Test
One of the most relied-upon grounds is that the covenant:
Impedes a reasonable use of the land
And does not secure practical benefits of substantial value or advantage
For commercial developers, this often arises where:
Planning permission has been granted
Market conditions have changed
The surrounding area has evolved significantly
However, planning permission alone does not automatically justify modification.
4. Compensation May Be Payable
Even where a covenant is modified, the Tribunal can award compensation to the benefiting party.
Compensation may reflect:
Loss of amenity
Diminution in value
Loss of bargaining position
This means modification is not necessarily a cost-free exercise.
5. Strategic Considerations for Commercial Transactions
Before acquiring commercial land, buyers should:
Carefully review title documents
Identify restrictive covenants early
Assess whether development plans are affected
Consider negotiation with beneficiaries before Tribunal proceedings
Early legal due diligence is critical in avoiding delay and unexpected costs.
6. Why This Matters in Today’s Market
With increasing redevelopment, mixed-use schemes and changing commercial demands, restrictive covenants are frequently encountered.
Developers and investors must balance:
The commercial viability of a scheme
The legal risk of enforcement
The cost and time involved in modification applications
A proactive strategy can significantly reduce transactional risk.
Conclusion
Restrictive covenants can limit commercial property use and development long after they were originally imposed. While modification or discharge is possible through the Upper Tribunal, each case depends on careful legal analysis, evidence and commercial strategy. Understanding the scope of any covenant and its practical impact is essential before progressing with acquisition or development plans.
