Summary
The case of Great Jackson Street Estates Limited v The Council of the City of Manchester was particularly complex. The developer attempted to alter or get relief from leasehold covenants that blocked a more than £300 million development project. What was interesting about this case was that the local council was both the planning authority and the landlord.
Great Jackson Street Estates Ltd (developer) is the tenant of two redundant warehouses in Manchester. At the time of the hearing there was still 61 years left remaining on the term. The developer obtained planning permission to demolish the warehouses and replace them with tower blocks to hold flats, subject to a s.106 agreement.
S.84 Application
The council then withheld consent, as landlord, due to numerous restrictive covenants. Instead, they offered Great Jackson a new 250-year building lease attached with strenuous conditions.
The two parties were unable to agree on terms, so the developers applied to the Upper Tribunal (UT) under S.84 Law of Property Act 1925 to discharge/modify the covenants. Tenants with leases exceeding 40 years can, after 25 years, apply to do this. The Tenant’s application was unsuccessful, with the UT holding that the restrictions continued to provide a “practical benefit of substantial advantage”.
Appeal
Great Jackson appealed the decision on the ground that the UT was wrong to find that the lease covenants were beneficial to the Council. This appeal was dismissed by the Court of Appeal stating that they were satisfied the council was trying to ensure the site was developed in the manner proposed by the Tenant. They wanted assurance that it would be done in a timely fashion and not left incomplete. The covenants enabled the local authority to further its overall strategy for the development of the area, and that was a benefit which flowed from compliance with the covenants in the lease.
Key takeaways
It is vital to remember that lease covenants can have more weight than planning permission. It is also worth remembering that lease review is critical, before heavily investing in developments you need to assess whether the terms support long-term objectives. Challenging restrictive covenants can be difficult especially when they are in the interest of the public.
