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Covenants over property are a potential nightmare for developers but fortunately there are circumstances in which a covenant can be removed.
If the beneficiaries of the covenant for which removal is sought cannot be persuaded by negotiation to give up their rights, an application under Section 84 of the Law of Property Act 1925 may be made to the Lands Chamber of the Upper Tribunal (UT) for the covenant to be removed or modified.
This can be granted on the following grounds (in simplified terms):
- Where the covenant is obsolete or where a reasonable use of the land concerned would be impeded unless the covenant is removed or modified;
- Where those adults that benefit from the covenant agree to its removal or modification;
- Where the removal or modification of the covenant will not cause a detriment to those who benefit from it;
- Where the UT is satisfied that the covenant does not provide any practical benefits of substantial value or advantage to those entitled to benefit from it; or
- Where it is contrary to the public interest for the covenant to remain and money will provide adequate compensation for those persons who will suffer from its discharge.
In practice, the UT will make its decision on an application to vary a covenant based on the specific facts of the case – there is relatively little in case law by way of guidelines. It is therefore important for those seeking the removal or modification of a covenant that the best possible case is made at the outset in order to persuade the UT that the arguments for the variation or removal are compelling.