Anyone For A Coffee? Restrictive Covenants In Property Law

This case highlights the complexity of modifying property covenants and reinforces the need for careful consideration of both the legal and practical implications when seeking to change property use.

The case background

Mr Farrell, the owner of a ground-floor property in Fulham, London, sought to change the use of his building from an office to a coffee shop. The property was subject to a restrictive covenant imposed in 1983, which limited its use to professional offices and prohibited retail or commercial activities such as restaurants or snack bars.

Under section 84 of the Law of Property Act 1925 (LPA 1925), the Upper Tribunal (Lands Chamber) may wholly or partially discharge or modify restrictive covenants on several grounds, including where:

• The covenant has become obsolete due to changes in the character of the property or the neighbourhood, or for other material circumstances (section 84(1)(a))
• The continued existence of the covenant would impede a reasonable use of the land without securing practical benefits of substantial value or advantage to those entitled to the benefit, and money would be adequate compensation for any loss or disadvantage (section 84(1)(aa)).

Mr Farrell’s application to the Upper Tribunal sought to modify the covenant on these grounds, arguing that:

• The concept of a modern coffee shop focused on quality drinks and comfortable spaces was not envisaged when the covenant was created
• The covenant no longer served a practical benefit to the residents of Bishop’s Mansions, given the area’s busy, mixed-use nature and the fact that other coffee shops already operated in the vicinity.

The legal issues at play

When considering applications under section 84 of the LPA 1925, the Tribunal must balance the ongoing utility of the restriction against the evolving needs of property owners and the surrounding environment. In this case, the applicant sought modification based on two main grounds:

1. Obsolescence of the covenant (Section 84(1)(a) LPA 1925): the applicant argued that the nature of commercial activity had changed significantly since 1983, particularly with the rise of coffee shops catering to a ‘latte culture’. He said that such establishments didn’t exist in their modern form when the covenant was imposed, and that it no longer aligned with contemporary property use
2. Impediment to reasonable use without practical benefit (Section 84(1)(aa) LPA 1925): Mr Farrell argued that the covenant restricted a reasonable use of the property without securing any practical benefit of substantial value or advantage to the residents of Bishop’s Mansions. He relied on the fact that the neighbourhood had developed into a mixed-use area where other coffee shops already operated along Fulham Palace Road and contended that permitting the proposed use would not cause material harm to the residents.

The Tribunal’s decision

The Upper Tribunal refused the application, concluding that the restrictive covenant continued to secure practical benefits of substantial value or advantage for residents. Key factors included:

• Impact on the residents: following a site visit, the Tribunal noted that the proposed coffee shop would make use of a shady and pleasant rear garden capable of accommodating more than 30 customers. Access to this area relied on a right of way over Bishop’s Mansions’ communal gardens, raising significant privacy and security concerns for the residents
• Preservation of residential amenity: the Tribunal emphasised that the covenant continued to serve a significant protective function, safeguarding residents from noise, nuisance and loss of privacy. The anticipated intensive use of the rear garden – less than four metres from the nearest rooms – would cause more disturbance than office use, particularly given the likely foot traffic and outdoor seating
• Continuing relevance of the covenant: while the Tribunal acknowledged the changes in commercial trends since 1983 (including the emergence of latte culture), it held that societal shifts don’t automatically render covenants obsolete under section 84(1)(a). The Tribunal concluded that the original purpose of the restrictive covenant – to prevent nuisance and protect residential amenity – remained relevant and continued to secure practical benefits of substantial value or advantage within the meaning of section 84(1)(aa).

Key takeaways for property lawyers and clients

1. Restrictive covenants remain robust: restrictive covenants will remain enforceable unless there’s clear evidence satisfying the statutory grounds under section 84 of the LPA 1925. Legal professionals should be cautious in assuming that changes in commercial trends or land use automatically justify a modification
2. The importance of site-specific facts: site visits and detailed factual evidence are critical in section 84 applications. Here, the Tribunal’s physical inspection of the property, rear garden and access arrangements played a decisive role in the outcome. This shows the importance of conducting thorough due diligence and anticipating how a site visit may affect the Tribunal’s assessment before applying for a modification
3. Obsolescence under section 84(1)(a) has a high threshold: while changes in societal trends, such as the emergence of coffee shop culture, may appear to render a covenant outdated, the legal threshold for proving obsolescence under section 84(1)(a) remains demanding. A covenant will only be deemed obsolete if it can no longer fulfil its original purpose by reason of changes in circumstances – not simply because commercial practices have evolved
4. Evolving property uses must be balanced with residential protection: in urban areas where mixed-use developments are common, property owners must balance commercial ambitions with the rights of residential communities. This case shows that the Tribunal will give significant weight to privacy, noise and security when assessing whether a covenant secures practical benefits of substantial value or advantage under section 84(1)(aa).

The broader impact

For property lawyers, a thorough understanding of the statutory regime under section 84 of the LPA 1925 is essential when advising clients on potential development opportunities and disputes. The Farrell v Garforth-Bles decision shows that, even in areas of high commercial demand, restrictive covenants designed to protect residential amenity will carry substantial weight before the Tribunal.

This case also highlights the importance of addressing the practical concerns of local communities when proposing changes to property use. Whether you’re advising clients on property development or managing legal disputes, the ongoing relevance of restrictive covenants for residential amenity must not be overlooked.