Restrictive covenant discharged to enable residential use of office space despite neighbouring restaurant's objection

An application to discharge a restriction preventing the use of premises (next door to a former Chinese restaurant) other than as offices was granted by the Upper Tribunal (Lands Chamber) to enable the applicants to convert the premises into two residential flats.

The case of Waggott & Anor v Yip [2017] UKUT 108 (LC) (13 March 2017) raised some specific questions including: whether the restriction was obsolete; whether the covenant secured practical benefits of substantial value or advantage; and whether the discharge would injure the objector.

In this case, the applicants originally purchased the property in question as an investment, and a considerable amount of money was spent to bring it up to a lettable standard. However, the recession in 2007/08 had a seriously detrimental effect upon commercial values and the falling demand for town centre offices generally meant that a tenant could not be found so the property was marketed for sale in 2008. A sale was agreed but it fell through, and local agents subsequently advised that the value of the property had fallen. Marketing continued and in 2012 a further subject to contract sale fell through. In 2014, the applicants reviewed their options. Advice received from local agents indicated that the property could have an enhanced value if it was converted back to residential. An application was made to the local planning authority for planning permission for conversion back to residential use but planning permission was not required. The next stage was to seek formally to get the restriction lifted. In August 2016, a commercial tenant was found for the property, but the applicants decided to continue to pursue the residential option as well in case either the tenant defaulted, or decided to exercise a break clause which was only two years away, and in case the applicants wanted to achieve the property's potentially enhanced value as a residential opportunity in the future.

The Upper Tribunal was satisfied that the increased risk of complaints about smells and noise from a future Chinese restaurant from future residential occupiers over office users were minimal so the restriction on the property from being turned from office use to residential use could be lifted. It was found that there would be no disturbance from cooking smells from the restaurant should it be reopened and there was little chance of there being any successful action for noise nuisance against any future neighbouring restaurant, especially since the location in question was in a town centre.

It was further found that any practical benefits of the restriction were so minor that the objector's property would not be devalued if it was removed and the use of the land that was the subject of the application became residential. Therefore, no compensation was payable to the objector.

The Upper Tribunal determined that the application succeeded under the Law of Property Act 1925, s84 and the restriction could be discharged.