Did you miss? Great Jackson ST Estates Ltd v Manchester City Council [2025] EWCA Civ 652

Great Jackson ST Estates Ltd v Manchester City Council [2025] EWCA Civ 652, 19 May 2025

restrictive covenants; “practical benefit” for the purposes of s.84(1)(aa); landlord also the planning authority

The facts

The Appellant, Great Jackson St Estates Limited, is the tenant of two redundant warehouses in Manchester. The Respondent, the Council of the City of Manchester, is the freehold owner and the relevant planning authority. At the date of the hearing before the Upper Tribunal, 61 years of that term remained unexpired.

Great Jackson obtained planning consent to demolish the warehouses and replace them with two 56-storey tower blocks containing 1037 flats. The Lease contains a number of restrictive covenants. Some of the relevant covenants prohibit development works on the site without the local authority’s consent. Some gave the local authority qualified control over the use and development of the site, by requiring that the applicant obtain its consent, which was not to be unreasonably withheld. Others imposed restrictions on the tenant’s general use and management of the site.

Great Jackson sought the Council’s consent to the proposed development under the Lease, which was not forthcoming. The Council instead offered Great Jackson a new 250-year building lease permitting the development on stringent conditions. The terms were not agreed. Great Jackson then applied to the UT pursuant to section 84 of the 1925 Act, for the modification or discharge of the covenants to enable the redevelopment to be carried out with a new lease.

The UT dismissed the tenant’s application. It found that the restrictions impeded the tenant’s proposed use for the purpose of s.84(1)(aa), but that they also secured to the local authority a practical benefit of substantial advantage under s.84(1A), by allowing it to influence the form of the development and mitigate the risk of it not being completed timeously.

Great Jackson appealed the decision arguing that the ability to use a restriction to prevent the reasonable user from being put into effect unless the applicant agreed to enter into a new lease is not a “practical benefit” for the purposes of s.84(1)(aa).

The Court of Appeal’s decision

The Court of Appeal dismissed the appeal. The phrase “practical benefits” in s.84(1A)(a) is a wide one. The courts have emphasised the breadth of the considerations which might be taken into account.  The Court noted that “practical benefits” must be practical rather than afford the covenantee an opportunity to extract monies from the covenantor for their release and that the benefits must flow from compliance with the covenants rather than from their discharge.

The Court of Appeal held that having heard the evidence, the UT made an evaluative judgment in relation to all the relevant elements. It had found that the local authority had a legitimate strategy in continuing to influence the use of the land and to secure its orderly and appropriate development; there was no reason why the interest in promoting and protecting the site should not be furthered through the leasehold covenants and through the statutory planning process. It was fully satisfied that the local authority wished to ensure that the site was developed in the manner proposed by the tenant, subject to appropriate safeguards to ensure that the development was commenced timeously and not left incomplete. It found that to be a facet of control over the use of the site which the covenants were intended to afford to the local authority. A mere ability to insist on a covenant being observed and, as a result, being able to control the use of the land, could not be a practical benefit. However, an ability to prevent development unless appropriate safeguards were put in place to mitigate the risk that Great Jackson might not commence the development and continue it in a timely fashion or might leave it unfinished, was not merely “control” in that sense. The covenants enabled the local authority to further its overall strategy for the development of the area. That was a benefit which flowed from compliance with the covenants in the lease rather than their discharge.

The covenants were being used for their intended purpose. Even if the local authority was restricted to relying on the advantages which the covenants afforded to it as a landlord, it was legitimate to take account of its role as planning authority. It carried out all of its functions as a public body, including its role as freehold landlord of the site. It had to exercise those rights in accordance with its wider public duties, one of which was to ensure the orderly and proper development of the site for the benefit of the area as a whole.

The Court of Appeal rejected the submission that the Council was seeking a monetary advantage from discharge of covenants rather than using them for their intended purpose of affording an element of control over the development of the site. The question was about the extent of the advantage which the restrictions provide to the Council by preventing the development going ahead unless its concerns were satisfied. They were not pecuniary or an attempt to seek a quid pro quo.

Lesson learnt

The case is a clear illustration of the breadth of the considerations which might be taken into account “practical benefit” for the purposes of s.84(1)(aa); there is a fine (and grey) line between an opportunity to extract a benefit from the release of a covenant and a benefit which flow its compliance rather than discharge. The ratio emphasis the reluctant of the judiciary to intervene when a local authority acting as landlord exercises its private right to ensure strategic development in its area pursuant to “its wider public duties”. It allows local authorities to argue that a covenant which prevents uncontrolled development of land and mitigates against the risk that a developer might not undertake a development in an “orderly fashion” is not mere control but a “practical benefit”; being a tool in the ‘overall management’ of the area. Developers dealing with a local authority will need to consider their options carefully before applying under s 84.

Article by Lina Mattsson.