Restrictive Covenants: When a landlord can legitimately withhold its consent to approval of plans under a restrictive covenant (89 Holland Park Management Ltd v Hicks – 2020)

When considering an application by a leaseholder for consent under a restrictive covenant, can the freeholder take into account interests and input from other leaseholders in the building and, further, reach a decision on aesthetic grounds where no adverse impact is created?

The background

In 89 Holland Park Management Ltd v Hicks [2020], the respondent Hicks proposed to build an ‘uncompromisingly contemporary’ property on land at the rear of 89 Holland Park. The freehold owner of the building at 89 Holland Park, comprising long leasehold flats, benefits from a restrictive covenant to the effect that Hicks was prevented from applying for planning permission on her site where plans, drawings or specifications have not been approved by the freeholder (approval not to be unreasonably withheld). The freeholder and the leaseholders held the benefit of the covenant and the right to enforce it.

Hicks applied for approval, which was denied on aesthetic grounds as, following the freeholder’s consultation with leaseholders, the design was not in keeping with the building and surrounding area, and further because trees would be lost and disturbance caused by the construction. Concerns were also raised by engineering and hydrology experts. The judge at first instance found that the freeholder was not entitled to refuse consent where there was no adverse impact or effect on the structure of the building or the value of the freeholder’s reversion and found that consent had been unreasonably withheld. The freeholder appealed.

The decision

The Court of Appeal found in favour of the freeholder, allowing the appeal. The judge at first instance had referenced the purpose of the covenant, but really should have addressed what was described as the ‘real principle’ whereby a party with the benefit of a restrictive covenant was entitled to consider matters and interests affecting the land benefiting from the restrictive covenant.

The restrictive covenant benefited the building and its leaseholders, and the freeholder was entitled to consult with leaseholders before refusing consent. The loss of trees and potential disturbance were relevant and refusal on aesthetic grounds was further permitted.

Advice and action

This case considered circumstances where a freeholder may withhold consent, and the decision may affect landlords and freeholders both positively and negatively, depending on the circumstances.

On the one hand, freeholders benefiting from a restrictive covenant over adjoining property potentially have greater ability to object to a development where the freeholder can demonstrate that its reasons relate to the land which benefits from the restrictive covenant, including reference to leaseholders’ interests where appropriate.

Conversely, freeholders wishing to develop land where a third party benefits from a restrictive covenant may find that the development is harder to obtain permission for where that third party, including those using the land, object whether on practical or aesthetic grounds. The decision raises questions as to how reasonableness will be addressed in subsequent cases and whether refusals to grant consent can be made objectively, rather than subjectively based on aesthetics and preferences.