UK urban development projects face a significant challenge in striking a balance between progress and regulation, as underscored by the Great Jackson ruling.
In a significant ruling, the Court of Appeal has endorsed the Manchester City Council's use of restrictive covenants to maintain control over the development of local authority land, emphasising the need for a balance between development and control. The case, known as **Great Jackson Street Estates v Manchester City Council**, sheds light on the interpretation of "practical benefit" under section 84(1)(aa) of the Law of Property Act 1925.
Great Jackson Street Estates, a tenant of two redundant warehouses in Manchester, had appealed the Upper Tribunal's decision, arguing that the restrictions imposed by the covenants did not provide practical benefits to the council. However, the Court of Appeal held that the council's use of restrictive covenants to ensure orderly and appropriate development, preventing uncontrolled development that could undermine their strategic interests, constituted a "practical benefit" of substantial advantage.
The lease contained covenants that prevented the redevelopment without the council's consent as the freeholder. When Great Jackson applied to the Upper Tribunal to modify or discharge the covenants, the court clarified that the council was using the covenants for their intended purpose of maintaining control over the site's development, according to schedule and in a timely manner. The Upper Tribunal dismissed the application, stating that the covenants provided the council with practical control over the redevelopment, which constituted a "practical benefit."
Great Jackson wanted to demolish the warehouses and build 56-storey tower blocks, which were consistent with the local development plan and had the necessary planning permission. However, the council denied consent under the existing lease and offered a new 250-year lease with conditions and milestones. The Court of Appeal did not find the conditions proposed under section 84(1C) sufficient to modify the covenants, as they did not address the council's concerns.
The court's ruling highlights that "practical benefit" is not limited to financial or monetary advantages but can also include strategic or regulatory interests that are essential for the proper management and development of the land. This interpretation underscores the importance of local authorities being able to maintain oversight while allowing for reasonable use of the land.
When engaging in development projects involving local authority land, it is crucial for developers to carefully review lease terms with their lawyers to mitigate potential conflicts. Lia Spurling, a paralegal with the firm, contributed to an Insight discussing the complexities of determining "practical benefit" under s.84(1)(aa).
It is unlikely for the Upper Tribunal to intervene in a situation where a local authority is exercising its rights as part of its other public duties. The Upper Tribunal Lands Chamber has endorsed a decision that restrictive covenants in a lease can provide practical benefits of substantial value for the purposes of sections 84(1) (aa) and 84(1A) of the Law of Property Act 1925. The ability to prevent uncontrolled development was a substantial advantage to Manchester City Council, making it a practical benefit in the eyes of the court.
The Upper Tribunal also rejected Great Jackson's argument that the council was seeking a monetary advantage from the discharge of covenants. The council's strategic interest in the orderly and appropriate development of the site was considered a practical benefit. This case serves as a reminder for developers to respect the rights of local authorities as landlords or landowners and to work collaboratively to achieve mutually beneficial outcomes in development projects.
[1] Great Jackson Street Estates v Manchester City Council [2019] EWCA Civ 1327 [2] Upper Tribunal Lands Chamber, Great Jackson Street Estates v Manchester City Council [2018] UKUT 0273 (LC)
- Despite arguing that the restrictive covenants in the lease did not provide practical benefits for the Manchester City Council, the Court of Appeal found that the Council's ability to maintain control over the redevelopment of local authority land, including preventing uncontrolled development, constituted a "practical benefit" of substantial advantage.
- In the world of finance and investing, this case underscores the importance for developers, particularly those dealing with real-estate projects involving local authority land, to carefully consider the lease terms regarding development projects, as the strategic interests and control of local authorities can offer substantial and practical benefits.
