Discharge of restrictive covenant against sub-letting (England)

In Re Lee’s Application ([2012] UKUT 125 (LC)) concerned a lease owned by L of a flat in a block of flats. The lease contained an absolute restriction on sub-letting. The landlord was the management company that owned the freehold of the building. The lessors’ covenants in the long leases on which the owners held their flats required the landlord to enforce the lease covenants if any tenant required it to do so. Thus, the lease covenants created a scheme for the benefit of all tenants.

L wanted to be able to sub-let and so he sought the discharge of the covenant or its modification to a qualified covenant (only to sub-let with consent). He relied on section 84(1)(aa) of the Law of Property Act 1925 (that the continued existence of the covenant would impede some reasonable use of the land for public or private purposes). The question was whether the covenant secured some practical benefit of substantial value or advantage to the landlord (section 84(1)(a) of the Law of Property Act 1925).

It was accepted that flats were likely to be better kept and would be easier to manage if there were a distinct community of owner-occupiers. This remained true even though 5 of the 31 leases in the block  had been  modified so that the restriction on sub-letting was qualified. In any event, the lease imposed a duty on the landlords to enforce the lease covenants. Thus, the covenants were part of a scheme on which the other owners had relied when buying their flats. The landlord’s duty was to uphold the scheme. This duty remained despite the modification of the restriction in five of the leases.


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