City Council Retains ‘Degree of Control’ Over Tower Blocks Development


To what extent is a local authority entitled to use its powers as a private landlord to promote its strategic objectives as a public planning authority? The Upper Tribunal (UT) pondered that issue in a case concerning the proposed demolition of two warehouses to make way for a major residential development.

The land on which the redundant warehouses stood was owned by a city council and was held by a corporate tenant under a lease that had about 60 years to run. Both landlord and tenant were anxious to see the site redeveloped as part of a wider regeneration project. The council had approved in principle the company’s planning application to remove the warehouses and construct in their place two 56-storey tower blocks, comprising over 1,000 flats.

To that end, the council was willing to grant the tenant a fresh, 250-year lease. However, the tenant was dissatisfied with the proposed terms of the new lease, which would, amongst other things, include provisions requiring commencement and completion of the development by specified dates. The tenant therefore wished to press ahead with the development under the terms of its existing lease.

Standing in the tenant’s path, however, were numerous restrictive covenants in the lease which prevented the development from proceeding without the consent of the council, as landlord. The tenant applied to the UT under Section 84 of the Law of Property Act 1925 to modify 11 of them. The principal focus of the case, however, was a covenant forbidding use of buildings on the site for anything other than light industrial, warehousing or repository purposes.

Ruling on the matter, the UT found that the proposed development represented a reasonable use of the land. As planning authority, the council had enthusiastically encouraged the project. Given the neighbourhood’s ongoing transformation from a light industrial to a residential area, it could readily be concluded that the use of buildings on the site as warehouses had become obsolete.

In rejecting the tenant’s application, however, the UT noted that it did not necessarily follow that the covenant was itself obsolete. Its purpose was not to fossilise the land’s light industrial use but to give the council a degree of control over any future change in its permitted use. It had indicated its willingness to grant the required consent for residential use, but only on terms that it viewed as necessary to ensure the project’s viability and timely delivery.

The council’s motives for relying on the covenant were not merely pecuniary or to boost its bargaining position. In the public interest, it was entitled to insist on provisions in any new lease that would ensure that the project was realised promptly and not left incomplete. In maintaining its significant degree of control over development of the site, the covenant continued to provide practical benefits of substantial advantage to the council.

The UT noted that the law should be slow to interfere with the judgment of a local authority which seeks to use its private rights as a landlord to promote its strategic objectives as a public planning authority. To modify the covenant in the manner proposed would inflict injury on the council’s interests. The UT had no doubt that development of the site would ultimately prove capable of being achieved through sensible commercial negotiation.

Share this article