The Upper Tribunal (Lands Chamber) has permitted a change from retail use to medical use and highlighted the different considerations in applications concerning leasehold covenants in Schwarzschild Ochs Pty Limited v Concerto Properties Limited [2022] UKUT 150 (LC).
The case concerned 208-210 Great Portland Street, W1, built in 1905-08, with commercial premises at ground floor and basement levels and four storeys of flats above. The applicant occupied the commercial premises on a sub-underlease granted in 1995 for a term expiring in March 2073. The underlease restricted the use of the premises to a shop and showroom or, with landlord’s consent not to be unreasonably withheld, for any use within B1 of the Town and Country Planning (Use Classes) Order 1987.
The property was originally used as a car showroom. It had generous head heights but due to a change in street levels the ground floor was 3ft higher at the back than at the front and divided by four steps. The applicant vacated the property in 2015 and wished to assign or sublet it. The layout made it unsuitable for use as a convenience store, pharmacy or large retail space because of the need to comply with disability discrimination legislation. The only solid interest received was from the medical sector, a use prohibited by the underlease. The applicant sought a modification of the user covenant to permit use for medical or health services or as offices under E(e) and (g) of the 1987 Order, as amended. The respondent, the applicant’s landlord, objected, citing the need to control the use of the property.
The applicant relied upon two grounds of section 84(1) of the Law of Property Act 1925: (a) where the restriction has become obsolete due to changes in the character of the property, the neighbourhood or other circumstances; and (aa) where the restriction impedes some reasonable use of the land, and the Tribunal is satisfied that it secures “no practical benefits of substantial value or advantage” to those with the benefit of the restriction.
The application under (a) failed. The premises had not changed and while there had been changes in the area with the northern end of Great Portland Street being absorbed into the expanding Harley Street medical district this was not significant when considering a leasehold covenant. The fact that the property was no longer suitable for use as a shop or poorly adapted to office use, and that there was no potential tenant for the permitted use did not make the restriction obsolete. It was still enforceable by the respondent and secured the negative outcome that the property was not used otherwise than for a shop and showroom.
However, the application succeeded under (aa). The use of premises in Great Portland Street for medical purposes was plainly a reasonable use and modification of the underlease to include such use would not affect other lease restrictions including that any change of use would be subject to the respondent’s consent. The Tribunal was satisfied that the respondent would still have practical control over the use of the property through the applicant’s general covenants as to use.
Louise Clark is a property law consultant and mediator
