Futile Restrictive Covenants?

In Re Abertawe Bro Morgannwg NHS Universtiy Trust's application the Lands Chamber of the Upper Tribunal gave a good indication as to how it will view applications to discharge a covenant on he basis that it is obsolete pursuant to section 84 (1) (a) of the Law of Property Act 1925. In particular the decision shows that not only can the nature of the area surrounding the property be taken into account but that wider issues, such as social and economic factors, can also be relevant considerations.  

In this case the land was sold subject to a 1938 covenant in terms that it could only be used as a maternity clinic. The clinic was built and continued to be used until 2005 when it closed.  The building remained vacant until the land owner found a purchaser who wished to use the site as a church. 

The land owner applied to the Lands' Chamber of the Upper Tribunal under Section 84(1) (a) of the Law of Property Act 1925 to discharge the covenant on the ground that it was obsolete. The land owner argued that because of the way in which health services were now provided, the provision of a maternity clinic at the property was obsolete and that the covenant should therefore be discharged.  The land owner also pointed out that the purpose of the covenant was to provide a maternity clinic for the local area.  It argued that the purpose was not achieved because the covenant did not positively require the property to be used for that purpose; it merely prevented it being used for any other purpose. 

The local Council, which had the benefit of the covenant, objected to the land owner's application and submitted that the property should be used for the provision of other health services, in particularly publicly funded dental care, such that the purpose of the covenant could be continued in that way. 

The Tribunal rejected the land owner's argument that, since there was no positive obligation to run a maternity clinic, the purpose of the covenant had not been achieved. The reality was that the covenant had achieved the desired effect because the property had been used as a maternity clinic for many years until 2005 when the need for that use ceased. 

However, the Tribunal ruled that if the original purpose of a covenant could no longer be served, it was obsolete. The Tribunal found that the property was built before the introduction of the NHS, at a time when most babies were delivered at home and there was concern about the level of infant mortality, such that the question was whether the covenant was capable of being achieved, given that the provision of health care to expectant mothers and babies had changed radically in the interim.  

The Tribunal ruled that the original purpose of the covenant could no longer be served in a meaningful way. By 2005 the need for care to be provided at maternity clinics was at a very low level.  As such it was clearly not viable to continue the clinic in the manner in which it had been undertaken previously hence the reason for its closure.  Because the only use specified in the covenant was as a maternity clinic, it followed that since that purpose could no longer be achieved, the covenant should be discharged. 

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