Great Jackson ruling highlights need to balance development and control in UK urban projects
Published on 3rd July 2025
Developers of local authority land should review lease terms before deciding on expenditure so as to mitigate conflict
The Court of Appeal in its judgment handed down in Great Jackson Street Estates v Manchester City Council has endorsed a recent decision by the Upper Tribunal Lands Chamber (UT) that restrictive covenants in a lease provided the lessor, being the local authority, with practical benefits that are of substantial value for the purposes of section 84(1) (aa) and section 84(1A) of the Law of Property Act 1925.
Dispute background
The appellant, Great Jackson Street Estates, was the tenant of two redundant warehouses in Manchester. Great Jackson wanted to demolish the warehouses and build 56-storey tower blocks consistent with the local development plan and already had the necessary planning permission. However, the lease contained covenants that prevented the redevelopment without Manchester City Council's consent as the freeholder. The council, while supportive of the development, denied consent under the existing lease and offered a new 250-year lease with conditions and milestones including forfeiture provisions to ensure timely completion.
Unable to reach an agreement, Great Jackson applied to the UT pursuant to section 84 of the act to modify or discharge the covenants.
Upper Tribunal decision
The UT dismissed the application holding that the covenants provided the council with practical control over the redevelopment which constituted a "practical benefit": this precludes modification or discharge provided the practical benefit is of substantial advantage. The covenants were not obsolete and continued to serve their intended purpose of protecting the council's reversionary interest. The UT rejected the argument that the council would not suffer if restrictions were modified or removed.
Great Jackson's submission that the council was seeking a monetary advantage from the discharge of covenants was also rejected by the UT. Instead, the tribunal clarified that it considered that the council was using the covenants for its intended purpose of maintaining control over the site's development, according to schedule and in a timely manner
Great Jackson appealed the UT's decision arguing that it was incorrect in asserting that the restrictions imposed by the covenants provided practical benefits to the council. Great Jackson argued that using a restriction to prevent a reasonable use from being put into effect, unless it was agreed pursuant to the terms of a new lease, was not a "practical benefit" under section 84(1)(aa).
Court of Appeal ruling
The Court of Appeal disagreed: the UT was entitled to hold that the covenants afforded the council practical benefits of substantial advantage. The council's legitimate strategic interest in the orderly and appropriate development of the site was a practical benefit and the ability to prevent uncontrolled development was a substantial advantage to the council.
The Court of Appeal rejected the argument that conditions should be imposed under section 84(1C) to modify the covenants, as the proposed conditions did not address the council's concerns.
Osborne Clarke comment
When embarking on development projects, particularly those involving local authority land, it is crucial for developers to work with their lawyers to review lease terms carefully before committing to large expenditure and to mitigate potential conflicts. Councils often find themselves in a unique situation, where they support redevelopment initiatives as planning authorities but oppose them as landlords or landowners to safeguard their strategic interests. This can pose significant challenges, particularly when dealing with restrictive covenants.
The Upper Tribunal, has broad discretion in these matters, which makes it difficult to contest decisions unless there is a clear legal error. It is unlikely to intervene in a situation where a local authority is exercising its rights as part of its other public duties.
Furthermore, the complexity of determining "practical benefit" under s.84(1)(aa) is highlighted by the nuanced distinction between extracting a benefit from covenant release and mere compliance.
Lia Spurling, a paralegal with Osborne Clarke, contributed to this Insight.
