Church Commissioners Succeed in Blocking ‘Pod Hotel’ Development

Hotels and flatsSome of the nation’s grandest estates rely on use restrictions in leases as a crucial part of their long-term management strategies. That factor was decisive in stymying plans to open a Japanese-style pod hotel in the heart of a 90-acre central London estate which has for centuries been owned by the Church.

The long leaseholder of a large 1960s building within the estate had been granted planning permission to convert part of it from offices and shops into a pod hotel which would have over 100 small, windowless and air-conditioned bedrooms. Its lease, however, contained a restrictive covenant which forbade use of any part of the premises for residential or sleeping purposes.

The leaseholder applied to the Upper Tribunal (UT) under Section 84 of the Law of Property Act 1925 for the covenant to be modified in such a way as to enable the hotel development to proceed. However, the Church Commissioners, who own the estate – which comprises about 2,300 residential and commercial properties in one of the capital’s most expensive areas – fiercely resisted the application.

The Commissioners’ objections ranged from concerns about the design and long-term viability of the hotel to anxieties that it might become a focus for prostitution. It viewed the proposal as incompatible with nearby residential uses and feared that modifying the covenant would undermine its management strategy for the wider estate and provide an invitation to those seeking short-term gains.

Ruling on the matter, the UT was satisfied that the hotel would be a reasonable use of the site. Whilst a small number of residents might suffer increased noise, the UT was unconvinced that the hotel would have an unacceptable impact on the area’s physical environment. Claims that the hotel would in the long term lead to a £38 million diminution in the value of the estate were entirely speculative.

In rejecting the leaseholder’s application, however, the UT noted the high value that the Commissioners place on such restrictive covenants as a means of maintaining control over the wider estate. The covenant secured a practical benefit of substantial advantage to the Commissioners and amending it would impinge upon their ability to manage the estate for their commercial advantage.