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SQE1 - Land Law > 8. Freehold Covenants > Flashcards

8. Freehold Covenants Flashcards

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1
Q

Is the original burdened party (covenantor) liable on the covenant even after the sale of land by the person benefitting from the covenant, and why?

A

Yes, under privity of contract, the person to whom the covenantee sells is essentially assigned the right to benefit from the covenant

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2
Q

What are the four conditions for the benefit of a restrictive covenant to be enforceable by the successors of the covenantee, i.e. the party who original benefitted?

A
  1. Covenant touches and concerns the land, i.e. benefits the land
  2. It was intended to pass with the legal estate held by the original benefitting party
  3. The BP held the legal estate in the land to be benefitted at the time the covenant was made, and
  4. The assignee of the original BP now holds the legal estate

Essentially a privity of contract argument to transfer a benefit to the land, which was intended to run with the legal estate, to the person who now owns the legal estate

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3
Q

Is the burden of a restrictive covenant enforceable in law against a successor in title of burdened land?

A

No, but it may be enforceable in equity

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4
Q

What are the two requirements for the burden of a restrictive covenant to be enforceable in equity against a successor in title of burdened land?

A
  1. The original benefitting party held the legal estate in the land to be benefitted when the covenant was made, and
  2. Burden was intended to run with the land
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5
Q

What is deemed notice of a restrictive covenant to be enforceable in equity against a successor in title of burdened in (1) the unregistered system and (2) the registered system?

A

Unregistered: D(ii) restrictive covenant land charge
Registered: Notice on charges register of burdened land

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6
Q

What are the three ways to enforce a restrictive covenant in equity?

A
  1. By annexation (showing covenant is intended to attach)
  2. By express assignment
  3. Under rule related to building schemes
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7
Q

Who do positive covenants generally only bind?

A

The original contracting parties

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8
Q

What are three of the ways of enforcing a positive convenant?

A
  1. Grant a lease
  2. Chain of indemnity covenants
  3. Benefit and burden rule
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9
Q

Why does a granting a lease allow a positive covenant to be enforced?

A

Because the burden of positive and negative leasehold covenants run with the land due to privity of estate

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10
Q

How does a chain of indemnity covenants allow a positive covenant to be enforced?

A

The original covenantor and each successive successor in title obtain an indemnity covenant from the next buyer, so the liability is continually offset and primarily enforceable

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11
Q

What is required for the rule that a person cannot accept a benefit without also accepting the burden, and what is a consequence of them failing to uphold a positive convenant?

A

The benefit and the burden must be related to each other, e.g. benefit of using a road paired with burden of helping fund its maintenance.

Whilst the obligation to maintain is not enforceable against a successor, they can be denied use of the benefit.

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12
Q

what is a covenant?

A

a promise usually (but not always) contained in a deed

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13
Q

when do covenants usually arise?

A

when one person sells part of their land and
wishes to ensure that the buyer does not do anything which could affect the amenity and value of the seller’s retained land

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14
Q

how is a valid covenant created?

A
  • in writing
  • signed by the grantor
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15
Q

covenantee

A
  • The person who receives the benefit of the promise.
  • The covenantee can sue if the covenant is breached.
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16
Q

dominant land

A

The land which is benefitted by the promise.

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17
Q

covenantor

A
  • The person who makes the promise.
  • The covenantor can be sued if the covenant is breached.
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18
Q

servient land

A

the land which is burdened by the promise

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19
Q

successor covenantee

A

a new owner of the dominant land

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20
Q

successor covenantor

A

a new owner of the servient land

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21
Q

positive covenant

A

a promise to do something (hand in pocket test)

  • maintain a boundary fence
  • contribute to the cost of repairing a shared drive
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22
Q

negative / restrictive covenant

A

a promise not to do something

  • not to use the land for business purposes
  • not to build above a certain height
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23
Q

which covenant(s) are recognised proprietary rights?

A

restrictive covenants are an equitable interest in land

positive covenants are not

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24
Q

what is the legal issue re covenants?

A

can a successor covenantee enforce a covenant against a successor covenantor?

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25
Q

can a positive covenant be enforced in equity?

A

no

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26
Q

what is the ‘hand in pocket’ test?

A

any covenant which requires expenditure of:
- money;
- effort; or
- time

look at the substance, not form

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27
Q

what are mixed covenants?

A

covenants with positive and negative/restrictive aspects.

either interpreted as:
- separate covenants; or
- one obligation, with a condition attached.

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28
Q

what is an example of a mixed covenant?

A

covenant not to build on the land (restrictive) without the consent (positive) of the dominant land.

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29
Q

can mixed covenants be separated?

A

yes e.g.,

covenant to paint the exterior of a building every two years (positive) and not to paint the front door red (restrictive).

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30
Q

how are mixed covenants interpreted if they are one obligation with a condition attached?

A

they will be interpreted as either overall positive or overall negative

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31
Q

general rule on equitable burdens

A

burden does not pass to a successor at common law (Austerberry; Rhone)

this means that, at common law, the covenant is unenforceable against a successor in title to the covenantor

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32
Q

what is the rule in Tulk v Moxhay?

A

for the burden of certain covenants to pass to successors:

  1. covenant must be restrictive
  2. the covenant must accommodate the dominant tenement
  3. there must be intention for the burden of the covenant to run
  4. there must be notice of the covenant
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33
Q

rhone v stephens

A

“For over 100 years it has been accepted law that equity will enforce negative covenants
against freehold land but has no power to enforce positive covenants against successors in title of the land.”

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34
Q

if a covenant is positive, what enforcement rules will apply?

A

common law rules

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35
Q

rule 2. the covenant must accommodate the dominant tenement - what are the 3 aspects?

A
  1. covenantee and successor covenantee must hold an interest in land at the time of creation and enforcement
  2. the covenant must touch and concern the land i.e., have some direct beneficial impact on the dominant land (nature, quality, use or value)
  3. the dominant land and the servient land must be in proximity
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36
Q

rule 3. there must be intention for the burden of the covenant to run - two ways

A

expressly:
- ‘X hereby covenants with B for themself and their successors in title to land known as […]’; or
- ‘X hereby covenants with the intention of binding land known as […]’

impliedly:
LPA 1925, s79
- there will always be implied intention on behalf of a covenantor’s successors, unless a contrary intention is expressed (exclusion) e.g., ‘X hereby covenants on behalf of itself only…’

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37
Q

rule 4. there must be notice of the covenant

A

registered land: protected by entry of a notice in the charges register of the servient
title (LRA 2002, s 32).

unregistered land: Class D(II) Land Charge.

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38
Q

what happens if there is no notice of the covenant (both registered and unregistered)

A
  • purchaser for value of the burdened land will not be bound
  • volunteer (or donee) (ie someone who inherits of is gifted the estate) would be bound
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39
Q

summary of passing the burden in equity

A
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40
Q

If a successor covenantee wishes to enforce a breach against a successor covenantor direct, which two
things must be shown?

A
  • burden of the covenant has passed to the successor covenantor in equity; and
  • benefit has passed to it in equity.
41
Q

what are the two elements required for the benefit to pass in equity?

A

(a) The covenant must ‘touch and concern’ the dominant land; and

(b) The benefit must pass by one of the methods recognised in Renals v Cowlishaw (1878):
(i) Annexation;
(ii) Assignment; or
(iii) A building scheme.

42
Q

what is annexation?

A

covenant made in such a way that the benefit becomes a permanent part of the dominant land

43
Q

how does annexation occur? - two ways

A
  • express annexation; and
  • statutory annexation (LPA 1925, s78)
44
Q

express annexation

A
  • covenant made ‘for the benefit of the owners and
    successors in title’ to named land was enough to demonstrate express annexation (Rogers v Hosegood [1900])
  • However, a covenant stated to be made with the covenantees, their heirs, executors
    and assignees was not enough to show express annexation because the benefit was stated to be
    for people, not for land (Renals v Cowlishaw)
45
Q

statutory annexation

A

a covenant relating to any land of the covenantee shall be deemed to be made with the covenantee AND with its successors in title of the land intended to be benefitted (LPA 1925, s78(1) / Federated Homes)

46
Q

is statutory annexation automatic

A

yes. automatic unless excluded

Annexation can be excluded impliedly if an alternative method for passing the benefit is stipulated in the transfer deed.

47
Q

how to exclude statutory annexation

A
  • ‘With the intention of benefitting X only, Y covenants to […]’
  • ‘With the intention of benefitting X and its assignees, Y covenants to […]’
48
Q

when does assignment occur

A

when the benefit of the covenant has not been annexed at the outset

49
Q

when should the benefit be assigned?

A

every time the land is transferred

50
Q

are there any formalities for assignment of the benefit?

A

yes (LPA 1925, s53(1)(c)):
- in writing
- signed by the person transferring the benefit

51
Q

if four conditions are met, a building scheme will allow new owners to enforce which covenants?

A

restrictive only

52
Q

four conditions of a building scheme (Ellison v Reacher [1908])

A

(a) All buyers buy from the same seller;

(b) The seller divided the estate into plots;

(c) The covenants were intended to benefit all plots; and

(d) Each buyer buys on the understanding that the covenants are intended to benefit all plots.

53
Q

are these conditions strict rules?

A

later cases have interpreted the rules as guidelines.

a court must be satisfied that it was the intention of the parties to create a scheme of mutually enforceable obligations.

54
Q

what happens to the original covenantee when the dominant land is sold?

A

they still have the benefit of the covenant and can sue on it (but highly unlikely that they would want to sue!)

55
Q

to obtain a remedy, a successor covenantee must show that which two things have passed to it?

A
  • the benefit
  • the burden
56
Q

which remedies are available to successor covenantees?

A

only equitable remedies, and these are discretionary:

  • prohibitory injunction
  • mandatory injunction
  • damages
57
Q

when would a prohibitory injunction be appropriate?

A
  • If a servient owner is using the burdened land for an unauthorised use, or
  • is building in breach of covenant
58
Q

when would a mandatory injunction be appropriate?

A
  • if a building has been built in breach of covenant, demolition could be ordered

(wrt to building work, likely to be refused if not applied for immediately)

59
Q

what does the maxim ‘delay defeats equity’ mean?

A

a claimant must not wait too long
before applying for an injunction

60
Q

example of damages in lieu of injunctions (Wrotham Park Estate v Parkside Homes [1974])

A

Facts: There was a breach of covenant not to develop land without approval.

Held: The court refused to grant a mandatory injunction to demolish the houses built in breach of covenant. It said that it would be ‘an unpardonable waste of much needed houses’ to do so.
Instead, it awarded equitable damages. The court did not award damages to reflect to the loss in value to the dominant land (which was nominal). Instead, it awarded damages calculated as a
percentage of the profit made by the developer. This reflected the amount which would theoretically have been paid to the owner of the dominant land to secure a release from the covenant.

61
Q

why is it always worth considering if you can pass the burden of the covenant using equitable rules before common law rules?

A

because of the general rule: at common law, the covenant is unenforceable against a successor in title, because the burden will not pass

62
Q

to which covenants are the common law rules primarily applied?

A

positive

63
Q

what does ‘the continuing liability of the original covenantor’ mean?

A

the original covenantor has the burden of the covenant, and can be sued for both:

  • its own breaches; and
  • the breaches of its successors
64
Q

examples of express continuing liability of the original covenantor

A
  • ‘the covenantor covenants for itself, its successors in title and all those deriving title under it to maintain the boundary fence […]’;
  • ‘the covenantor covenants that it and its successors in title will maintain the
    boundary fence […
    ]’; or
  • ‘the covenantor covenants with the intention of binding land known as 9 Main Street to maintain the boundary fence […]’.
65
Q

what happens if there is no express wording in the covenant itself?

A

it will be implied (LPA 1925, s 79(1))

66
Q

summary of the continuing liability of the original covenantor

A
67
Q

what is the only remedy available against the original covenantor?

A

damages

(because the original covenantor is no longer in possession / control of the land)

68
Q

what is an indemnity?

A

An indemnity is a primary obligation and is an agreement by one party to bear the
cost of certain losses or liabilities suffered by another party in certain circumstances.

69
Q

how does an indemnity covenant help the original covenantor?

A

enables the original covenantor to sue their direct successor; may be able to recover any outlay it has to pay out for a breach.

As part of the sale process, the original covenantor (the seller) should require its successor (the buyer) enter an indemnity covenant promising to comply with the covenant and to indemnify (reimburse) it for any loss incurred as a result of a breach. An indemnity covenant should then be sought each time the burdened land is sold. This creates a chain of indemnities to the current owner.

70
Q

how does indirect enforcement work

A

there must be a complete chain of indemnity for indirect enforcement to work

71
Q

what is the exception to the general rule that the burden of a covenant does not pass to a successor at common law (and so the covenant is unenforceable)?

A

the doctrine of mutual benefit and burden / the rule in Halsall v Brizell

72
Q

what is the doctrine of mutual benefit and burden?

A

the burden passes to a successor covenantor at common law where the covenantee grants a benefit in the nature of an easement, and imposes a connected burden

73
Q

facts in Halsall v Brizell

A

transfer deed relating to a plot of land granted rights of way and drainage over private roads and drains. In the deed, the original purchasers covenanted to contribute to the cost of maintaining the roads and drains. A successor covenantor relied on the common law rule that a
burden does not pass, and refused to pay, whilst still enjoying the benefit of the easements.

74
Q

principle in Halsall v Brizell

A

The court held that the successor covenantors could not take the benefit (ie the rights of
way and drainage) without submitting to the burden (ie the obligation to contribute to the costs of maintenance). Only if the successor covenantor is happy to relinquish the benefit, the burden cannot be enforced. The liability is conditional.

75
Q

what are the three conditions that have refined the doctrine of mutual benefit and burden?

A
  1. There must be a clear link between the burden and the benefit.
    There is no general principle that someone who takes a benefit
    under a deed must submit to any burden which it imposes (Rhone v Stephens)
  2. There must be a genuine choice as to whether or not to take the benefit. This choice can be theoretical.
    If there is no real choice but to take the benefit, then the normal
    common law rule applies and the successor covenantor does not
    take the burden (Thamesmead Town v Allotey)
  3. The benefit and burden must have been conferred in the same transaction (Davies v Jones)
76
Q

what is another way of enforcing the covenant / side-stepping the rule that the burden of a freehold covenant will not pass to a successor covenantor?

A

grant of long lease

77
Q

why does a grant of long lease allow us to side-step the rule?

A

All covenants in leases except personal ones are enforceable by and against successors in title via the doctrine of privity of estate.

78
Q

The original covenantee can enforce a covenant as a matter of

A

contract law

79
Q

if the dominant land is sold, the successor covenantee must show that

A

the benefit has passed to it at common law

80
Q

who can the successor covenantee enforce the covenant against?

A
  • the original covenantor
  • the successor covenantor, if the doctrine of mutual benefit and burden applies
81
Q

what are the two ways a benefit can pass at common law?

A
  1. express assignment; or
  2. implied assignment
82
Q

express assignment formalities

A

LPA 1925, s136:

  • in writing
  • express notice of the assignment to the covenantor (to ensure the covenantor realises that a new person is in a position to enforce the covenant)
83
Q

implied assignment formalities

A

P&A Swift conditions must be met:

  1. the covenant must touch and concern the land;
  2. intention that the benefit should run with the land;
  3. original covenantee must have a legal estate in the dominant land;
  4. the successor covenanteee must hold a legal estate in the dominant land.
84
Q

rule 2. how can intention be shown

A
  1. expressly; or
  2. impliedly through statute, unless expressly excluded (LPA 1925, s78)
85
Q

example of express intention

A

A covenant drafted ‘for the benefit of land known as 5 High Street’ or ‘with the covenantee and
successors in title to land known as 5 High Street’ shows express intention.

86
Q

rules 3 and 4. the original covenantee must have owned a legal estate when the covenant was
made, and that the successor must own a legal estate at the time of enforcement

A

The legal estate does not need to be of the same nature: Smith and Snipes Hall Farm Ltd v River
Douglas Catchment Board [1949] 2 KB 500.
In that case the original covenantee held a freehold and the successor held a leasehold. The successor was held to be entitled to the benefit of the covenant and could therefore enforce it.

87
Q

Smith & Snipes Hall Farm v River Douglas Catchment Board confirms what?

A

the covenantee and their successor in title can hold different legal estates in land

88
Q

what is discharge of a covenant?

A

means that it is no longer valid

89
Q

modification of a covenant

A

scope of the covenant is altered, but not completed invalidation

90
Q

what is a merger in the covenant context

A

covenant will automatically be discharged if the same person becomes the owner of both the dominant and servient land (Re Tiltwood, Sussex)

91
Q

how can a dominant owner expressly agree to discharge a covenant?

A
  • enter into a formal release of covenant– usually in return for a payment
  • must be by deed.
92
Q

how can a dominant owner impliedly agree to discharge a covenant?

A

doing nothing when the covenant is being breached openly

93
Q

for which types of covenant can the servient landowner apply to the Upper Tribunal (Lands Chamber) to discharge/modify

A

restrictive covenant (CHECK THIS - p99)

94
Q

LPA 1925, S 84(1) sets out the grounds on which the Lands Chamber can discharge or modify a covenant:

A
  • S 84(1)(a): obsolete due to changes in the character of the property or neighbourhood
  • S 84(1)(aa): its continued existence impedes the reasonable use of the land
  • S 84(1)(b): the dominant owners expressly or impliedly agree
  • S 84(1)(c): the dominant owners will not suffer injury
95
Q

example of ‘obsolete due to changes in character’

A

a covenant to use property only as a residence may be obsolete if the surrounding
area is now business, retail of mixed use.

96
Q

example of ‘its continued existence impedes the reasonable use of the land for public or private purposes’

A

a covenant restricting the density of houses on a plot may confer no practical value
on the dominant land if that land is itself densely developed.

97
Q

example of ‘the dominant owners expressly or impliedly agree’

A

an application here may be appropriate where the parties have expressly agreed a
release in principle, or where the dominant owner has tolerated a long-term breach. In this instance, the tribunal will decide the level of compensation to be paid, thereby preventing the
dominant owner holding the servient owner to ransom.

98
Q

what does ‘the dominant owners will not suffer injury’ mean?

A

the tribunal can override spurious or frivolous objections, but will balance this with wider social or economic concerns as well.

SQE1 - Land Law (16 decks)

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