Chapter 4: Freehold covenants Flashcards
1
Q
- Introduction to freehold covenants
1.1 Covenants – terminology
A
A covenant is a promise which is usually contained in a deed, although a deed is not essential.
Covenants between freehold owners generally arise 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. They are a means of private control of land use
2
Q
Assessment focus point
A
To validly create a covenant, it must be in writing and signed by the grantor (LPA 1925, s
53(1)(a)).
3
Q
Key Terminologies
A
Covenantee: The person who receives the benefit of the promise. The covenantee can sue if
the covenant is breached.
Dominant land: The land which is benefitted by the promise.
Covenantor: The person who makes the promise. The covenantor can be sued if the covenant
is breached.
Servient land: The land which is burdened by the promise.
Successor covenantee: A new owner of the dominant land.
Successor covenantor: A new owner of the servient land.
4
Q
1.2 Covenants can be positive or negative
Positive Covenant
A
A promise to do something.
This usually involves expenditure of money.
5
Q
Examples: Positive covenants
A
- To maintain a boundary fence
- To contribute to the cost of repairing a shared drive
6
Q
1.2.2 Negative or restrictive covenant
A
A promise not to do something.
This restricts the use of the land and can be complied with by inaction.
7
Q
Examples: Restrictive covenants
A
- Not to use the land for business purposes
- Not to build above a certain height
Note. A restrictive covenant is an equitable interest in land. It is a recognised proprietary right. A
positive covenant is not.
8
Q
1.3 The legal issue with covenants
A
As between the original parties (the covenantor and covenantee) there is no legal issue, all the
covenants are enforceable on contractual principles. However, when the dominant and/or servient land are sold, the successors are not parties to the original contract and there is no direct contractual relationship between the party in breach of the covenant and the party who is looking to enforce it. The legal issue is therefore whether the covenants are enforceable by and against successors in title to the dominant and servient land.
9
Q
Example
A
A owns a piece of land, and sells half of it to B, retaining the rest.
In the transfer deed, B enters into two covenants: to use the land for retail use only; and to erect
and maintain a security fence between the two pieces of land.
As between A and B, the covenants are enforceable on contractual principles.
A’s land is sold to C and B’s land is sold to D.
There is no contractual relationship between C and D.
D breaches the covenants.
The legal issue is can C enforce the covenants direct against D in these circumstances?
10
Q
1.4 Passing the benefit and burden
A
There are two sets of rules for passing the burden and benefit of covenants. The equitable rules
and the common law rules.
For a covenant to be enforced in equity, it must be shown that the benefit and burden have both
passed using the rules of equity. For the covenant to be enforced at common law, it must be shown that the burden and benefit have both passed using the common law rules. The rules in common law and equity must not be mixed.
11
Q
1.5 Summary
A
- A freehold covenant is a promise relating to land.
- Although covenants are often contained in transfer deeds when land is sold, they need only be
in writing and signed by the grantor (the covenantor). - The covenantor is the party that enters into/grants the covenant and owns the servient
(burdened) land. - The covenantee is the party that receives the benefit of the covenant and owns the dominant
(benefitted) land.
12
Q
1.5 Summary
A
- Covenants can be both positive and restrictive (negative). A restrictive covenant is an equitable
interest in land ie a proprietary right. - When the dominant and/or servient land is transferred to a third party, the legal issue is the
enforceability of a covenant(s) by and against successors who were not a party to the original
grant. - The benefit and burden of a covenant must pass to successors using the common law or
equitable rules.
13
Q
2 Positive and restrictive covenants
A
[…] Only such a covenant as can be complied with without expenditure of money will be
enforced against a successor covenantor.
Lindley LJ, Haywood v Brunswick Permanent Benefit Building Society (1881) 8 QBD 403
Positive covenants will not be enforced against a successor covenantor in equity. It is therefore
important to be able to distinguish between positive and restrictive covenants.
14
Q
2.1 Determining the nature of a covenant
A
The test for identifying whether a covenant is positive or restrictive is set out in Haywood v Brunswick Permanent Benefit Building Society (1881) 8 QBD 403. This is known as the ‘hand in pocket’ test. If covenantors have to put their hands in their pockets to find money to spend to comply with the
covenant, it is positive.
15
Q
Expenditure of money, effort or time
A
Time is money’ so any covenant which requires expenditure of money, effort or time falls within
the definition of positive covenants.
Deciding whether a covenant is positive or restrictive is a matter of looking at the substance not
form: look beyond the words used and ask: ‘what is the essence of the obligation?’
16
Q
Example: Looking at the substance of a covenant
A
A covenant not to allow a building to fall into disrepair. This covenant appears to be restrictive as it is written in a negative form, but the underlying obligation is to maintain the building: positive.
17
Q
2.2 Covenants can be both positive and negative - mixed
Mixed Covenants
A
Mixed covenant: A promise which has positive and restrictive elements
Mixed covenants can be interpreted in one of two ways:
(a) As separate covenants; or
(b) As one obligation with a condition attached.
18
Q
Example: Mixed covenant
A
A covenant not to build on the land without the consent of the owner of the dominant land.
* ‘Not to build’ is the restrictive part of the covenant;
* ‘without consent’ is the positive part of the covenant.
19
Q
2.2.1 Separate covenants
A
This approach can be taken if the positive and restrictive aspects of the obligation can be separated to create two separate ‘stand alone’ covenants; one positive and one restrictive.
20
Q
Example: When a covenant can be separated
A
A covenant to paint the exterior of a building every two years and not to paint the front door red.
This covenant can be split into two parts:
(a) To paint the exterior every two years: positive
(b) Not to paint the front door red: restrictive
21
Q
2.2.2 As one obligation with a condition attached
A
This approach is taken if the mixed covenant cannot be split into two separate obligations. The
covenant is interpreted as being overall positive or restrictive, depending on whether it obliges the covenantor to do or not do something. The additional element, which cannot stand alone as a covenant, is viewed as being simply a condition attached to an overall positive or restrictive obligation.
22
Q
Example: A mixed covenant that cannot be split
A
A covenant not to build on the servient land without the consent of the dominant owner.
This covenant cannot be split.
* ‘Not to build’ is the main obligation: restrictive covenant.
* ‘Without consent’ is not a stand-alone obligation. Seeking consent only operates as part of
the main obligation. The covenant is therefore a restrictive covenant with a positive condition attached.
23
Q
2.3 Summary
A
- A positive covenant is a promise to do something.
- A restrictive covenant is a promise not to do something.
- To decide whether a covenant is positive or restrictive, look at the substance not the words.
- The ‘hand in pocket’ test helps to interpret covenants as positive or restrictive.
- A mixed covenant has positive and restrictive elements.
- It may be possible to split a mixed covenant into two separate covenants.
- If it is not possible to split the covenant, it will be viewed as either overall positive with a
restrictive condition attached, or as overall negative with a positive condition attached.
24
Q
3 Equitable rules: Burden
3.1 The general rule
A
As a general rule, the burden of a covenant does not pass to a successor at common law:
Austerberry v Oldham Corporation [1885] AC 29 ChD 750. This decision was followed for over 100 years and was confirmed by the House of Lords in Rhone v Stephens in 1994. This means that at common law the covenant is unenforceable against a successor in title to the covenantor and the covenantee or the successor covenantee is unable to enforce the covenant against the person who has breached it.
25
Rule in Tulk v Moxhay
Equity has developed rules which allow the burden of certain covenants to pass to successors,
which allows the covenant to be enforced direct against the person in breach. The equitable rules began with the case of Tulk v Moxhay (1848) 2 Ph 774, and have developed into what is known today as the rule in Tulk v Moxhay.
26
3.2 The covenant must be restrictive
In Rhone v Stephens [1994] AC 310 Lord Templeman said:
[…] 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. This means that to enforce a covenant in equity it must be shown that the substance of the
covenant is restrictive. If a covenant is positive then the common law rules will apply to its enforcement.
27
3.3 The covenant must accommodate the dominant tenement
There are three aspects to this second rule:
(a) The covenantee and successor covenantee must hold an interest in land at the time of creation and enforcement.
(b) The covenant must touch and concern the land.
(c) The dominant land and the servient land must be in proximity.
28
Aspect of Rule: The covenantee and successor covenantee must
hold an interest in land at the
time of creation and
enforcement.
Explaination: There must be a dominant tenement which can be
benefitted, so the original
covenantee and successors
must have retained an
interest in dominant land at
the time of creation and
enforcement of the covenant.
29
LCC v Allen [1914] 3 KB 642
Facts: Mr Allen bought land
from LCC and covenanted
not to build on it. He sold the
land to his wife who started to
build. LCC tried to enforce
the covenant against her.
Held: The court refused to
enforce the covenant as LCC
had retained no land capable
of being benefitted when it
sold the land to Mr Allen.
30
Aspect of Rule: The covenant must touch and concern the land.
Explaination: The covenant must have some direct beneficial impact on the dominant land. Lord
Oliver’s test in P&A Swift
Investments Ltd v Combined
English Stores Group plc
[1989] provides that the
covenant should:
* Only benefit the dominant
owner whilst they own
dominant land;
* Affect the nature, quality,
use or value of dominant
land; and
* Not be expressly personal.
31
Example
A covenant not to use the
servient land for industrial
purposes would benefit the
dominant land. Not having
industrial use nearby would
make the dominant land more
enjoyable, peaceful and
valuable than it would be if
there was a factory on the
servient land.
32
Aspect of Rule: There must be sufficient proximity between the
dominant land and the
servient land.
Explaination: The dominant land and the servient land must be near to each other.
Example: The dominant and servient land do not need to share a common boundary, or be
directly next to each other,
but must be close enough
that the dominant land benefits from the covenant Bailey v Stephens (1862) 12 CB (NS) 91.
33
3.4 There must be intention for the burden of the covenant to run
This intention can be shown in two ways:
* Expressly: the covenant is worded in such a way as to make it clear that successors are to be
bound:
‘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, s 79 states that a covenant relating to land shall be deemed to be made
by the covenantor on behalf of its successors in title, unless a contrary intention is expressed.
The impact of LPA 1925, s 79 is that there will always be implied intention unless the covenant is
drafted in such a way to exclude it eg ‘X hereby covenants on behalf of itself only…’
34
3.5 There must be notice of the covenant
Whether the successor covenantor is deemed to have notice of the covenant depends on whether
it has been properly protected by registration.
35
3.5.1 Registered land
The covenant must be protected by the entry of a notice in the charges register of the servient title (LRA 2002, s 32).
36
3.5.2 Unregistered land
The covenant must be protected by a Class D(II) Land Charge.
In either case, if not done, a purchaser for value of the burdened land will not be bound, but a volunteer (or donee) (ie someone who inherits of is gifted the estate) would be.
37
4 Equitable rules: Benefit
If a successor covenantee wishes to enforce a breach against a successor covenantor direct, two
things must be shown:
* That the burden of the covenant has passed to the successor covenantor in equity; and
* That the benefit has passed to it in equity. It is not enough to show that the burden has passed in equity and the benefit passes at common law. If an equitable remedy is required, both the benefit and burden must pass in equity: the rules go hand in hand
38
4.1 Passing the benefit in equity
There are two elements which must be fulfilled for the benefit to pass in equity:
(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
Note. See above for a reminder of what it means for a covenant to ‘touch and concern’ the land.
You may have already established the covenant does touch and concern the land when passing
the burden using Tulk v Moxhay
39
4.2 Annexation
This occurs when the covenant is made in such a way that the benefit becomes a permanent part
of the dominant land itself.
It therefore passes automatically when the dominant land is sold, without being specifically
mentioned in the transfer deed.
Annexation occurs in one of two main ways:
* Express annexation; and
* Statutory annexation (LPA 1925, s 78).
40
Assessment focus point
Think of annexation like ‘legal glue’. It occurs at the point of creation of the covenant and if done, means the benefit will automatically pass each time the dominant land is sold. Always look for evidence of express annexation first!
41
4.2.1 Express annexation
This occurs where the express words of the covenant make it clear that the original parties intend
the benefit to become part of the dominant land, rather than simply a personal advantage to the
covenantee.
42
Example: Express annexation
In Rogers v Hosegood [1900] 2 Ch 388 a covenant made ‘for the benefit of the owners and
successors in title’ to named land was enough to demonstrate express annexation. However, in
Renals v Cowlishaw, 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.
43
4.2.2 Statutory annexation
If there is no evidence of express annexation in the wording of the covenant, consider if statutory
annexation will apply.
LPA 1925, s 78(1) as interpreted in the case of Federated Homes v Mill Lodge Properties Ltd [1980]
1 WLR 594 provides that a covenant relating to any land of the covenantee shall be deemed to be
made with the covenantee and its successors in title of the land intended to be benefitted.
The effect of this interpretation of LPA 1925, s78(1) is to make annexation automatic unless it is
excluded. Annexation can be excluded expressly, in the wording of the covenant, or impliedly if an
alternative method for passing the benefit is stipulated in the transfer deed.
44
Example: Excluding statutory annexation
If the covenant if drafted as follows, this would be evidence that statutory annexation has been
excluded:
* ‘With the intention of benefitting X only, Y covenants to […]’
* ‘With the intention of benefitting X and its assignees, Y covenants to […]’
45
4.3 Assignment
This occurs where the benefit of the covenant has not been annexed at the outset. The benefit can
nevertheless be assigned when the dominant land is transferred. As the benefit exists separately
from the land itself, it is treated as a separate interest in the land and must be transferred every time the land is transferred. The separate assignment of the benefit must comply with the formalities in LPA 1925, s 53(1)(c): in writing and signed by the person transferring the benefit.
46
4.4 Building scheme
When a new housing estate is built, all houses are sold subject to the same covenants. New owners who wish to enforce a covenant against a neighbour may struggle to show that the benefit of a particular covenant has passed to them.
Building schemes resolve this problem relating to restrictive covenants only. If the conditions of a building scheme are met, the covenants are treated as a set of by-laws enforceable by and against all owners. It is not necessary to show specifically that the benefit of a particular covenant has passed to a claimant.
47
The conditions of a building scheme are set out in Ellison v Reacher [1908] 2 Ch 374:
(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.
Later cases have interpreted these rules as guidelines rather than strict requirements. A court will need to be satisfied that it was the intention of the parties to create a scheme of
mutually enforceable obligations.
48
4.5 The position of the original covenantee
When dominant land is sold, the original covenantee technically still has the benefit of the covenant and can sue on it. This is based on contractual principles. However, it is highly unlikely that an original covenantee would wish to enforce a covenant in these circumstances. Even if action was taken, it is hard to envisage any loss which could be suffered by an original covenantee who no longer owns the dominant land. For example, a covenant not to build on servient land is of no value to a covenantee once the dominant land is sold. A breach of the covenant causes the original covenantee no loss.
49
4.6 Remedies
Where the successor covenantee can show that the benefit of the covenant has passed to it, and
that the burden has passed to the successor covenantor, it can enforce the covenant direct
against the successor covenantor who is in breach.
As a restrictive covenant is an equitable interest in land, equitable remedies are available to
enforce the breach against the current owner. However, equitable remedies are discretionary,
there is no automatic right to them.
50
4.6.1 Injunction
The most common remedy for breach of covenant is an injunction.
Typically, if the breach is threatened or ongoing, the claimant can apply for a prohibitory
injunction, ordering the breach to cease. If the breach has already occurred, the claimant can apply for a mandatory injunction, ordering the person in breach to do something.
51
Example
If a servient owner is using the burdened land for an unauthorised use, or is building in breach of
covenant, a prohibitory injunction would be appropriate. If a building has been built in breach of covenant, a mandatory injunction, ordering the demolition of the building, may be appropriate.
52
Subject to general equitable principles
An injunction, like all equitable remedies is awarded subject to general equitable principles and
maxims. For example, the maxim ‘delay defeats equity’ means a claimant must not wait too long
before applying for an injunction.
53
Refusal of application
A claimant who wishes to apply for an injunction in respect of building work being carried out in breach of covenant must act immediately. If the claimant waits until the building is complete and then applies for a mandatory injunction to knock the building down, the application is likely to be refused.
54
Not awarded as of right
Equitable damages are not awarded as of right. They may be awarded in lieu of an injunction, as
an injunction may be refused where it would be oppressive to grant it.
55
Key case: Wrotham Park Estate Co Ltd v Parkside Homes [1974] 1 WLR 798
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
56
4.7 Summary
* If the burden has passed in equity, the benefit must be shown to have passed in equity.
* It must always be shown that the covenant touches and concerns the dominant land.
57
The benefit can be passed in one of these ways:
- Express annexation: The words of the covenant are sufficient to make the benefit part and parcel of the dominant land from the outset.
- Statutory annexation: LPA 1925, s 78(1) operates to annex the benefit of a covenant to land, unless it is expressly excluded.
- Assignment: The express transfer of the benefit of a covenant alongside a transfer of the
dominant land.
- Building scheme: If the parties intended to create a scheme of reciprocal local laws, the
benefit of restrictive covenants passes to all new owners.
* If the benefit and burden can pass in equity, equitable remedies, such as an injunction, are available at the discretion of the court. The equitable principles apply and damages may be awarded in lieu.
58
5. Common law rules: burden and indirect enforcement
Remember, at common law the covenant is unenforceable against a successor in title to the covenantor because of the general rule that the burden will not pass. For this reason, it is always worth considering if you can pass the burden of the covenant using
the equitable rules first.
59
Assessment focus point
As the burden of restrictive covenants can pass using the equitable rules, the common law
rules are primarily applied to covenants that are positive in nature.
60
5.1 Continuing liability of the original covenantor
The effect of the general rule is that at common law, a successor covenantor cannot be sued.
However, the burden of a covenant does not disappear. It remains with the original covenantor permanently. This is known as ‘the continuing liability of the original covenantor’. This means that it is the original covenantor who has the burden of the covenant and can be sued for both its own breaches and the breaches of its successors.
61
Continuity expressly stated in the wording of the covenant
* ‘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 […]’.
62
LPA 1925, s 79(1)
If there is no express wording in the covenant itself, LPA 1925, s 79(1) has been held to imply such
wording.
63
5.2 Remedies
The only remedy available against the original covenantor is damages. This is because the original covenantor is no longer in possession or control of the land.
64
Example
If the successor covenantor has breached a covenant to maintain a fence, the covenantee wants
to force the successor covenantor to maintain the fence. However, the burden does not pass to the
successor covenantor. If the covenantee sues the original covenantor, the original covenantor is not in possession of the land and is not therefore able to maintain the fence. Instead, damages may be awarded to the covenantee, but that simply awards money, and does not solve the essential problem.
65
5.3 Indemnity covenant
The original covenantor may be able to recover any outlay it has to pay out for a breach by a
successor if it has an indemnity covenant.
66
Indemnity
Indemnity: 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.
67
Chain of indemnities
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.
68
Indirect enforcement
An indemnity covenant enables the original covenantor to sue their direct successor only, but if
there is a complete chain of indemnity to the current owner in breach, it works as a method of
indirect enforcement. There must be a complete chain of indemnity for indirect enforcement to work.
69
Complete Chain
There may be a complete chain, yet indirect enforcement fails if a party dies or is made bankrupt. A chain of indemnities is therefore only as strong as its weakest link.
70
Assessment focus point
An indemnity covenant does not pass the burden of the covenant and it does not enable the
current owner to be sued by anyone except their predecessor in title.
71
5.4 Summary
At common law the burden does not pass.
* The burden of positive covenants therefore remains personal to the original covenantor.
* This continuing liability can be stated:
- Expressly: ‘the covenantor covenants for themself, their successors in title and all those
deriving title under them…’
- Impliedly: LPA 1925, s 79(1) implies this wording into covenants to make original covenantor
liable for all breaches by any successor.
72
5.4 Summary
* Remedy is damages only.
* If the original covenantor is sued, it can recover any outlay from its successor if it took an indemnity at the time of sale.
* If there is a complete chain of indemnities to the current owner in breach, this operates as a
means of indirect enforcement.
73
6. Common law rules: the doctrine of mutual benefit and
burden
As you know, the general rule is that the burden of a covenant does not pass to a successor at
common law. This means that at common law the covenant is unenforceable against a successor in title to the covenantor. The burden remains with the original covenantor who can be sued for damages. There is, however, a limited exception to the general rule enabling the burden of a covenant to pass to a successor covenantor at common law. It is known as the ‘doctrine of mutual benefit and burden’.
74
Assessment focus point
The doctrine of mutual benefit and burden is also known and referred to as ‘the rule in Halsall
v Brizell’.
75
Key case: Halsall v Brizell [1957] Ch 169
Halsall v Brizell enables the burden of a covenant to pass to a successor covenantor at common
law where the covenantee grants to the covenantor a benefit in the nature of an easement, and
imposes a connected burden.
76
Key case: Halsall v Brizell [1957] Ch 169
Facts: 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.
77
Key case: Halsall v Brizell [1957] Ch 169
Held: 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.
78
6.1 The three conditions that must exist
The rule has been refined in subsequent cases and three conditions have been established that must be met for it to operate.
79
Rhone v Stephens [1994] 2
AC 310
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.
80
Thamesmead Town Ltd v
Allotey (1998) 3 EGLR 97
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.
81
Davies v Jones [2009]
EWCA Civ 1164
The benefit and burden must have been conferred in the same
transaction.
82
6.2 Other ways of enforcing covenants: grant of long lease
One way of side-stepping the rule that the burden of a freehold covenant will not pass to a
successor covenantor is to dispose of the land by way of long lease.
All covenants in leases except personal ones are enforceable by and against successors in title via
the doctrine of privity of estate.
83
6.3 Summary
* The burden of a covenant generally does not pass at common law: it remains with the original
covenantor.
* There is an important exception to this rule: the doctrine of mutual benefit and burden in
Halsall v Brizell:
- The burden and benefit must be linked;
- The successor covenantor must have a choice whether to take the benefit; and
- The benefit and burden must be in the same transaction.
* Rather than freehold transfer, the grant of a long lease can also be used as a workaround to
ensure a covenant will be enforceable against a successor covenantor.
84
7 Common law rules: benefit
The original covenantee can enforce a covenant as a matter of contract law.
If the dominant land is sold, the successor covenantee must show that the benefit has passed to it
at common law.
This enables the successor covenantee to enforce the covenant either against the original
covenantor, or (in limited circumstances if the doctrine of mutual benefit and burden applies)
against the successor covenantor.
There are two ways the benefit can pass at common law:
(a) Express assignment; or
(b) Implied assignment
85
7.1 Express assignment
Under normal contractual principles, the benefit of a covenant can be expressly assigned to a
successor. LPA 1925, s 136 requires the assignment must be in writing and express notice of the assignment must be given to the covenantor. This is to ensure that the covenantor realises that a new person is in a position to enforce the covenant.
86
7.2 Implied assignment
Where there is no express assignment, the benefit of a covenant may pass to a successor
covenantee if certain conditions are met. This involves the benefit automatically passing every
time the land is transferred, as long as the conditions are met. The conditions of implied assignment are set out in the case of P&A Swift Investments v Combined English Stores Group plc [1989] AC 632
87
7.2.1 The covenant must touch and concern the land
The covenant must benefit the dominant land itself, it must affect the nature, quality, use or value
of the land. It must not be expressed to be personal and should only benefit the dominant owner for the time being, so that, if separated from the land, it ceases to be of any advantage to them.
88
Example: ‘Touch and concern’ the dominant land
A covenant to maintain a house on the burdened land does touch and concern the dominant land
as it preserves the quality of the environment and therefore the value of the dominant land.
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7.2.2 There must have been an intention that the benefit should run with the dominant land
Intention of the parties can be shown expressly or impliedly through statute. If there is no express intention, LPA 1925, s 78 implies an intention for the benefit to pass unless it is expressly excluded.
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Example: Express intention
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.
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7.2.3 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
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.
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7.3 Summary
* If the burden has passed at common law, or the burden cannot pass because of the common
law rule, the benefit must be shown to have passed at common law for a successor in title
covenantee to be able to enforce it.
* It may pass by express assignment. The assignment must be in writing with notice given to the covenantor
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P&A Swift Investments Conditions
- The covenant must touch and concern the land.
- There must have been an intention that the benefit should run with the dominant land.
- The original covenantee must have a legal estate in the dominant land.
- The successor covenantee must hold a legal estate in the dominant land.
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8. Discharge, modification and release of covenants
8.1 The problem with old covenants
Restrictive covenants, once validly granted, last forever. Over time, these can become obsolete
and can unduly restrict the use of the servient land. For example, a covenant not to build on land might have benefitted the dominant tenement whilst that land was used for residential purposes, but no longer does if the dominant land is now a factory. There are various ways in which a covenant can be discharged or modified
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Discharge
Discharge of a covenant means that it is no longer valid.
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Modification
Modification of a covenant means that the scope of the covenant is altered, but it is not completely invalidated.
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8.2 Methods of
discharging/modifying covenants
A covenant will automatically be discharged if the same person becomes the owner of both the
dominant and servient land (Re Tiltwood, Sussex [1978] Ch 269).
This is known as merger.
A dominant owner may expressly agree to discharge the covenant and will enter into a formal
release of covenant, usually in return for a payment. The release must be made by deed.
Alternatively, the dominant owner may impliedly agree to discharge the covenant by doing
nothing when the covenant is being breached openly
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8.3 Statutory discharge or modification of covenants
The dominant owner could hold the servient owner to ransom by asking for a large sum of money to discharge an obsolete covenant.
To avoid this, the servient owner can apply to the Upper Tribunal (Lands Chamber) for the discharge or modification of any covenant.
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LPA 1925, s 84(1)
LPA 1925, s 84(1) gives the Lands Chamber the power ‘wholly or partially to discharge or modify
any […] restriction’.
Note. This provision only applies to restrictive covenants!
Section 84(1) sets out the grounds on which the Lands Chamber can discharge or modify a covenant. If the Lands Chamber discharges or modifies a covenant it may require compensation to be paid to the owners of the dominant land.
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8.3.1 Section 84(1)(a): Obsolete due to changes in the character of the property or neighbourhood
A servient owner may apply to the tribunal for a declaration to discharge or modify a covenant on
the basis that the covenant has become obsolete due to changes in the character of the property
or neighbourhood. For example, a covenant to use property only as a residence may be obsolete if the surrounding area is now business, retail of mixed use.
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8.3.2 Section 84(1)(aa): Its continued existence impedes the reasonable use of the land for
public or private purposes
An application can be made on the basis that the covenant impedes reasonable use of the servient land. The applicant must show either that the covenant confers no practical value, or that it is contrary to public interest.
The tribunal must be satisfied that financial compensation would be adequate for the dominant
owner. For example, 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.
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8.3.3 Section 84(1)(b): The dominant owners expressly or impliedly agree
This section applies where the dominant owners have agreed, expressly or impliedly, to discharge.
For example, 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.
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8.3.4 Section 84(1)(c): The dominant owners will not suffer injury
This section enables an application to be made where discharge of a covenant will not ‘injure’ the
dominant owners. This provision means that the tribunal can override spurious or frivolous objections. However, the tribunal has a balancing act to do; it will be wary of discharging covenants on this basis simply because discharge will not injure the current dominant owner and it will have regard
to social and economic concerns: the wider public interest rather than the interest of one
dominant owner.
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8.4 Summary
* Properly created covenants can exist forever.
* Covenants can be discharged or modified in several ways:
- Merger
- Express release/modification
- Implied release/modification
- By application to the Upper Tribunal (Land Chamber) on one of the grounds in LPA 1925, s
84.
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