Covenants Flashcards
is a covenant capable of being legal?
No
what is a positive covenant?
A covenant that requires effort or expense for its performance
how can a covenant be made?
Covenants can be created by being in writing and signed.
how is the original covenantor bound?
The original covenantor is bound by privity of contract.
what are the remedies for breach of positive covenant?
Remedies for the breach of a positive covenant are damages and possible specific performance.
what are the remedies for breach of negative covenant?
Remedies for the breach of a restrictive covenant are injunction or damages in lieu of an injunction.
how can a positive covenant be enforced?
Positive covenants may be indirectly enforced using the doctrine of mutual benefit and burden or a chain of indemnity covenants.
who is the covenantor?
The person who makes the promise and who has the burden of the covenant
who is the covenantee?
The recipient of the promise and who has the benefit of the covenant
what is the servient land?
(Or burdened land) – the land bound by the covenant owned by the covenantor
what is the dominant land?
(Or benefited land) – the land with the benefit of the covenant owned by the covenantee
what is annexation?
This means that the benefit of the covenant is attached to the land of the covenantee and the benefit passes automatically to any successor in title of the covenantee
what is assignment?
An express transfer of the benefit of the covenant to a successor in title to the covenantee.
what is a covenant?
a promise to do or not to do something
what is a negative covenant?
a negative covenant is a promise to refrain from doing something but there must be no effort or expense attached to it (otherwise it is a positive covenant)
give some examples of negative covenants
o To keep the land as an open space.
o Not to divide the property into flats.
o Not to allow the grounds of the hotel to be used for public events.
o Not to use the property other than as a single private dwelling house.
give some examples of positive covenants
o Not to let the property fall into disrepair.
o To contribute towards the cost of the maintenance of the shared driveway.
o To paint the exterior of the property every five years.
can a covenant be a legal interest?
No, it can only be an equitable interest
what format must a covenant take?
it must be in signed and in writing (i.e. complying with s53(1) LPA 1925)
can be created by deed or contract
who are parties to the contract/deed of covenant? What is the effect of this?
The original covenantor and original covenantee are parties to a contract
Therefore, this is governed by contract law and privity of contract and the liability of the original covenantor could last forever. This applies to positive and negative covenants. These means the covenant is always enforceable between the contracting parties
can the burden of a covenant pass at common law?
No. This applies to positive and negative covenants.
what is the effect of privity of contract on the covenantor and covenantee?
the original covenantee and covenantor will always be bound by the contract because of privity of contract.
a successor in title to the original covenantor is not bound by the covenant because covenants cannot pass at common law
this relates to positive and negative covenants
can the burden of a covenant run in equity?
The burden of restrictive covenants only can pass in equity under Tulk v Moxhay, if the requirements are met
what are the Tulk v Maxhoy requirements?
o Must be a negative covenant
o the covenant was entered into for the benefit of ascertainable retained land of the covenantee
o The covenant must touch and concern the dominant land
o the burden of the covenant was intended to bind successors in title; and
o The owner of the servient land must have notice of the covenant for it to bind them (the method will depend on whether the land is registered or unregistered)
re: Tulk v Maxhoy
explain ‘the covenant was entered into for the benefit of ascertainable retained land of the covenantee’ and give an example
As most covenants are made when the land is sold, this means the seller must retain the land
Case law example - C sold land subject to a covenant not to build on it. The covenantor started to build on it. C could not stop her as they had failed to retain any dominant land.
what test is used to establish if the covenant touches and concerns the dominant land?
The test in P&A Swift Investments v Combined English Stores Group PLC can be used:
* The covenant must only benefit the dominant owner for the time they are on the land. In other words, if they were separated from their land it would cease to be advantageous to them
* The covenant must affect the nature, quality, mode of user or value of the land of the dominant owner
* The covenant must not expressed to be personal
re: Tulk v Maxhoy
how can intent to burden the servient land be demonstrated?
Explain.
it can be express or implied
express = this will be set out in the document creating the covenant, i.e. ‘The Buyer and their successors in title covenants with the Seller to use the property only as a private dwelling house’
Implied under s79(1) LPA 1925
what is the position under s79(1) LPA 1925?
“A covenant relating to any land of a covenantor… Shall, unless a contrary intention is expressed, be deemed to be made by the covenantor on behalf of himself and his successors in title and the person’s deriving title under him or them…”
what does it mean if a covenant is ‘running with the land’?
successive owners / occupiers are bound by the restriction
how can a positive covenant be enforced and why?
given that positive covenants cannot run at common law or equity (so do not bind successors in title), common law has devised three ways positive covenants can be enforced against successors in title:
1. create a lease
2. indemnity covenant
3. doctrine of mutual benefit and burden
how does an indemnity chain work?
the original covenantor does not sue the current owner (there is no privity of contract between them). The original covenantor sues the original covenantee, who then seeks an indemnity from their successor (and the chain continues)
re: enforcing positive covenants
explain the position in relation to indemnity covenants
this is an indirect method of enforcement
in the sale of servient land, it is common practice for the buyer to enter into an indemnity covenant promising to observe and indemnify the positive covenants and indemnify the seller for any loss incurred as a result of any breach
an indemnity covenant is then sought from each subsequent buyer creating a chain of indemnity covenants
re: enforcing positive covenants
explain the position in relation to leases
if the owner of the freehold land wants to ensure a covenant is enforceable, they could grant a lease rather than selling the land
this is because positive (and negative) covenants and binding on a successor in titled to a tenant
however, leases are less attractive to buyers than the freehold
re: enforcing positive covenants
what is the problem with indemnity covenant chains
it is only as strong as its weakest link, if one person cannot be found or is insolvent then the chain is on little value and the burden falls on the last person in the chain
if the negative covenant runs in equity, what effect does this have?
the original covenantor can enforce is against the current owner/occupier directly
what is the doctrine of mutual benefit and burden?
Halsall v Brizell doctrine
The doctrine provides that a person who wishes to take advantage of a service/facility which benefits their land must comply with any corresponding obligation.
There are two conditions (Thamesmead Town v Allotey [2000]):
o There must be a clear correlation between the benefit and the linked burden; and
o The covenantor’s successor in title must have the opportunity to elect whether to take the benefit and accept the related burden or to renounce it and escape the burden
what are the Halsall v Brizell conditions?
There are two conditions (Thamesmead Town v Allotey [2000]):
o There must be a clear correlation between the benefit and the linked burden; and
o The covenantor’s successor in title must have the opportunity to elect whether to take the benefit and accept the related burden or to renounce it and escape the burden
If Halsall v Brizell is relied upon, what effect does this have?
Give an example
this is not a direct method of enforcement. The enables the owner of the benefitted land to prevent the exercises of rights if the cost is not paid
Example - Sam sells part of her garden to Joy. As part of this, Joy has a right of way subject to a contribution towards maintenance. Joy sells the land to Tom who refuses to accept. If the conditions are satisfied, Sam can prevent Tom from exercising the right of way under the contribution is made.
can the benefit of a covenant run at common law?
Yes, by either annexation or assignment
re: covenant running at common law
explain annexation
the original covenantee can enforce the benefit of a covenant against a successor in title to the benefitting land (i.e. the original convenantor has sold the land and the original covenantee wants to enforce against the new owner) if:
o The covenant must touch and concern the land
o There must be intention that the benefit should run with the estate owned by the covenantee (either express or implied)
o The covenantee must have legal estate in the benefitted land (i.e. if they only had equitable interest this is not possible)
o The buyer of the benefitted land must also take a legal title in the benefitted land (the legal title need not be identical i.e. the benefit of a covenant could pass to the tenant of a legal lease)
re: covenant running at common law & equity
explain assignment
the benefit of a covenant can pass to a successor by express agreement, the conditions are:
o it must take place at the same time as the transfer of land;
o Be in writing;
o Singed by the assignor (the original covenantee); and
o Written notice of the assignment must be given to the person with the burden of the covenant
can the benefit of a covenant run in equity?
yes, there are three methods:
o Annexation
o Assignment
o Building schemes
re: benefit of a covenant running in equity
explain annexation
this means the covenant has permanently attached to the dominant land. Therefore, any owner of dominant land can enforce the covenant. There are three methods of annexation:
1. express
2. implied
3. statutory
re: benefit of a covenant running in equity
explain express annexation
express annexation will take place where the covenant:
* expresses an intention to benefit a defined piece of land in clear and precise words (i.e. it is not sufficient for the covenant to be made for the benefit of the covenantee and their successors)
* The annexation applies to all of the dominant land (no matter how extensive)
it is standard practice to use the words ‘each and every part’ in case the land is divided into smaller plots in the future
re: benefit of a covenant running in equity
what are examples of words of annexation
‘for the benefit and protection of’
re: benefit of a covenant running in equity
explain implied annexation
the court has been willing to imply annexation where such annexation was obvious and there would be an injustice to ignore it
Test - the required intention must be manifested in the transfer as construed in light of all the circumstances
statutory annexation must be considered before implied annexation is considered
re: benefit of a covenant running in equity
explain statutory annexation
S78 LPA 1925 will automatically annex a freehold covenant to each and every part of the land retained by the covenantee provided that:
o The covenant was granted post-LPA 1925;
o The covenant must touch and concern the land; and
o The benefitted land can be identified from a description, plan or other reference in the transfer
re: benefit of a covenant running in equity
how is statutory annexation limited?
o The original covenanting parties can exclude the effect of s78 LPA 1925 from the transfer creating the covenant; and
o The need for the benefitted land to be identified from a description, plan or other reference in the transfer
re: benefit of a covenant running in equity
explain building schemes
- These are rare and modern developments tend the exclude them
The following conditions must be met:
o Applies to a defined area where the title is derived from a common owner
o The estate was laid out in lots subject to restrictions intended to be imposed on all the lots
o The common owner intended restrictions to apply to all the lots to be sold; and
o The original buyers bought their lots on the basis that the restrictions would benefit all of the lots in the scheme
The effect is to impose reciprocal obligations between the buyers of the different plots of the scheme, including PCs
if the dominant land and the servient land have both been transferred from the original covenantee & covenantor, what must happen for the dominant land owner to take action?
how the benefit and burden have passed to the successors needs to match for the dominant land owner to take action.
re: passing of the benefit and burden
explain the position regarding negative covenants
The burden of a restrictive covenant can only pass in equity (subject to requirements being met)
Therefore, the original covenantee (and the successor in titled) needs to have the benefit of the covenant in equity too. This will enable them to pursue a claim in equity against the successor in title to the original covenantor
can a successor in title to dominant land sue a successor to servient land for breach of positive covenant? Explain.
No. The new dominant land owner cannot sue the new servient land owner.
This is because in order for a new dominant owner to sue, the way the benefit and burden passed from the original covenantee/or to the new owner(s) must match.
The burden of positive covenants cannot pass at common law or equity. Therefore, it is impossible for this to match the way the benefit passed to the new dominant land owner.
This means the new dominant land owner would need to sue the original covenantor for the new servient owner’s breach. They will only be able to do this if they can show that the benefit passed from the original covenantor to them (i.e. the new dominant owner) by common law.
The dominant owner can sue the original covenantor is this was because the original covenantor is still bound by privity of contract.
The original convenantor would then sue the new servient owner, if they had given an indemnity.
re: remedies for breach of positive covenant
who can claim damages and against whom?
o original covenantee against the original covenantor
o the new dominant land owner (i.e. successor to the original covenantee) against the original covenantor (provided they can show they have the benefit of the covenant at common law)
re: remedies for breach of positive covenant
when can specific performance be sought?
where there is a breach of positive covenant by the original covenantor. However, if they have disposed of the land they will not be able to perform the obligation.
re: remedies for breach of positive covenant
what remedies are available?
o most common (common law remedy) - damages for loss and future loss
o specific performance
re: remedies for breach of positive covenant
how can an award of damages be limited?
damages are only awarded where a loss has been suffered. Therefore, if the original covenantor (/their successor), has disposed of the land, they would not be able to claim damages
re: remedies for breach of positive covenant
what are the limitations to the remedy of specific performance?
o it cannot be used against the successor to the original covenanter
o if the original convenantor has already disposed of the land, they will not be able to perform the obligation.
what is the remedy for breach of restrictive covenant?
as the restrictive covenant runs with the land in equity, the principal remedy is an injunction, but the court may award damages
when can an injunction be applied for?
An injunction can be applied for in anticipation of a breach or in response to an existing breach
is there a right to an injunction?
no, there is no automatic right to an injunction. It is awarded at the judge’s discretion (as are all equitable remedies).
when will a judge award damages rather than an injuction?
o The injury to C’s rights are small;
o Capable of being estimated in money;
o Can be adequately compensated by money; and
o It would be oppressive to the respondent to grant an injunction
give an example where the court is likely to award damages for breach of a restrictive covenant rather than an injunction
homes have been built, sold and occupied in breach of an RC. The court is likely to award damages.
when will an injunction not be awarded?
- where there is delay;
- where C does not have clean hands; or
- if damages would be more appropriate
can the person with the benefit of a restrictive covenant pursue a claim against the original covenantee?
yes, based on privity of contract. however, this would be for damages anyway which would unlikely be adequate (as the purpose of a restrictive covenant is to stop someone doing something)
re: removing/limiting the effect of a covenant
explain express release
i.e. when the covenantees agree to modify a RC or PC
A deed is required
It must be entered into by the serv and dom owners of the land
what are the methods of removing/limiting the effect of a freehold covenant?
o Express release
o Common ownership
o s84 LPA 1925
o Insurance
re: removing/limiting the effect of a covenant
explain common ownership
Where the serv and dom land come into common ownership, the RC / PC will be extinguished
This is called the unity of resin
re: removing/limiting the effect of a covenant
explain s84 LPA 1925
this applies to restrictive covenants only
An application can be made to the Lands Chambers of the Upper Tribunal to discharge or modify the RC in whole or part
re: removing/limiting the effect of a covenant
what must be satisfied for an applicant to make a successful s84 LPA 1925 application?
The applicant must satisfy one of the grounds in s84(1) LPA 1925:
1. The RC is found to be obsolete;
2. The RC impedes some reasonable use of the land and either:
It does not secure any practical benefit or value to the persons it should benefit; or
It is contrary to the public interest
AND in either case, money will be adequate to compensate
o those entitled to the benefit have expressly or impliedly agreed to the discharge; or
o The discharge will not injure the persons entitled to the benefit
re: s84 application
what happens if the identity of the dominant owners is not known?
a preliminary application must first be made to establish the identity of the dominant owners
re: removing/limiting the effect of a covenant
explain insurance
- This relates to RCs only
- This policy would be purchased for a one-off premium
- If the dominant owners sought to enforce the breach of the RC, the insurer accepts the financial risks
when will a purchaser of unregistered land be burdened by a restrictive covenant?
The RC must have been registered as a Class D(ii) land charge against the name of the owner of the burdened land when the RC was given. If the RC is not registered, the buyer of a legal estate for money or money’s worth is not bound by the covenant.
The registration is deemed to constitute actual notice from the date of registration whether or not the buyer actually searches the land charges register.
when will a purchaser of registered land be burdened by a restrictive covenant?
pre-October 2003 > the RC should have been protected as a minor interest at the time the covenant was given by the registration of a notice in the charges register of the burdened land
post-October 2003 > the RC should have been protected by a notice in the charges register of the burdened land
