Covenants

Question 1

Nature of covenants

Answer 1

• Nothing more than a promise contained in a deed
  
  • A deed is used to it is binding
• Essentially contractual, so content can be anything
• For it to be accepted as the equitable proprietary right (freehold covenant), the content must touch and concern the land [Smith & Snipes Hall v River Douglas Catchment Board]
• In as much as it is a private agreement, it is contractual
  
  • If it is to bind third parties (key feature of a proprietary right), IT MUST TOUCH AND CONCERN THE LAND

Question 2

Features of covenants

Answer 2

• The covenant must be negative or restrictive of the user of land (control of use of land, not control of the person entitled to the land)
  
  • Cannot personal to the occupier
• There must be a dominant tenement (but note, there is not necessarily a servient tenement)
  
  • Positive covenants will not run with the land
• The covenant must benefit or accommodate the dominant tenement
  
  • Must make it a more amenable place to live
• It must be intended to “run with the land [Smith & Snipes Hall v River Douglas Catchment Board]”
  
  • If it touches and concerns, it will be deemed to be intended to be permanent

Question 3

Covenants v easements

Answer 3

• Functionally similar with easements because they play a role with the enjoyment of the land and the development of the land
• Different in substance
• The common ones are about the maintenance of an area
• S84 LPA – the court has power to remove a covenant
• Parties can agree to lift a covenant

Question 4

Functional similarity between covenants and easements

Answer 4

Functionally similar with easements because they play a role with the enjoyment of the land and the development of the land

Like privately created planning rules

Very useful – if you rely on the character of an area to be governed by local planning rules, nothing will happen. Land is maintained better by private individuals to their mutual benefit. This is a more nuanced and flexible way of controlling the environment and development of land

Question 5

Substantive differences of covenants and easements

Answer 5

Easements enable the owner of dominant land to enter and do something on servient land whilst freehold covenants allow the owner of the benefitted land to prevent the owner of the burdened land from doing something on their own land

Freehold covenants are almost the mirror image of an easement

Question 6

Are covenants more limited than easements?

Answer 6

• The burden of restrictive covenants may bind assignees to the covenantor only in equity under the doctrine of Tulk v Moxhay and here too they behave like property rights
• The binding quality of some covenants is problematic as it allows private contractual agreements to have force beyond the parties to that agreement
  
  • This is why the burden runs in different ways than the burden of easements; easements are about doing something on another’s land, the owner of the burdened land does not need to do anything
  • A positive burden requires action, and the law is very reluctant to make people do things on the basis of an agreement they did not enter
  • The burden will only pass and behave like a proprietary right if it is restrictive (if it does not require the other person to do something, but simply refrain from doing something)

Question 7

Reform?

Answer 7

Law Commission Consultation Paper No 186, Easements, Covenants and Profits à prendre

• The law is far too complex
• There is an imbalance between positive and restrictive covenants
• Abolition is not the best solution
  
  • They should be reformed and called land obligations

Question 8

Utility of freehold covenants

Answer 8

• Private planning agreements – more flexible to suit the needs of the estate owners
• Restrictive covenants may be used to serve private and detailed individual purposes for which planning law is unsuitable
• Planning restrictions, even if they are adequate for the needs of adjoining owners, are enforceable only by the planning authorities
  
  • Most owners would wish to have the power of enforcement in their own hands

Question 9

Distinguish between property and contract

Answer 9

• Between the original parties (covenantee and covenantor), the covenant is simply a matter of contract: the burden, whether positive or restrictive, is enforceable by the covenantee against the covenantor
  
  • Because they are the contracting parties to the agreement
• When a third party is involved (and the C(RTP)A 1999 does not apply), then the solution is found in property law and you have to consider:
  
  • Where assignee of covenantor breaches burden
  • Where assignee of covenantee wishes to enforce the benefit

When someone is an assignee, you are out of the realm of contract law

Question 10

Distinguishing between property and contract

As between covenantee and covenantor

Answer 10

I.e. the original parties

Contract

Question 11

Distinguishing between property and contract

As between assignee from the covenantee and (original) covenantor

Answer 11

Must show that the burden has passed to himself at law [s78 LPA] unless equitable remedies sought (e.g. injunction) then must show that benefit has passed in equity

Question 12

Distinguishing between property and contract

As between covenantee and assignee in covenantor

Answer 12

Must show that the burden has passed to the assignee in equity, can only do so if covenant is restrictive

Question 13

Distinguishing between property and contract

As between assignee from the covenantee and assignee from the covenantor

Answer 13

must show that the benefit has passed to himself in equity and that the burden has passed to assignee from covenantor in equity, but only if burden is restrictive

Question 14

Passing the benefits and burdens

Answer 14

• Benefits and burdens are not treated the same at law or in equity
• Benefits run with the land
• Burdens do not
• Distinction created by 19th century approach of equity (Austerberry v Oldham Corp; but has been upheld in modern times in Rhone v Stephens)
  
  • Burdens of covenants do not run at law, and because of this, different rules apply

Question 15

Passing the benefit at law between the covenantee and others

Answer 15

s56(1) + s78(1) LPA
Contracts (Rights of Third Parties) Act, s1 + s7(1)

Question 16

s56(1) LPA

Answer 16

• Use if a third party
• A way of including third parties
• An assignee may be able to enforce a covenant that they did not sign under this section as long as they are existing and identifiable at the time of the agreement (may be named only generically)
  
  • Does not abrogate the doctrine of privity
• It does not enable future owners unless they are named to enforce the covenant

Question 17

Passing the benefit at law between the covenantee and the assignee

Answer 17

Must show that the covenants substance touches and concerns the land and was intended to run with the land [Smith & Snipes v River Douglas]

S78(1) LPA makes it run with the land if it touches and concerns the land

Question 18

s78(1) LPA

Answer 18

• Use if an assignee
• Allows the covenant to pass at law with the property
• Authorises third parties (assignees) to enforce the covenant because the covenants are deemed to be made with “the covenantee and his successors in title and persons deriving title under him … and shall have the effect as if such successors and other persons were expressed”
  
  • They are treated as it they were parties to the covenant – the benefit will pass with the title to the land
• Only affects covenants entered into after 1926
• The benefit at land must be identifiable within the covenant document

Question 19

Contracts (Rights of Third Parties) Act

Answer 19

• Only for covenants entered into after May 11 2000
• S1+2: if the contract either expressly or as a matter of construction purports to confer a benefit on a third party, he may enforce the contract, as long as he comes with the generic class described
  
  • Although he may not be in existence or identifiable at the time of the agreement), so wider than s56(1)
• No requirement that the covenant touch and concern the land, so wider than s78(1)

Question 20

Burden at law

Answer 20

Although the benefit can be enjoyed by a third party, a burden can never be imposed on a third party

Question 21

Burden at law on covenantor

Answer 21

• S79 treats the burden, whilst s78 treats the benefit
  
  • They work in opposite ways
  • When the covenantor covenants on behalf of their heirs and assigns, they do so to bear liability for the breaches of any of their future assignees (they agree to forever remain liable on the covenants even after they have parted with the land)
  • The burden stays with the original covenantor
• LPA s79(1): note that this does not have the same effect that s78 has for covenantees – it does not pass the burden; instead it fixes the covenantor with liability for his assignee’s breaches (i.e. the burden forever stays with the original covenantor)
  
  • Can contract out of it: section applies “unless a contrary intention is expressed”

Question 22

Burden at law on assignee

Answer 22

Does not receive the burden

• Austerberry v Oldham Corp*
• Rhone v Stephens*

S79(1) – original covenantor liable

Question 23

Austerberry v Oldham Corp

Answer 23

About an obligation to keep a road in good repair

Lindley LJ: if you want a burden to run with the land, it must be one of the legally recognised forms of proprietary rights

This is why covenants are only recognised in equity and are not registered (but they are registered as a notice on the register)

Question 24

Restriction on passing burden creates difficulties

Answer 24

This affects the value of the benefited land if the burden becomes unenforceable because the covenantor has conveyed his title to someone else

So, several indirect ways of transmitting the burden have arisen, though none is satisfactory

Question 25

Indirect transmission of the burden at law

Answer 25

Chain of indemnity

Benefit and Burden

Rent of Entry annexed to a rentcharge

Commonhold schemes

Question 26

Chain of indemnity

Answer 26

TRW Steering v North Cape Properties

• Weak link?
• A chain is only as strong as its weakest link – the covenantor, when they sell the property to the assignee, they will make them promise to reimburse them and to exact an identical promise of indemnity to the person who he will sell in the future
• Finding the person who is liable is difficult, and making people pay up the chain is difficult

Question 27

Benefit and burden

Answer 27

Holsall v Brizell

If the person who lives on the burdened land also receives a benefit which is somehow connected to the burden, then they must accept the burden

Limited to circumstances of relevance

Ives v High

Question 28

Rent of entry annexed to a rentcharge

Austerberry v Oldham Corp

Answer 28

This is a legal right in land and so can ‘run’ with burdened land

Rare

Commonhold schemes

Question 29

Commonhol schemes

Answer 29

• Possible since 2003 [Commonhold and Leasehold Reform Act 2002, for flats]
  
  • Designed to make it possible to own a freehold of flats in a commonhold scheme (midway between leases and freehold estates)
  • The covenants are scene as mutually enforceable
  • Since the scheme has come into operation, there have only been a handful of these schemes set up
• Almost never used

Question 30

Benefit and burden conditions

Answer 30

• Two conditions in Thamesmead Town v Allotey:
  
  • The burden must be relevant to the exercise of the rights which enable the benefit to be obtained; and
  • The assignees of the covenantor must be free, at least in theory, to elect whether to take the benefit of the covenant (must be able to avoid burden by renouncing benefit)

So, in Rhone, the assignee of the covenantor, although entitled to the ‘benefit’ of the support for her roof, could not realistically elect to renounce this to avoid the burden of having to pay for its repair

• Rhone v Stephens, per Lord Templeman: “the condition must be relevant to the exercise of the right”
• But, TRW Steering v North Cape Properties: “it matters not what actual use, if any, has been, or is likely to be, made of the right of way. Use of the improved right of way is available to the dominant tenement, which in my opinion can properly be said to benefit from the obligation and so to be affected by it”
• The cost of maintenance must be connected to the use of the benefit, not simply incidental to it [Konstantanidis v Townsend]

Question 31

History of passing the benefit at equity

Answer 31

• Originally the burden of a covenant was a private contractual obligation at common law, and so would not run with the land
  
  • They were simply agreements between neighbours regarding restrictions on the land
• But, equity took a different view. Per Lord Cottenham in Tulk v Moxhay:
  
  • It ought to be a matter of conscience if somebody bought land that was subject to a restrictive covenant. if you bought property and knew about the restriction, it would be unconscionable to ignore the restriction, even if it was subject to a contract which you were not party to
  • “For if an equity is attached to a property by the owner, no one purchasing with notice of that equity can stand in a different situation from the party from whom he purchased”
• Originally, covenants ran with the land as a matter of conscience in equity to prevent somebody taking advantage of a restriction and then turning around and making a profit out of it

Question 32

Passing the benefit in equity

Answer 32

• As a matter of procedure, most cases will be argued on equitable principles because you cannot mix equitable and legal principles in the same case
• Usually, you will be trying to force a covenant against a successor in title, and so you will have to show
  
  • The burden ran to bind the successor in title in equity
  • That the benefit runs in equity (refer to the equitable principles)

If you are arguing to enforce it against the original covenantor, you argue at law

• The covenantee in equity (same as common law): s78 LPA, Smith & Snipes Hall Farm v River Douglas Catchment Board

Question 33

Three modes of passing the benefit at equity

Answer 33

The assignee (from the original covenantee)

• Assignment [Newton Abbot Co-op Soc v Williamson v Treadgold]
  
  • Of little importance, has been taken by Annexation
• Annexation [Federated Homes v Mill Lodge Properties]
• Scheme of development (use when you cannot use annexation)
  
  • Elliston v Reacher
  • Re Dolphin’s Conveyance
  • Small v Oliver Saunders

Question 34

Assignment

Answer 34

• Before 20th century, was the main way covenants were passed
  
  • Before Tulk because they were deemed to be private contractual agreements, thus when you sold your land to a purchaser, you would personally give (assign) the benefit to that person so that they could exercise it (not as a property right)
• Largely overtaken by statutory annexation after Federated Homes, but still has use where statutory annexation has failed for some reason
  
  • E.g. pre 1926 covenant, as in Small v Oliver & Saunders
• Three conditions [Newton-Abbot v Williamson & Treadgold]
  
  • Covenant must benefit land and not be a personal benefit
  • Land must be ascertainable (named or identifiable in some way)
    
    • There must be land to be benefited
  • Assignment must be contemporaneous with transfer of land to be benefited, it cannot come later or before the transfer of land
• Because this is a personal transfer, there must be a chain of assignments to keep the benefit intanct
  
  • A fresh assignment every time the property is transferred. If there is a break, the benefit dies and cannot be resurrected

Question 35

Annexation

Answer 35

• Making the right fixed to the land itself and therefore passes with the title / successors to title
• Statutory annexation by s78(1) LPA 1925 has the effect of annexing the benefit to the land [Federated Homes v Mill Lodge Properties: Brightman LJ; but can contract out]
  
  • Taking the benefit on behalf of people who will own the land in the future
• Annexed to ‘each and every part’, so that if parcel later divided, benefit remains annexed to divisions
  
  • see Re Ballard’s Conveyance (1937), where the dominant tenement was too large to benefit, no annexation at all;
• Land to be benefited must be identifiable, otherwise no annexation occurs: Rogers v Hosegood; Renals v Colishaw, Sainsbury plc v Enfield LBC
  
  • In London County Council v Allen, the CC did not have any land to which the benefit could be attached (pre LPA 1925). The burden could not run because it was not serving any land, only the county council
• Permanent attachment of benefit of restrictive covenant to land. Once annexed, benefit passes automatically on a transfer of the land without specification.
  
  • S78 is a word saving provision
• Cannot use when there has been no benefit taken for the plot of land against the neighbouring plot

Question 36

Federated Homes v Mill Lodge Properties

FACTS

Answer 36

Mill Lodge covenanted with not to exceed a certain density of building on its land for the benefit of land retained by the seller. Seller then sold two lots (red and green land) down chain of conveyances until they came to Federated Homes. Chain of conveyance of green land had assigned the benefit, but no such express provision re red land.

Q – whether FH, as owner of red land, could enforce the covenant against ML.

Question 37

Federated Homes v Mill Lodge Properties

HELD

Answer 37

• Benefit passes under s78 if dominant land identified expressly and benefit touches and concerns the land.
  
  • Benefit becomes annexed to each and every part, so any later divided plot carries benefit.
• NB: Roake v Chadha: can avoid effect of s78 by express declaration that benefit is personal (by contracting out of it)
• For historical reasons, benefits do not pass under s62 LPA 1925 (see Roake, Sugarman v Porter)
  
  • Covenants were never recognised as property rights, unlike easements, because of their origin in contract

Question 38

Crest Nicholson v McAllister

FACTS

Answer 38

: the developer was selling parcels of land with restrictive covenants, and the land to be benefited by the covenant was confined to the land which ‘remained unsold’; so, by the time the last plot was sold the covenant no longer remained as there was no more land remaining unsold. This killed off all the burdens because there was no land to be benefited for the covenant to be annexed to

If it had said, ‘for the benefit of land retained by the covenantee for the time being,’ it would have worked

Question 39

Crest Nicholson v McAllister

HELD

Answer 39

Land must be identified either expressly or by implication as intended to be benefited. Here, developer sold off parcels of land with restrictive covenants on numbers of dwellings

Land being held for the time being by the covenantee would sufficient

Question 40

Scheme of development

Answer 40

• Useful where you cannot show annexation
• Reciprocity and mutual enforceability – useful in housing developments where it is intended that the neighbourhood will retain a certain character
• Elliston v Reacher: four requirements:
  
  • Plots sold by common vendor *
    
    • Re Dolphin’s Conveyance – no need for common vendor as long as intention that mutuality is clear; here, seller undertook same covenants with every plot.
  • Previously defined portions *
    
    • Baxter v Four Oaks Properties Ltd: plots need not have been laid out previously;
  • Intended by vendor to be for mutual benefit;
  • Purchasers bought plots with this understanding;
• Emile Elias & Co v Pine Groves Ltd (Privy Council): lack of uniformity in covenants and so could not infer any mutuality or reciprocity, so there was no scheme of development

Question 41

Passing the burden

Answer 41

Covenantor: bound, same as at common law

• S79(1) LPA 1925;
• Opposite of s78, makes the original covenantor liable for breaches of all his successors in title

Assignee:

• Can bear the burden under the doctrine of *Tulk v Moxhay (was not restrictive to restrictive covenant)
• Haywood v Brunswick – only restrictive burden can pass (Courts were reluctant to force activity and expense on the basis of a deal to which the individual was not a party, but no such restrictions applies in leasehold covenants, the Law Commission has recommended change)
• London CC v Allen: in order for a restrictive burden to run, the covenantee must own land to be benefited at time of grant or burden will not bind assignee of covenantor.

Question 42

Doctrine in Tulk v Moxhay

Answer 42

• Lord Cottenham LC: “The question is not whether the covenant runs with the land, but whether a party shall be permitted to use the land in a manner inconsistent with the contract entered into by his vendor, and with notice of which he purchased.”
• An equity which binds the conscience of the assignee who takes with notice (n.b., after 1926 notice replaced by registration as land charge on entry as notice against title);
• Prevents situation in which A grants neighbouring land to B at a low price in view of burden of restrictive covenant benefiting A’s retained land, then B sells burdened land to C for a much higher price, knowing that C would not be bound by contract between A and B (Grey & Grey – unjust enrichment). B and C could collude to get valuable land cheaply; value of benefited land diminished.

Question 43

Modern view of Tulk v Moxhay in Rhone

Answer 43

• Only restrictive burdens run
• Lord Templeman: enforcement of restrictive covenants lies in property, not conscience: it deprives the covenantor of one of the rights associated with ownership, so that when covenantor transfers title to assignee, the assignee purchases limited ‘bundle’ of rights.
  
  • Property rather than an equitable view

Question 44

Protection of benefits

Answer 44

• Remember that the benefit of a restrictive covenant is _never_ a legal interest, despite being made by deed; it is only equitable, so…
  
  • Does not come under s1(1) LPA, and so cannot be registered
  • Does not come under s27 LRA because it is always equitable
• Registered land:
  
  • MUST be protected by entry of notice: LRA 2002, s 32;
• Cannot be protected by actual occupation because it is a right over land you do not occupy / go on to

Question 45

Modification of covenant

Answer 45

• Obsolescence: Crest Nicholson Residential Ltd v McAllister (2002);
• There was no land to be benefited so the covenant died
• LPA 1925, s 84; Upper Tribunal has power to discharge or modify where it is no longer fit for purpose
  
  • Shephard v Turner
• Covenant against increasing density of housing lifted (house built in garden of existing house in scheme of development.

Question 46

Shephard v Turner

Answer 46

The Lands Tribunal may discharge or modify a restrictive covenant not only if the covenant is obsolete; but also, if it impedes some reasonable use of the land. In order to succeed under this alternative head, the Tribunal needs to be satisfied that the restrictive covenant does not secure any practical benefit for the beneficiaries. It must further take the view that payment of money will adequately compensate for the disadvantage arising from the modification.

Question 47

Future land obligations

Answer 47

Law Commission Consultation Paper No 186, Easements, Covenants and Profits à prendre.

• ‘Land obligation’ to be new interest in land;
• Could impose positive obligations of maintenance and repair;
• No implied creation;
• Could affect tenements even when under common ownership and occupation;
• S 84 to be modified to include land obligations

Question 48

Summary of rules

BURDEN AT LAW

Answer 48

Cannot pass: Austerberry v Oldham Corp;

S 79 LPA 1925 –Covenantor is liable for breaches of assignees

Question 49

Summary of rules

BENEFIT AT LAW

Answer 49

Can pass if it touches and concerns the land: Smith & Snipes Hall Farm v River Douglas Catchment Board;

S 78 LPA 1925 – benefit passes to assignees

Question 50

Summary of rules

BURDEN AT EQUITY

Answer 50

Can pass: Tulk v Moxhay;

But only if restrictive: Haywood v Brunswick; Rhone v Stephens

Question 51

Summary of rules

BENEFIT AT EQUITY

Answer 51

Can pass – 3 ways:

• Assignment;
• Annexation - Federated Homes v Mill Lodge Properties
• Scheme of development