Freehold covenants Flashcards
What is a covenant?
A promise (usually contained in a deed)
Though a deed is not essential
Generally arise between freehold owners when one person sells part of land and wishes to ensure. buyer does not do anything which could affect amenity and value of seller’s retained land
How is a covenant validly created?
In writing and signed by grantor
What is a covenantor and covenantee and dominant land and servient land?
- Covenantee = person who receives the benefit of promise and can sue if breached (owns the dominant land which is benefitted)
- Covenantor = person who makes promise and can be sued if breached (owns the servient land which is burdened)
What is the difference between a positive and negative/restrictive covenant?
- Positive = a promise to do something, usually expenditure of money (maintain fence, contribute cost of repair)
- Negative/restrictive = promise not to do something; land us restricted and complied with by inaction (do not use for business purposes or build above certain height)
What are the two sets of rules for passing the burden and benefit of covenants to new owners?
Equitable rules and common law rules - which one depends on what rules can be used to pass the burden
Must not be mixee
If burden and benefit has passed under rules of equity or using common law rules - they can be enforced
What will not be enforced against a successor covenantor in equity?
Positive covenants
So important to distinguish between positive and negative
What is the test to decide whether a covenant is positive or negative?
The hand in pocket test - if covenantors have to put hands in pockets to find money to spend to perform = positive
Is only money included in the hand in pocket test?
No - can also include effort and time
In deciding, do we look at substance or form?
Substance! i.e. what is the essence of the obligation?
E.g. covenant to not allow a building to fall into disrepair - appears restrictive, but obligation is to maintain the building = positive
Are both positive and restrictive covenants interests in land?
- Restrictive covenant is; has proprietary status
- Positive covenant does not have proprietary status in same way
What is a mixed covenant and what are the 2 ways they can be interpreted?
A promise which has positive and restrictive elements
1. As separate covenants
2. As one obligation with a condition attached
E.g. a covenant not to build on land (restrictive) without consent of owner of dominant land (positive)
When is the separate covenants approach taken in mixed covenants?
If positive and restrictive aspects of obligation can be separated to create two standalone covenants; one positive and one restrictive
E.g. a covenant to paint the exterior of a building every 2 years and not to paint front door red - split into two separate parts
When is the one obligation with a condition attached approach taken and what happens?
If mixed covenant cannot be split - covenant will be interpreted as being overall positive or restrictive depending on obligation. The additional covenant will be viewed as simply a condition attached to overall positive or restrictive obligation
E.g. a covenant not to build on servient land without consent of dominant owner - is a restrictive covenant with a positive condition attached
How is a covenant enforceable between original parties?
As a matter of contract law
If a successor covenantee wishes to enforce a breach against a successor covenant, what 2 things must be shown?
- Burden of covenant has passed to successsor covenantor
- Benefit has passed to successor covenantee
Is it enough to show burden has passed in equity and benefit passes at common law?
No - if equitable remedy required, both benefit and burden must pass in equity
Same for common law
What is the general rule for the passing of a burden to a successor under common law?
Burden does not pass to a successor = covenant unenforceable against successor in title
Unenforceable = cannot be enforced against covenantor and covenantee/successor covenantee is unable to enforce the covenant against person who breached it
What role does equity play in burdens passing?
Has developed rules allowing burden of certain covenants to pass to successors = allows covenant to be enforced direct against person in breach
What cannot pass in equity?
The burden of positive covenants
For positive covenants - use common law rules instead
What are the 4 requirements for the burden to pass in equity?
Tulk v Moxhay
- Covenant must be restrictive
- Covenant must accomodate the dominant tenement
- There must be intention for the burden of the covenant to run
- There must be notice of the covenant
1st requirement = positive covenants cannot pass
What does it mean that the covenant must ‘accomodate the dominant tenement’?
2nd requirement
- Covenantee and successor covenantee must hold interest in land at time of creation and enforcement
- Covenant must touch and concern the land
- Dominant land and servient land must be in proximity
What does it mean that the covenantee and successor covenantee must hold an interest in land at time of creation and enforcement?
Must be a dominant tenement that can be benefitted so original covenantee and successors must have retained an interest in the dominant land at time of creation and enforcement of covenant
- Original covenantee will hold freehold to dominant land at time of creation
- Succcessor will hold freehold to dominant land at time of enforcement
What does it mean for the covenant to touch and concern the land?
Covenant must have some direct beneficial impact on dominant land:
- Only benefits dominant owner whilst they own dominant land
- Affects the nature, quality, use or value of dominant land; and
- Not be expressly personal
COVENANT MUST BENEFIT LAND I.e. benefits land not person
E.g. covenant not to use servient land for industrial purposes would benefit dominant land; not having industrial use means dominant land is more enjoyable and valuable than if there were a factory on servient land
What does sufficient proximity mean?
Dominant and servient land must be near to each other but do not need to share a boundary/be right next to each other
Close enough that dominant land benefits from covenant
How can intention be shown?
3rd requirement
- Expressly - covenant worded in a way to make clear successors are bound (X hereby covenants with B for themself and their successors in title
- Impliedly - covenant relating to land shall be deemed to be made by covenantor on behalf of successors unless contrary intention shown
How is notice of the covenant shown for registered and unregistered land?
4th requirement
- Registered - covenant must be protected by entry of a notice in charges register of servient title
- Unregistered - covenant must be protected by a Class D Land Charge
If notice is not done, does that mean all successors will not be bound?
Purchaser for value will not be bound, but a donee (inherited/gifted) will be
What two elements must be fulfiled for the benefit to pass in equity?
Need to consider if benefit passes after deciding burden does
- Covenant must touch and concern the dominant land (same test as for burden)
- The benefit must pass by annexation, assignment or building scheme
When does annexation occur?
When covenant is made in such a way that benefit becomes a permanent part of the dominant land at the time when covenants are created
Legal glue
What is the consequence of annexation?
The benefit passes automatically when the dominant land is sold (without specifically being mentioned in transfer deed)
What are the 2 ways annexation might happen?
- Express annexation - where express words of covenant make clear that original parties intend the benefit to become part of dominant land (not just a personal advantage to covenantee) e.g. for the benefit of the owners and successors in title
- Statutory annexation - a covenant relating to any land of covenantee shall be deemed to be made with the covenantee and his successors in title of land intended to be benefitted
Statutory may make express seem unecessary - but consider other methods of passing the benefit
When does assignment occur?
Where the benefit of covenant not annexed at outset, but benefit can be assigned when dominant land is transferred
Will assignment have the ‘legal glue’ effect of annexation?
No - the benefit must be assigned each time the land is transferred
Benefit exists separately from land itself; separate interest in land
What are the formalities of assignment?
In writing and signed by person transferring benefit
How to covenants work in a building scheme (new housing estate)?
- All houses are subject to same covenants
- If conditions met, covenants treated as a set of by-laws enforceable by and against all owners (not necessary to show specifically that benefit of a particular covenant has passed to a C)
Restrictive covenants only
What are the 4 conditions of a building scheme?
- Buyers buy from same seller
- Seller divided estate into plots
- Covenants were intended to benefit all pots
- Each buyer buys on understanding that covenants are intended to benefit all plots
Interpreted as guidelines rather than strict requirements
Can the original covenantee sue for breach of the benefit after the dominant land is sold?
E.g. after they move out
Technically yes - they still have the benefit of covenant - but unlikely they would want to and hard to envisage any loss suffered by original covenantee who no longer owns dominant land
Summary of benefit and burden passing in equity
What can a successor covenantee do once they show that:
* Benefit of covenant has passed to it
* Burden has passed to successor covenantor
?
It can enforce the covenant direct against the successor covenantor who is in breach
What is the nature of available remedies and are they automatic?
Equitable remedies (because restrictive covenant is an equitable interest in land) - no automatic right as they are dicretionary
Most common is injunction
What two kinds of injunction can be applied for?
- Prohibitory injunction - if breach threatened or ongoing (e.g. land being used for unauthorised use)
- Mandatory injunction - breach already occurred and can order person in brach to do something (e.g. building has been built in breach)
When should a claimant apply for an injunction?
Immediately - equitable principle ‘delay defeats equity’
E.g. waits until building is complete and then applies = application likely to be refused
When will equitable damages in lieu be awarded?
Where it would be oppressive to grant injunction
But no automatic right!!!!
E.g. Wrotham Park Estate - court refused to grant mandatory injunction to demolish much needed houses and awarded equitable damages insead - calculated as a % of profit made by developer reflecting amount that theoretically would have been paid to owner to secure a release from the covenant
When should you consider the common law rules?
- Covenant is positive; or
- Does not consider Tulk v Moxhay
What are the common rules primarily applied to?
Positive covenants
As burden of restrictive can pass using equitable rules
What is the general rule for the burden of a covenant in common law?
The buden does not pass in common law
So unenforceable against successor in title
As the burden does not pass at common law, what happens to it?
Does it disappear?
It remains with the original covenantor
The continuing liability of the original covenantor
What is the effect of the continuing liability of the covenantor?
The original covenantor can be sued for both its own breaches and the breaches of successors
Is the continuing liability of the covenantor express or implied?
Can be expressed but will be implied by statute
What remedy is available against the original covenantor?
Only damages - they are no longer in possession/control of land
How does the original covenantor recover outlay?
I.e. protect itself from breaches by successors
Enters an indemnity covenant as part of the sale process - successor promises to comply and will indemnify (reimburse) for any loss incurred as a result of breach
Happens each time the burdened land is sold
Known as indirect enforcement
Can the original covenantor sue beyond their direct successor?
No - current owner can be sued by no one but their predecessor in title in the chain of indemnity
What happens if the chain of indemnity is broken?
The last successor in the chain will have no recourse
How could a complete chain fail?
If someone in chain is bankrupt/dead/missing - their predecessor cannot recover
Chain only as strong as its weakest link
What is the exception to the general rule that the burden of a covenant does not pass to a successor at common law?
Meaning burden of a covenant can pass to successor covenantor
Doctrine of mutual benefit and burden
The rule in Halsall v Brizell
Meaning indemnity covenant not necessary!
When will the doctrine of mutual benefit and buden apply?
Where the covenantee grants to the covenantor a benefit in the nature of an easement and imposes a connected burden
E.g. covenantee grants right to park on their land to covenantor, and covenantor covenants to contribute to the cost of maintaining the parking area it has the right to use = successor covenantor cannot take the benefit of parking but avoid payment by relying on the basic common law rule of the burden not passing
Can the successor covenantor relinquish the benefit (and so burden would not pass)??
Yes - unless successor covenantors submit voluntarily to the burden, they could not take the benefit
Liability is conditional
What are the 3 requirements for the doctrine of mutual benefit and burden?
- Clear link between burden and benefit (no general principle that someone taking benefit under deed must submit to the burden it imposes)
- Must be a genuine choice re whether to take the benefit
- The benefit and burden must have been conferred in same transaction?
What happens where there is no real choice but to take the benefit?
Common law rule applies and covenantor does not take burden
Why grant a long lease to enforce a covenant?
All covenants in leases except personal ones are enforceable by and against successors in title via doctrine of privity of estate
Sidesteps rule that burden of freehold covenant wont pass to successor
How will an original and successor covenantee enforce the benefit?
To allow enforcement against original/successive covenantor
- Original = as a matter of contract law
- Successor = showing that benefit has passed to it in common law
What are the two ways that the benefit can pass at common law?
- Express assignment - in writing and express notice given to covenantor (so they know a new person in position to enforce covenant)
- Implied assignment - where no express, benefit can still pass if certain conditions are met
Implied is more common
Will implied assignment mean the benefit will pass automatically every time land is transferred?
Yes if conditions met
What are the conditions of implied assignment of the benefit?
- Covenant must touch and concern the land (same as usual test; affects nature/value/use of land and benefit ceases once dominant owner separates from the land)
- Must be intention that benefit should run with dominant land
- Original covenantee must have a legal estate in dominant land (when covenant made)
- Successor covenantee must hold a legal estate in dominant land (at time of enforcement)
How will intention of the parties for benefit to run be shown?
- Expressly (e.g. for the benefit of land known as…)
- Impliedly (unless expressly excluded)
Must the legal estate, in which original and successor covenantees held/hold interes in, be of the same nature?
No - original might hold a freehold and the successor a leasehold - sucessor still entitled to benefit of covenant
Why discharge a covenant?
As restrictive covenants, once validly granted, last forever, they may become obsolete and restrict use of land
What is the difference between discharging and modifying a covenant?
- Discharge = covenant no longer valid
- Modification = scope of covenant is altered but not completely invalidated
When will a covenant automatically be discharged?
In a merger; same person becomes owner of both dominant and servient land
How can a dominant owner expressly agree to discharge covenant?
Entering into a formal release of covenant made by deed - usually in return for payment
When will a dominant owner impliedly agree to discharge covenant?
By doing nothing when covenant is being breached openly
What is stautory discharge/modification?
The power for the Lands Chamber to discharge/modify restrictive covenants on application by the servient owner
On what grounds can the Lands Chamber discharge/modify a covenant?
May require compensation to be paid to owners of dominant land
- Has become obsolte due to changes in character (e.g. surrounding area of property with covenant to use it only as residence has become business)
- Its continued existence impedes reasonable use of land
- Dominant owners expressly or impliedly agree
- Dominant owners will not suffer injury
When will a covenant’s existence impede the reasonable use of land?
Where it confers no practical value or that it is contrary to the public interest
If dominant owners will not suffer injury, is this enough for discharge by the tribunal?
Not simply on this basis - will also have regard to social and economic concerns and the wider public interest rather than interest of one dominant owner
