Freehold Covenants Flashcards
What is a covenant?
A covenant is a promise – usually contained in a deed, though not necessary.
- To validly create it must be in writing and signed by grantor s53 LPA
- Covenantee – person who receives benefit of promise
- Dominant land – land which is benefitted by promise
- Covenantor – person who makes the promise
- Servient land – land which is burdened by the promise
- Successor covenantee – a new owner of dominant land
- Successor of covenantor – a new owner of servient land
Covenants can be positive or negative
- A promise to do something – usually involved expenditure of money
- Like – maintain a boundary fence
Negative or restrictive covenant
- A promise not to do something
- Like not to use it for a specific purpose or not to build above a certain height
Restrictive covenants are an equitable interest in land, recognised proprietary right, a positive covenant is not.
Legal issue?
- Between original parties everything is fine.
- However, when dominant or servient land is sold, successors are not parties to original contract and there is no direct contractual relationship between the party in breach and party trying to enforce.
Passing the benefit and burden - Two sets or rules
- Equitable rules
o Must be shown that benefit and burden have both passes using rules of equity - Common law rules
o Must be shown that benefit and burden have both passes using rules of common law
Difference between positive and negative covenant?
Determining nature of covenant
- Hand in pocket test – if covenantors have to put money in to comply its positive. Time is money so anything that requires effort or time is also positive.
Covenants can be mixed
- Both elements – can be interpreted in two ways
- A separate covenant or
o See it as stand alone
- One obligation with a condition attached
General rule? Burden in equity?
General rule
- Burden of a covenant does not pass to successor at common law.
- At common law covenant is unenforceable against a successor in title.
Equity has developed to allow certain burdens to pass to successors
Tulk v Moxhay
- Covenant must be restrictive
- Covenant must accommodate dominant tenement – benefit the land
o Covenantee and successor covenantee must hold an interest in land at time of creation and enforcement
o Creation must touch and concerns the land - WHICH MEANS * 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
o Dominant land and servient land must be proximity
- There must be intention for burden of the covenant to run
o Express - covenant worded in such a way to ensure successors are bound
o Impliedly – shall be deemed to be made by covenantor on behalf of its successors in title unless a contrary intention is shown.
- There must be notice of covenant
o Registered land
o Protected by entry of a notice on the charges register of servient title
o Unregistered
o Must be protected by a class D land charge. o
Equitable rules - benefit?
If successor covenantee wishes to enforce it against a successor covenantor direct 2 things must be shown.
- Burden of covenant has passed to successor covenantor in equity
- That the benefit has passed to it in equity
BOTH BURDEN AND BENEFIT MUST PASS IN EQUITY
Tulk v Moxhay
Passing the benefit in equity?
- 2 elements which must be met for benefit to pass
- Covenant must touch and concern dominant land
- Benefit must pass by one of the methods recognised
o Annexation
Covenant made in such a way benefit becomes a permanent part of dominant land itself. – therefore, automatically passes.
2 ways
Express annexation – where parties intend it to become part of dominant land
Statutory annexation LPA 1925 s78 – if no evidence of express – statue will deem it to be made unless its excluded expressly.
o Assignment
Occurs where benefit of covenant has not been annexed at outset but can nevertheless be assigned when dominant land is transferred. It is treated as separate interest in the land a must be transferred every time the land is transferred.
Must comply with formalities – in writing and signed by person transferring the benefit.
o A building schemes
When a new housing estate is built all houses sold subject to 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.
Apply to restrictive covenants only – if conditions of building scheme are met – covenants are treated as a set of by-laws enforceable by and against all owners.
All buyers buy from same seller
Seller divided estate into plots
Covenant were intended to benefit all plots
Each buyer buys on understanding that the covenants are intended to benefit all plots.
Position of original covenatee?
Position of original covenantee
- When dominant land is sold – original covenantee still has benefit of covenant and can sue on it.
- However, it’s highly unlikely.
- Unlikely any loss suffered could be shown.
Remedies
- When successor covenantee can show that benefit of covenant has passed to it and that the burden has passed to successor covenantor it can enforce the covenant direct against the successor covenantor who is in breach.
- Equitable remedies available – but are discretionary
Common law - burden passing?
Continuing liability of original covenantor
- Effect of general rule is that at common law a successor covenantor cannot be sued.
- Burden does not disappear – remains with original covenantor permanently. – continuing liability of original covenantor.
- Found expressly stated in wording of covenant
- If no express wording – s79 LPA has been held to imply such wording.
The remedy
- Only one is damages
But as burden stays with original covenator - can get an?
Indemnity covenant
- Original covenant may be able to recover any outlay if it has indemnity covenant
- Indemnity – a primary obligation and is an agreement by one party to bear cost of certain loses of liabilities suffered by another party in certain circumstances.
- So, the seller (original covenantor) should require the successor to enter into an indemnity covenant promising to comply with covenant and to indemnify for any loss incurred as a result of breach.
- It should be sought every time the land is sold – creates a chain of indemnities. If chain works as a method of direct enforcement too.
Common law doctrine of mutual benefit and burden?
Common law the covenant is unenforceable against a successor in title.
Burden remains with original covenant who can be sued for damaged.
Limited exception to general rule
Doctrine of mutual benefit and burden – Rule in Halsall v Brizell.
- Allows burden to pass to a successor at common law where covenantee grants to covenantor a benefit in nature of an easement and imposes a connected burden
- So cannot enjoy a benefit whilst relying on basic common law rule of burden not passing.
- 3 conditions that must exist
- Clear link between burden and benefit
- Genuine choice – as to whether to not to take benefit
- Same transaction
Common law rule for benefit passing?
Original covenantee can enforce a covenant as a matter of contract law
If dominant land is sold – successor covenantee must show that the benefit has passed to it at common law
Two-way benefit can pass at common law
Express assignment
- Expressly assigned to successor
Implied assignment
- Where no express – benefit may pass if conditions are met
- Covenant must touch and concern the land
o Must affect the nature, quality or use of land
- There must have been an intention that benefit should run with dominant land
- Original covenantee must have a legal estate in dominant land
- Successor covenantee must hold a legal estate in dominant land
Discharge of a covenant?
The problem with old covenant
- Restrictive covenants once validly granted last forever – over times they can become obsolete and unduly restrict the use of servient land.
Covenant can be
Discharged – means no longer valid
- Automatically if same person becomes owner of both dominant and servient land – known as merger
- Dominant owner may expressly agree to discharge the covenant and will enter into a formal release of covenant usually in return for a payment – this is made by deed
Covenant can be modified?
Statutory discharge or modification of covenant
Dominant owner could hold servient owner to ransom
- To avoid this servient owner can apply to upper tribunal land chamber for discharge or medication of any covenant
- Only applied to restrictive convents
- These are the grounds the land chambers can discharge or modify a covenant
- Of becomes obsolete in character
- If it impedes reasonable use of land
- Dominant owners expressly or impliedly agree
- The dominant owners will not suffer injury.
