Freehold Covenants

Question 1

What are covenants?

Answer 1

Promises that are exchanged by deed; they are equitable proprietary interests under the LPA 1925.

Two kinds of freehold covenants:

1. Positive covenants: an obligation on someone to do something on their land - usually requires an expenditure of money (e.g. repair a fence)
2. Restrictive covenants: restricts the use of the land - usually does not require money to be spend (e.g. no building)

Any covenant must benefit the land and not be personal.

Question 2

Who is the covenantor and who is the convenantee?

Answer 2

The person who is burdened by the covenant is the covenantor. The person who benefits from the covenant is the covenantee.

Question 3

What is dominant land?

Answer 3

The land owned by the covenantee that enjoys the benefit of the covenant is the dominant land.

Question 4

What is servient land?

Answer 4

The land owned by covenantor that is subject to the burden of the covenant is known as the servient land.

Question 5

How does the original covenantee enforce the covenant against the original covenantor?

Answer 5

The covenantee can sue the covenantor under the contract they entered into.

Two ways covenants can be enforced by or on third parties: common law or equity

• A covenant creates two kind of relationship: a contractual one and a proprietary interest that is potentially enforceable against successors-in-title (third parties).
• For the original parties to the deed, they can just rely on their contractual relationship to enforce the covenant.

Question 6

How does the benefit pass at common law?

Answer 6

The benefit of a covenant can be assigned.

• The original covenantee can assign the benefit of the covenant to their successor in title.
• If the burden does not pass, the SIT can only enforce the covenant against the original covenantor. They cannot enforce it against the covenantor’s SIT.

Question 7

How can the burden pass at common law?

Answer 7

It can’t. Burdens cannot be assigned under common law. The original covenantor remains on the hook. They will enter into an indemnity agreement with their successor-in-title. This creates the chain of indemnity.

Question 8

How is the benefit passed in equity?

Answer 8

1. The restrictive covenant must “touch and concern” the land. Can’t be a personal benefit.
2. The benefit was intended to “run” with the land.

Question 9

How is the burden passed in equity?

Answer 9

1. Covenant must be a restrictive covenant. Positive covenants can only be enforced via common law (chain of indemnity)
2. RC must “touch and concern the lans” (not be personal)
3. The RC must “accommodate” the dominant land
4. The burden of the RC mist have intended to run with the land
5. Notice: the RC must be registered at the Land registry to be binding on a third-party purchaser.

Question 10

Can you register positive covenants?

Answer 10

A positive covenant does not need to be registered, as it is not binding on the successor in title to the servient land.

Only capable of being enforced via contractual rights. However, an entry may still be made in the Proprietorship Register that an indemnity in relation to a positive covenant has been given.

Question 11

How do you validly create a covenant?

Answer 11

Must be in writing and signed by the grantor.

Question 12

Who is the covenantee?

Answer 12

The person who receives the benefit of the promise.

Can sue if the covenant is breached.

On the dominant land.

Question 13

Who is the covenantor?

Answer 13

The person who makes the promise - can be sued if the covenant is breached.

On the servient land.

Question 14

What is a positive covenant?

Answer 14

A promise to do something - usually involves expenditure of money.

Examples:
- maintain a boundary fence
- contribute to the cost of repairing a shared drive

Question 15

What is a negative or restrictive covenant?

Answer 15

A promise not to do something - this restricts the use of land and can be complied with by inaction.

Examples:
- Not to use the land for business purposes
- Not to build above a certain height

Question 16

In order for a successor covenantee to enforce a covenant against a successor covenantor, what must the successor covenantee show?

Answer 16

That the benefit of the covenant has passed to the successor covenantee and that the burden of the covenant has passed to the successor covenantor

In order for the covenant to be enforced by a successor covenantee, they must show that they have the benefit of the covenant to enable them to sue. In order to enforce the covenant against a successor covenantor they must show that the successor covenantor has the burden of the covenant to enable them to be sued.

Question 17

What is the approach if a covenant has both positive and restrictive aspects of the obligation?

Answer 17

1. Separate the covenants into two parts
   e.g. a covenant to paint the house every two years and not to paint the door red
   - positive: paint exterior every two years
   - restrictive: not to paint door red
2. As one obligation with a condition attached: covenant will be interpreted as being overall positive or restrictive depending on whether it obliges the covenantor to do or not do something.
   e.g. a covenant not to build on the servient land without the consent of the dominant owner. - can’t be split.
   Main obligation is not to build: restrictive
   ‘without consent’ is not a stand-alone obligation
   Covenant is therefore a restrictive covenant with a positive condition attached.

Question 17

What is the key difference in terms of enforcement between positive and restrictive covenants?

Answer 17

Positive covenants will not be enforced against a successor covenantor in equity.

Negative convenants will.

Question 18

Can the burden of a covenant pass to a successor at common law?

Answer 18

The general rule is that it cannot.

Means the at common law the covenant is unenforceable.

But can in equity - if requirements are met.

Question 19

What are the four requirements for the burden of a covenant to pass to successors in equity? (Rule in Tulk v Moxhay)

Answer 19

1. Covenant must be restrictive
2. The covenant must accommodate the dominant tenement
3. There must be intention for the burden of the covenant to run
4. There must be notice of the covenant.

Question 20

What are the three aspects to the rule that the covenant must accommodate the dominant tenement?

Answer 20

1. The covenantee and successor covenantee must hold an interest in land at the time of creation and enforcement (must retain an interest in the dominant land)
2. The covenant must touch and concern the land (should only benefit the dominant owner whilst they own dominant land, affect nature, quality, use or value of dominant land; and not be expressly personal)
3. The dominant land and the servient land must be in proximity - land must be near each other.

Question 21

How can it be demonstrated that there must be intention for the burden of the covenant to run?

Answer 21

One of two ways:

1. Expressly: covenant is worded in such a way as to make it clear that successors are to be bound.
2. Impliedly (s79 LPA 1925): a covenant relating to land shall be deemed to be made by the covenantor on behalf of his successors in title unless a contrary intention is expressed.

Question 22

When is the successor covenantor deemed to have notice of the covenant?

Answer 22

Whether they are deemed to have notice depends on whether it has been properly protected by registration.

Registered land: Covenant must be protected by the entry of notice in the charges register of the servient title

Unregistered land: 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 donee (someone who inherits or is gifted the estate) would be.

Question 23

What must be shown if a successor covenantee wishes to enforce a breach against a successor covenantor direct?

Answer 23

1. That the burden of the covenant has passed to the successor covenantor in equity and
2. The benefit has passed to the successor covenantee in equity.

Not enough to show that the burden has passed in equity and the benefit has passed in common law. If an equitable remedy is required, both the benefit and burden must pass in equity: the rules go hand in hand.

Question 24

What is required to show a benefit of a covenant has passed in equity?

Answer 24

1. The covenant must touch and concern the dominant land.
2. The benefit must pass by one of the methods in Renals v Cowlishaw
   - Annexation
   - Assignment
   - Building Scheme

Question 25

What is annexation (benefit of covenant)?

Answer 25

This occurs when the covenant is made in such a way that the benefit becomes a permanent part of the dominant land itself. Annexation occurs at the point the covenants are created.

It therefore passes automatically when the dominant land is sold without being specifically mentioned in the transfer deed.

Occurs one of two ways:

1. Express annexation
2. Statutory annexation (s78 LPA 1925)

Question 26

What is express annexation?

Answer 26

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.

Example:
- A covenant made ‘for the benefit of the owners and successors in title’ to named land was enough to demonstrate express annexation
- A covenant stated to be made with the covenantees, their heirs, executors and assignees was not enough to show express annexation (benefit was stated to be for people not for land)

Question 27

What is statutory annexation?

Answer 27

A covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and his successors in title of the land intended to benefit.

Can be expressly excluded.

Question 28

What is assignment of the benefit of a covenant?

Answer 28

Occurs where the benefit of the covenant has not been annexed at the outset.

Can still be assigned when the land is transferred. Assignment occurs at the time the dominant land is sold. Must be assigned each time the land is transferred.

Separate assignment of the benefit must comply with the formalities in LPA: in writing and signed by the person transferring the benefit.

Question 29

When is the benefit passed by a building scheme?

Answer 29

If the parties intended to create a scheme of reciprocal local laws the benefit of the restrictive covenants passes to all new owners.

Conditions (more guidelines):
1. All buyers buy from same seller

2. Seller divided the estate into plots
3. The covenants were intended to benefit all plots
4. Each buyer buys on the understanding that the covenants are intended to benefit all plots

Question 30

What are the remedies for a breach of covenant?

Answer 30

As a restrictive covenant is an equitable interest in land, equitable remedies are available to enforce the breach against the current owner.

Equitable remedies are discretionary, no automatic right to them.

Most common remedy for breach of a covenant is an injunction.
- Prohibitory injunction: if the breach is threatened or ongoing, will order the breach to cease.
- Mandatory injunction: if breach has already occurred, can order the person in breach to do something (e.g. demolition of a building it wasn’t supposed to build)

Damages are not awarded as a right, may be awarded in lieu of an injunction where it would be oppressive to grant it.

Note: delay defeats equity - must not wait too long before applying for an injunction. If wait too long will likely be refused. (but may award equitable damages). e.g. damages calculated as a percentage of profit made by a developer who built houses in breach of covenant.

Question 31

What type of covenants do the common law rules usually apply to?

Answer 31

As the burden of restrictive covenants can pass using equitable rules. The common law rules are primarily applied to covenants that are positive in nature.

Question 32

What is meant by the continuing liability of the original covenantor?

Answer 32

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.

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.

Question 33

What remedies are available against an original covenantor?

Answer 33

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.

Question 34

How can an original covenantor protect themselves?

Answer 34

As part of the sale process the original covenantor should require its successor enter into an indemnity covenant promising to comply with the covenant and to indemnify it for any loss incurred as a result of a breach.

Question 35

What does an indemnity covenant protect/not protect?

Answer 35

An indemnity covenant should then be sought each time the burdened land is sold. This creates a chain of indemnities to the current owner. (only as strong as it weakest link)

• Enables the original covenantor to sue their direct successor. If there is a complete chain of indemnity to the current owner in breach, it is therefore a method of indirect enforcement.
• It 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.

Question 36

What is the doctrine of mutual benefit and burden (rule in Halsall v Brizell)?

Answer 36

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.

If the covenantor is happy to relinquish the benefit the burden cannot be enforced - must be a choice to take the benefit.

Must be clear link between burden and benefit - the benefit and burden must have been conferred in the same transaction.

Question 37

How can a successor covenantee show the benefit of a covenant has passed at common law?

Answer 37

1. Express assignment: Must be in writing and an express notice of assignment must be given to the covenantor
2. Implied assignment: Where no express assignment, the benefit of a covenant may pass if certain condition are met (will automatically pass every time the land is transferred).

Question 38

What are the conditions for implied assignment of the benefit of a covenant?

Answer 38

1. The covenant must touch and concern the land
2. There must have been an intention that the benefit should run with the dominant land (express or implied through statute - if no express will be implied by statute unless expressly excluded)
3. The original covenantee must have a legal estate in dominant land
4. The successor covenantee must hold a legal estate in the dominant land

Question 39

What is meant by discharging or modifying a covenant?

Answer 39

Discharge of a covenant means it is no longer valid.

Modification means that the scope of the covenant is altered but it is not completely invalidated.

Question 40

When will a covenant be automatically discharged?

Answer 40

If the same person becomes the owner of both the dominant and servient land. Known as a merger.

Question 41

How can an express discharge of a covenant be made?

Answer 41

A dominant owner may expressly agree to discharge the covenant and will enter into a formal release of covenant usually in return for payment.

Release must be made by deed.

Question 42

What is an implied discharge of a covenant?

Answer 42

Where a dominant owner impliedly agrees to discharge the covenant by doing nothing when the covenant is being breached openly.

Question 43

What is statutory discharge of a covenant?

Answer 43

Where the servient owner applies to the Upper Tribunal (Lands Chamber) for the discharge or modification of any covenant. (Restrictive covenants only).

Question 44

What are the grounds on which the Lands Chamber can discharge or modify a covenant?

Answer 44

LPA 1925 s84(1)(a): it has become obsolete due to changes in character - e.g. covenant to use property only as residence may be obsolete if the surrounding area is now business retail.

(aa): its continued existence impedes the reasonable use of land - e.g. a covenant restricting density of houses on a plot may confer no practical value on the dominant land if that land is densely developed

(b): the dominant owners expressly or impliedly agree: e.g. expressly agreed a release in principle or there has been a tolerated long-term breach, tribunal will decide level of compensation to be paid (prevents holding ransom)

(c): the dominant owners will not suffer injury: way to override spurious or frivolous objections - balancing act.