Freehold Covenants

Question 1

How is a covenant validly created?

Answer 1

• must be in writing
• signed by the grantor

Question 2

What is a positive covenant?

Answer 2

A promise to do something - normally involves expenditure of money

Eg

• maintain a boundary fence
• contribute to the cost of repairing a shared drive

Question 3

What is a negative or restrictive covenant?

Answer 3

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

Eg

• not to use the land for business purposes
• not to build above a certain height

Question 4

What is the legal issue with covenants?

Answer 4

They are enforceable between the original parties on contractual principles but successors in title are not necessarily able to enforce

Question 5

What are the two methods whereby the benefit and burden of covenants can pass?

Answer 5

• common law rules
• equitable rules

Question 6

Can positive covenants be enforced against a successor Covenanter in equity?

Answer 6

No - positive covenants cannot be enforced against a successor Covenanter in equity

Question 7

What is the test for determining if a covenant is positive or not?

Answer 7

Hand in pocket test - if the Covenanter has to spend money, effort or time then the covenant is positive

Need to look at the substance of the obligation not the form

Question 8

How should covenants that have both positive and negative elements be treated?

Answer 8

• if possible to separate the negative and restrictive aspects of the obligation then there will be two stand alone covenants - one positive and one negative
• if not possible to split the covenant into two separate obligations, that covenant is to be interpreted as either overall negative or overall positive. The additional element is to be seen as a condition attached to overall covenant.

Question 9

What is the general common rule in relation to burden of a covenant?

Answer 9

It does not pass meaning the covenant is unenforceable at common law against successor successor in title

Question 10

What conditions are there for the burden of a covenant to pass in equity?

Answer 10

1) the 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 11

What is meant by the condition that the covenant must accommodate the dominant tenement for the burden of a covenant to pass in equity?

Answer 11

Three aspects to this leg of the test:

• the covenantee and the successor covenantee must hold an interest in the land at the time of creation and enforcement
• the covenant must touch and concern the land ie have direct beneficial impact on the dominant land such as affecting nature, quality, use or value of dominant land and not be expressly personal
• the dominant land and the servient land must be in proximity

Question 12

How can intention for the burden of the covenant to run for the burden of a covenant to pass in equity be shown?

Answer 12

Intention can be shown in two ways:

• expressly - covenant worded in such a way as to make it clear that successors are to be bound
• impliedly - LPA s 79 shall deem covenant to be made by Covenanter on behalf of successors in title unless contrary intention can be shown

Question 13

In what ways can there be notice of the covenant for the burden of a covenant to pass in equity be shown?

Answer 13

Covenant needs to be protected

• registered land - covenant must be protected by entry of notice in the charges register of the servient title
• unregistered land - covenant must be protected by Class D (ii) Land Charge

Otherwise purchaser for value will not be bound but volunteer/donee will be bound

Question 14

What must be shown for the benefit of a covenant to pass in equity?

Answer 14

a) the covenant must ‘touch and concern’ the dominant land

b) the benefit must pass by one of the methods recognised in Renals v Cowlishaw:

i) annexation

ii) assignment or

iii) a building scheme

Question 15

What is annexation for the benefit of the covenant passing in equity?

Answer 15

Occurs when the covenant is made in such a way that the benefit becomes a permanent part of the dominant land itself

Can happen expressly or by statute (s 78 LPA 1925)

Question 16

What is express annexation for the benefit of the covenant passing in equity?

Answer 16

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 just a personal benefit to covantee

Eg successors in title not just covenatees, their heirs, executors and assignees - as just personal

Question 17

When will statutory annexation occur for the benefit of the covenant passing in equity?

Answer 17

S 78(1) of the LPA 1925 act will mean a covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and its successors in title of the land intended to be benefitted

Benefit will therefore pass under this unless expressly or impliedly excluded

Question 18

When will assignment occur for the benefit of the covenant passing in equity?

Answer 18

Occurs where the benefit of the covenant has not been annexed at the outset. Benefit can nevertheless be assigned when the assigned when the dominant land is transferred.

Assignment must happen every time land is transferred

Question 19

What formalities are there for assignment to occur for the benefit of the covenant passing in equity?

Answer 19

Must be in writing and signed by the persons transferring the benefit

Question 20

What special rules are there for the benefit of restrictive covenants to pass?

Answer 20

If the conditions of a building scheme are met, the covenant are treated as a set of by-laws enforceable by and against all owners.

Not necessary to show specifically that the benefit of a particular covenant has passed to a claimant

Question 21

What conditions must be met for a building scheme to be met meaning the benefit of the restrictive covenants automatically pass?

Answer 21

a) all buyers buy from the same seller

b) the seller divided the estate into plots

c) the covenants were intended to benefit all plots and

d) each buyer buys on the understanding that the covenants are intended to benefit all parties

Question 22

Does the original covantee have the benefit of any covenant?

Answer 22

Yes under contractual principles so could technically sue although unlikely to be able to show any loss has happened

Question 23

What remedies are available where covenantee is able to enforce?

Answer 23

• equitable remedies at discretion of the court (equitable principles apply ie must come with hands clean and not delay)
• most commonly an injunction
• prohibitory injunction to stop breach and mandatory injunction to get the person in breach to do something
• damages in lieu of injunction (no automatic right to damages in equity)

Question 24

What is the effect of the general rule at common law that the covenant is unenforceable against a successor in title to the covenanter because the burden does not pass?

Answer 24

The original covenantor is still liable and can be sued for its own breaches and that of its successor

Question 25

What remedy is available against the original covenanter at common law?

Answer 25

Damages only

Question 26

How does the original covenantor limit its ongoing liability at common law for covenants?

Answer 26

As part of the sale process it will require its successor to enter an indemnity covenant promising to comply with the covenant and to indemnify it for any breaches

Every time the land is subsequently sold a similar covenant should be sought creating a chain of indemnities

Question 27

What must there be for indirect enforcement of a covenant under common law?

Answer 27

There must be a complete chain of indemnity stretching from current owner back to original covenantor

Question 28

What exception is there in common law that the burden of the covenant generally does not pass at common law?

Answer 28

Exception of doctrine of mutual benefit and burden in Halsall v Brizell

Question 29

What three conditions must exist for the exception of doctrine of mutual benefit and burden to operate to pass the burden of the covenant at common law?

Answer 29

• the burden and benefit must be linked
• the successor covenantor must have a choice whether to take the benefit and
• the benefit and burden must be in the same transaction

Question 30

How can the benefit of a covenant pass at common law?

Answer 30

Either by

• express assignment or
• implied assignment

Question 31

What is required for express assignment to operate for the benefit of a covenant pass at common law?

Answer 31

Normal contractual principles apply

Must additionally be in writing and express notice of the assignment must be given to covenantor show they know new person is able to enforce the covenant

Question 32

What conditions are there for implied assignment of the benefit of a covenant to happen at common law?

Answer 32

1) the covenant must touch and concern the land

2) there must have intention that the benefit should run with the dominant land

3) the original covenantee must have a legal estate in the dominant land

4) the successor covanantee must hold a legal estate in the dominant land

Question 33

For implied assignment of the benefit of a covenant to happen at common law, what does it mean that the covenant must touch and concern the land?

Answer 33

Covenant must affect the nature, quality, use or value of the land

Must not be expressed to be personal and should only benefit the dominant owner for the time being

Question 34

For implied assignment of the benefit of a covenant to happen at common law, how will there be intention that the benefit should run with the dominant land?

Answer 34

Intention can be express or implied through statute.

Where no express intention, s 78 LPA 1925 implies intention for benefit to pass unless explicitly excluded

Question 35

For implied assignment of the benefit of a covenant to happen at common law, when will the original covenantee have owned a legal estate when the covenant was made and when will the successor own a legal estate at time of enforcement?

Answer 35

When either has either freehold or leasehold estate at relevant time

Question 36

What methods are there for discharging/modifying covenants?

Answer 36

• merger - automatic discharge when same person owns both the dominant and servient land
• discharge by deed - dominant owner may expressly discharge covenant and enter formal release in deed (normally for money)
• impliedly agree - dominant owner may impliedly agree to discharge by doing nothing when the covenant is breached openly
• statutory discharge by Upper Lands Tribunal on application by servient owner

Question 37

What power does the Upper Tribunal (Lands Chamber) have for discharging or modifying covenants?

Answer 37

• can wholly or partially discharge or modify any restrictive covenants
• only restrictive covenants though not positive
• may order compensation to be paid to owners of dominant land

Question 38

What four grounds can an application for modifying or discharging restrictive covenants be brought to the Upper Tribunal (Lands Chamber)?

Answer 38

• it has become obsolete due to the changes in character ie due to changes of character of property or neighbourhood
• its continued existence impedes the reasonable use of the land for public or private purposes - must show the covenant confers no practical value or that it is contrary to public interest (financial compensation must be adequate for dominant owner)
• dominant owner expressly or impliedly agrees to discharge - tribunal will decide adequate compensation to prevent servient owner being held to ransom
• the dominant owner will not suffer injury - enables application to be made where discharge of a covenant will not injure the dominant owners (tribunal can override spurious or frivolous objections). The tribunal will have regard to social and economic concerns, wider public interest over interest of dominant owner