FREEHOLD COVENANTS Flashcards
WHAT IS A COVENANT?
A covenant is a promise to do or not to do something. Here, we are concerned with covenants related to land. It is an
example of a third-party right that can in some way limit the use of land, so it is important that the buyer of a piece of land makes full enquiry and investigation to try to establish the
nature and extent of any such obligations.
Covenantor vs Covenantee
The person entering into the covenant is the ‘covenantor’(usually the buyer) and the person having the beneft of the covenant is known as the ‘covenantee’ (usually the seller).
Beneft vs Burden
The land over which the covenant has been imposed takes the burden of it. The land which imposed the covenant en-joys the beneft of it.
Restrictive Covenant
A restrictive covenant is an obligation imposed on land which is negative in nature. Examples of common restrictive cove-nants are:
*Not to use the land for any ofensive trade or business;
*Not to allow more than one dwelling to be built on a piece of land; and
*Not to be a nuisance or annoyance to neighbouring property owners.
Positive Covenant
*An obligation on a landowner to fence a section of boundary and to maintain it thereafter; and
*An obligation to contribute to the costs of repair of a shared private road.
Note that it is** the steps required to comply** with the covenant that determine whether it is positive or restrictive, not the wording of the covenant.
EXAMPLE
Most restrictive covenants start with ‘Not to . . .’ For example:
‘Not to be a nuisance or annoyance to neighbours’. To com-**ply with this covenant requires no act or step by the land-
owner. Contrast this with: ‘Not to allow the fence at the rear to fall into disrepair’. This looks like a restrictive covenant, as it starts with the words ‘not to’, but it requires a positive act to comply with it (that is, the payment of money to repair the
fence) and so it is, in fact, a positive covenant.
Original Contracting Parties—Covenants
Enforceable
The original covenantee can always enforce the covenants against the original covenantor. The original covenantor **remains liable on the covenant even after sale of the land,under normal principles of contract law via the doctrine of privity of contract.
Successors in Title
- Whether a covenant is enforceable between successors in ti-tle to the original contracting parties depends on whether the beneft and burden to the covenant have passed to the suc-cessors in title.
- The rules for the beneft and burden passing
are diferent at common law and in equity. - The burden and beneft must pass together either at common law **or **in equity in order to be enforceable
Passing the Burden in equity
*The covenant is negative in nature (“party shall not . . .”); a positive covenant will never be enforceable against a successor in equity;
*The covenant accommodates the dominant tenement(that is, touch and concern the land, meaning afect the value of the land and not simply personally beneft the owner of the land);
*The burden was intended to** run with the land** (that is, the original parties intended that the covenant would remain efective even after the property was sold. This is implied under statute, unless the parties expressly state that they do not intend the beneft to run); and
*The successor in title has notice of the covenant (mean-ing, a D(ii) land charge in unregistered land or a notice on the Charges Register in registered land).
Passing the benefit in equity
The covenant must touch and concern the land (this means the covenant must beneft the land itself and not be merely a personal right—consider whether the right is something that enhances the value of the land and whether it is something any landowner would like); and
One of the following must apply:
*Annexation—this means that the benefit of the covenant is attached to the land (for example, by the use of the words ‘for the beneft of the land’). Annexation occurs automatically unless it is expressly excluded by the original parties;**
Express assignment**—this means the beneft of the covenant is expressly assigned when the benefted land is sold; or
**Building schemes—this basically means that a scheme of development has been set up when an estate is built (so that the covenant is obvious).
Passing the Burden at Common Law
- Generally, the burden does not pass at common law and a positive covenant binds only the original covenantor.
- However, there are some exceptions to
the rule that the burden does not pass at common law, set forth below.
(1) Chain of Indemnity Covenants
(2) The Mutual Beneft and Burden Rule
Chain of Indemnity Covenants
- If the original covenantor and each successive successor in title of the servient tenement obtain an indemnity cov-enant from the next buyer, the continuing liability of the original covenantor can be ofset by a chain of indemnity.
- Under an indemnity covenant, the original covenantor can seek to recover damages from their successor, if they are held liable for their breach.
- This is a kind of indirect enforcement. However, this is unreliable, as there may be a break in the chain of indemnity.
The Mutual Beneft and Burden Rule
Some covenants convey to the covenantor a beneft as well as a burden. A person cannot enjoy a beneft without accepting a burden that goes with it. For this rule to apply, t**he beneft and the burden must be rele-vant to each other. **
For example, assume property was
sold with an obligation to contribute towards the cost of maintaining a roadway over which rights of way were granted. The obligation to pay for upkeep of the road is unenforceable against a successor in title. However, the
successor in title may be denied use of the right of way if it does not also undertake the obligation to pay for the upkeep of the road. Thus, the exercise of the right can be made conditional on compliance with the positive obliga-
tion. (Halsall v Brizell [1956] 1 All ER 371).
Passing the Beneft at Common Law
*The covenant touches and concerns the land of the covenantee;
*The covenant was intended to run with the legal estate held by the covenantee;
*At the time the covenant was made, the covenantee held the legal estate in the land to be benefted; and
*The assignee of the original covenantee now holds the legal estate.
Enforceability of Freehold Covenants
