Freehold Covenants

Question 1

What is a Covenant?

Answer 1

A promise relating to Land.

These are usually contained within a Deed, but not necessarily.

Question 2

What are the Requirements to validly Create a Covenant?

Answer 2

It must be in writing and signed by the Grantor.

Question 3

When dividing a Freehold, why would a Freeholder impose Restrictive Covenants on the Buyer?

Answer 3

To preserve the value and amenity of his retained lot.

For reference, whoever benefits from a Covenant is the Covenantee, and their land is the Dominant Tenement, while whoever is burdend is the Covenantor, and their land is the Servient Tenement.

Question 4

How does one distinguish between a Positive and Negative Covenant?

Answer 4

The Hand in Pocket Test:

• If the Covenantor must spend time, money, or energy to honour the Covenant;
• The Covenant is Positive, even if the wording is Negative.

Haywood v Brunswick Permanent (1881) 8 QBD 403.

Question 5

Why is it Legally Critical to distinguish between Positive and Negative Covenants?

Answer 5

Positive Covenants will not be enforced against a Successor Covenantor in Equity.

Haywood v Brunswick Permanent (1881) 8 QBD 403.

Question 6

What is a Mixed Covenant?

Answer 6

A Covenant with Positive and Negative elements.

Question 7

How can a Mixed Covenant be construed?

Answer 7

Either as:

• A series of separate Covenants; or
• One Covenant with conditions.

Question 8

When will a Mixed Covenant be construed as Separate Covenants?

Answer 8

When its Positive and Negative aspects can be annexed to create separate, standalone Covenants.

Question 9

When will a Mixed Covenant be construed as One Covenant with Conditions?

Answer 9

When its Positive and Negative aspects cannot be annexed to create separate, standalone Covenants.

The nature of the Covenant itself, whether Positive or Negative, will depend on the facts.

Question 10

Does the Burden of a Covenant pass to a Successor at Common Law?

Answer 10

No, generally. Accordingly, Covenatees cannot enforce against Successive Covenantors, all things being equal.

Austerberry v Oldham [1885].

As such, the Original Covenantor can be sued in damages for both its breaches and its Successors’ breaches.

As a countermeasure, the Original Covenantor must demand an Indemnity Covenant from its Successor.

Question 11

What is an Indemnity Covenant?

Answer 11

• A promise by the Successor Covenantor to reimburse the Original Covenantor;
• If the Successor breaches the Covenant and causes the Original losses.

Chains of Indemnity are the product of multiple Indemnity Covenants between Successors.

Question 12

How can the Burden of a Covenant pass to a Successor at Common Law?

Answer 12

Under the:

• Doctrine of Mutual Benefit and Burden; or
• The Doctrine of Privity of Estate.

Question 13

How can a Covenant pass under the Doctrine of Mutual Benefit and Burden?

Answer 13

A Covenant will pass to a Successor Covenantor if:

• In the same transaction;
• The Covenantee grants the Original Covenantor a benefit in the nature of an Easement; and
• Imposes a burden that is clearly linked to the benefit; unless
• The Covenantor had no theoretical choice except taking the benefit.

Halsall v Brizell [1957]

For instance, the Covenantee grants a right to park, but imposes an obligation to pay for maintenance.

Question 14

How can a Covenant pass under the Doctrine of Privity and Estate?

Answer 14

If Land is disposed of using a Long Lease, all Leasehold, Non-Personal Covenants will automatically pass to Future Owners.

A Long Lease is any lease for 99 years or more.

A Personal Covenant is a Covenant tied to a particular individual, not the Land.

Question 15

Does the Burden of a Covenant pass to a Successor in Equity?

Answer 15

Yes, but only under the following circumstances:

• The Covenant is Negative.
• The Covenant accommodates the Dominant Tenement.
• There is an intention for the Covenant’s burden to survive succession.
• There is notice of the Covenant:
  • If the Servient Tenement is registered, on the Charges Register.
  • If the Servient Tenement is unregistered, a Class D(II) Charge on the Register of Charges.

Tulk v Moxhay (1848)

Intention should always be express, but where it is not, there is a rebuttable presumption of such intention (s. 79, LPA 1925).

If notice is absent, a Purchaser for Value will not be bound, but a Donee will.

Question 16

What does it mean for a Covenant to Accommodate the Dominant Tenement?

Answer 16

• The Original Covenantee must hold an interest in Land at the time of creation;
• The Successive Covenantee must hold an interest in Land at the time of enforcement;
• The Covenant must touch and concern the Land, i.e. have a direct beneficial impact; and
• The Dominant and Servient Tenements must be in proximity.

LCC v Allen [1914]

Question 17

What must be shown for a Successor Covenantee to directly enforce against a Successor Covenantor?

Answer 17

• The Covenant’s burden has passed to the Successor Covenantor in equity; and
• Its benefit has passed to the Successor Covenantee in equity.

Question 18

What must be shown to establish a Covenant’s Benefit passing in Equity?

Answer 18

• The Covenant must touch and concern the Dominant Tenement; and
• The benefit must pass by either Annexation, Assignment, or a Building Scheme.

Question 19

What is Annexation?

Answer 19

The process of making a Covenant’s benefit a permanent fixture of the Land. This may be done either expessly or by statute.

Question 20

What is Express Annexation?

Answer 20

Express wording in the Covenant that its benefit is attached to the Land, not just the Original Covenantee.

Question 21

What is Statutory Annexation?

Answer 21

An excludable statutory operation that automatically attaches a Covenant’s benefit to the Land.

LPA 1925 — s. 78(1).

Question 22

What is Assignment?

Answer 22

A transfer of an interest in land in accordance with s. 53(1).

LPA 1925 — s. 53(1).

The formalities are that the Assignment must be in writing and signed by the Covenantee or their agent.

Assignment occurs when the Dominant Tenement is sold, and the benefit must be Assigned every time the land is transferred.

Question 23

What is a Building Scheme?

Answer 23

Any arrangement where the following apply:

• The Seller divides an estate into plots.
• All Buyers purchase their plots from the same Seller.
• The estate’s Covenants are intended to benefit all plots.
• Each Buyer understands the Covenants are intended to benefit all plots.

In the end, a Covenant’s benefit will pass if the parties meant to create a scheme of mutually enforceable obligations.

Ellison v Reacher [1908].

The effect is that Covenants may be enforce by or against all owners, new or present.

Question 24

How can a Covenantee pass a Covenant’s benefit in Common Law?

Answer 24

Either through Express or Implied Assignment.

Question 25

What are the Requisites for Express Assignment?

Answer 25

• The Assignment must be in writing; and
• The Covenantor must be expressly notified.

LPA 1925 — s. 136.

Question 26

What are the Requisites for Implied Assignment?

Answer 26

All of the following must apply:

• The Covenant must touch and concern the Land.
• There was an intention for the benefit to run with the Dominant Tenement.
• The Original Covenantee had a legal estate in the Dominant Tenement at the time of creation.
• 4. The Successor Covenantee holds a legal estate in the Dominant Tenement at the time of enforcement.

P&A Swift Investments [1989] AC 632.

Question 27

How can a Covenant by Modified or Discharged?

Answer 27

Merger:

• The same person comes to own the Dominant and Servient Tenements.

Express Agreement:

• The Dominant Tenant expressly agrees in a Deed of Release or Variation.

Implied Agreement:

• The Dominant Tenant impliedly agrees through inaction when it is breached.

Statute:

• Application to the Upper Tribunal to discharge or modify any Restrictive Covenant due to:
  • Obsolesence;
  • Express or Implied Agreement;
  • Impedence of reasonable use of the Land; or
  • Improbability of injury to the Dominant Tenant.