Freehold covenants

Question 1

What is a covenant?

Answer 1

A promise (usually contained in a deed)

Though a deed is not essential

Generally arise between freehold owners when one person sells part of land and wishes to ensure. buyer does not do anything which could affect amenity and value of seller’s retained land

Question 2

How is a covenant validly created?

Answer 2

In writing and signed by grantor

Question 3

What is a covenantor and covenantee and dominant land and servient land?

Answer 3

• Covenantee = person who receives the benefit of promise and can sue if breached (owns the dominant land which is benefitted)
• Covenantor = person who makes promise and can be sued if breached (owns the servient land which is burdened)

Question 4

What is the difference between a positive and negative/restrictive covenant?

Answer 4

• Positive = a promise to do something, usually expenditure of money (maintain fence, contribute cost of repair)
• Negative/restrictive = promise not to do something; land us restricted and complied with by inaction (do not use for business purposes or build above certain height)

Question 5

What are the two sets of rules for passing the burden and benefit of covenants to new owners?

Answer 5

Equitable rules and common law rules - which one depends on what rules can be used to pass the burden

Must not be mixee

If burden and benefit has passed under rules of equity or using common law rules - they can be enforced

Question 6

What will not be enforced against a successor covenantor in equity?

Answer 6

Positive covenants

So important to distinguish between positive and negative

Question 7

What is the test to decide whether a covenant is positive or negative?

Answer 7

The hand in pocket test - if covenantors have to put hands in pockets to find money to spend to perform = positive

Question 8

Is only money included in the hand in pocket test?

Answer 8

No - can also include effort and time

Question 9

In deciding, do we look at substance or form?

Answer 9

Substance! i.e. what is the essence of the obligation?

E.g. covenant to not allow a building to fall into disrepair - appears restrictive, but obligation is to maintain the building = positive

Question 10

Are both positive and restrictive covenants interests in land?

Answer 10

• Restrictive covenant is; has proprietary status
• Positive covenant does not have proprietary status in same way

Question 11

What is a mixed covenant and what are the 2 ways they can be interpreted?

Answer 11

A promise which has positive and restrictive elements
1. As separate covenants
2. As one obligation with a condition attached

E.g. a covenant not to build on land (restrictive) without consent of owner of dominant land (positive)

Question 12

When is the separate covenants approach taken in mixed covenants?

Answer 12

If positive and restrictive aspects of obligation can be separated to create two standalone covenants; one positive and one restrictive

E.g. a covenant to paint the exterior of a building every 2 years and not to paint front door red - split into two separate parts

Question 13

When is the one obligation with a condition attached approach taken and what happens?

Answer 13

If mixed covenant cannot be split - covenant will be interpreted as being overall positive or restrictive depending on obligation. The additional covenant will be viewed as simply a condition attached to overall positive or restrictive obligation

E.g. a covenant not to build on servient land without consent of dominant owner - is a restrictive covenant with a positive condition attached

Question 14

How is a covenant enforceable between original parties?

Answer 14

As a matter of contract law

Question 15

If a successor covenantee wishes to enforce a breach against a successor covenant, what 2 things must be shown?

Answer 15

1. Burden of covenant has passed to successsor covenantor
2. Benefit has passed to successor covenantee

Question 16

Is it enough to show burden has passed in equity and benefit passes at common law?

Answer 16

No - if equitable remedy required, both benefit and burden must pass in equity

Same for common law

Question 17

What is the general rule for the passing of a burden to a successor under common law?

Answer 17

Burden does not pass to a successor = covenant unenforceable against successor in title

Unenforceable = cannot be enforced against covenantor and covenantee/successor covenantee is unable to enforce the covenant against person who breached it

Question 18

What role does equity play in burdens passing?

Answer 18

Has developed rules allowing burden of certain covenants to pass to successors = allows covenant to be enforced direct against person in breach

Question 19

What cannot pass in equity?

Answer 19

The burden of positive covenants

For positive covenants - use common law rules instead

Question 20

What are the 4 requirements for the burden to pass in equity?

Tulk v Moxhay

Answer 20

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

1st requirement = positive covenants cannot pass

Question 21

What does it mean that the covenant must ‘accomodate the dominant tenement’?

2nd requirement

Answer 21

1. Covenantee and successor covenantee must hold interest in land at time of creation and enforcement
2. Covenant must touch and concern the land
3. Dominant land and servient land must be in proximity

Question 22

What does it mean that the covenantee and successor covenantee must hold an interest in land at time of creation and enforcement?

Answer 22

Must be a dominant tenement that can be benefitted so original covenantee and successors must have retained an interest in the dominant land at time of creation and enforcement of covenant

• Original covenantee will hold freehold to dominant land at time of creation
• Succcessor will hold freehold to dominant land at time of enforcement

Question 23

What does it mean for the covenant to touch and concern the land?

Answer 23

Covenant must have some direct beneficial impact on dominant land:

• Only benefits dominant owner whilst they own dominant land
• Affects the nature, quality, use or value of dominant land; and
• Not be expressly personal

COVENANT MUST BENEFIT LAND I.e. benefits land not person

E.g. covenant not to use servient land for industrial purposes would benefit dominant land; not having industrial use means dominant land is more enjoyable and valuable than if there were a factory on servient land

Question 24

What does sufficient proximity mean?

Answer 24

Dominant and servient land must be near to each other but do not need to share a boundary/be right next to each other

Close enough that dominant land benefits from covenant

Question 25

How can intention be shown?

3rd requirement

Answer 25

1. Expressly - covenant worded in a way to make clear successors are bound (X hereby covenants with B for themself and their successors in title
2. Impliedly - covenant relating to land shall be deemed to be made by covenantor on behalf of successors unless contrary intention shown

Question 26

How is notice of the covenant shown for registered and unregistered land?

4th requirement

Answer 26

• Registered - covenant must be protected by entry of a notice in charges register of servient title
• Unregistered - covenant must be protected by a Class D Land Charge

Question 27

If notice is not done, does that mean all successors will not be bound?

Answer 27

Purchaser for value will not be bound, but a donee (inherited/gifted) will be

Question 28

What two elements must be fulfiled for the benefit to pass in equity?

Need to consider if benefit passes after deciding burden does

Answer 28

1. Covenant must touch and concern the dominant land (same test as for burden)
2. The benefit must pass by annexation, assignment or building scheme

Question 29

When does annexation occur?

Answer 29

When covenant is made in such a way that benefit becomes a permanent part of the dominant land at the time when covenants are created

Legal glue

Question 30

What is the consequence of annexation?

Answer 30

The benefit passes automatically when the dominant land is sold (without specifically being mentioned in transfer deed)

Question 31

What are the 2 ways annexation might happen?

Answer 31

1. Express annexation - where express words of covenant make clear that original parties intend the benefit to become part of dominant land (not just a personal advantage to covenantee) e.g. for the benefit of the owners and successors in title
2. Statutory annexation - a covenant relating to any land of covenantee shall be deemed to be made with the covenantee and his successors in title of land intended to be benefitted

Statutory may make express seem unecessary - but consider other methods of passing the benefit

Question 32

When does assignment occur?

Answer 32

Where the benefit of covenant not annexed at outset, but benefit can be assigned when dominant land is transferred

Question 33

Will assignment have the ‘legal glue’ effect of annexation?

Answer 33

No - the benefit must be assigned each time the land is transferred

Benefit exists separately from land itself; separate interest in land

Question 34

What are the formalities of assignment?

Answer 34

In writing and signed by person transferring benefit

Question 35

How to covenants work in a building scheme (new housing estate)?

Answer 35

• All houses are subject to same covenants
• If conditions met, covenants treated as a set of by-laws enforceable by and against all owners (not necessary to show specifically that benefit of a particular covenant has passed to a C)

Restrictive covenants only

Question 36

What are the 4 conditions of a building scheme?

Answer 36

1. Buyers buy from same seller
2. Seller divided estate into plots
3. Covenants were intended to benefit all pots
4. Each buyer buys on understanding that covenants are intended to benefit all plots

Interpreted as guidelines rather than strict requirements

Question 37

Can the original covenantee sue for breach of the benefit after the dominant land is sold?

E.g. after they move out

Answer 37

Technically yes - they still have the benefit of covenant - but unlikely they would want to and hard to envisage any loss suffered by original covenantee who no longer owns dominant land

Question 38

Summary of benefit and burden passing in equity

Answer 38

Question 39

What can a successor covenantee do once they show that:
* Benefit of covenant has passed to it
* Burden has passed to successor covenantor
?

Answer 39

It can enforce the covenant direct against the successor covenantor who is in breach

Question 40

What is the nature of available remedies and are they automatic?

Answer 40

Equitable remedies (because restrictive covenant is an equitable interest in land) - no automatic right as they are dicretionary

Most common is injunction

Question 41

What two kinds of injunction can be applied for?

Answer 41

• Prohibitory injunction - if breach threatened or ongoing (e.g. land being used for unauthorised use)
• Mandatory injunction - breach already occurred and can order person in brach to do something (e.g. building has been built in breach)

Question 42

When should a claimant apply for an injunction?

Answer 42

Immediately - equitable principle ‘delay defeats equity’

E.g. waits until building is complete and then applies = application likely to be refused

Question 43

When will equitable damages in lieu be awarded?

Answer 43

Where it would be oppressive to grant injunction

But no automatic right!!!!

E.g. Wrotham Park Estate - court refused to grant mandatory injunction to demolish much needed houses and awarded equitable damages insead - calculated as a % of profit made by developer reflecting amount that theoretically would have been paid to owner to secure a release from the covenant

Question 44

When should you consider the common law rules?

Answer 44

• Covenant is positive; or
• Does not consider Tulk v Moxhay

Question 45

What are the common rules primarily applied to?

Answer 45

Positive covenants

As burden of restrictive can pass using equitable rules

Question 46

What is the general rule for the burden of a covenant in common law?

Answer 46

The buden does not pass in common law

So unenforceable against successor in title

Question 47

As the burden does not pass at common law, what happens to it?

Does it disappear?

Answer 47

It remains with the original covenantor

The continuing liability of the original covenantor

Question 48

What is the effect of the continuing liability of the covenantor?

Answer 48

The original covenantor can be sued for both its own breaches and the breaches of successors

Question 49

Is the continuing liability of the covenantor express or implied?

Answer 49

Can be expressed but will be implied by statute

Question 50

What remedy is available against the original covenantor?

Answer 50

Only damages - they are no longer in possession/control of land

Question 51

How does the original covenantor recover outlay?

I.e. protect itself from breaches by successors

Answer 51

Enters an indemnity covenant as part of the sale process - successor promises to comply and will indemnify (reimburse) for any loss incurred as a result of breach

Happens each time the burdened land is sold

Known as indirect enforcement

Question 52

Can the original covenantor sue beyond their direct successor?

Answer 52

No - current owner can be sued by no one but their predecessor in title in the chain of indemnity

Question 53

What happens if the chain of indemnity is broken?

Answer 53

The last successor in the chain will have no recourse

Question 54

How could a complete chain fail?

Answer 54

If someone in chain is bankrupt/dead/missing - their predecessor cannot recover

Chain only as strong as its weakest link

Question 55

What is the exception to the general rule that the burden of a covenant does not pass to a successor at common law?

Meaning burden of a covenant can pass to successor covenantor

Answer 55

Doctrine of mutual benefit and burden

The rule in Halsall v Brizell

Meaning indemnity covenant not necessary!

Question 56

When will the doctrine of mutual benefit and buden apply?

Answer 56

Where the covenantee grants to the covenantor a benefit in the nature of an easement and imposes a connected burden

E.g. covenantee grants right to park on their land to covenantor, and covenantor covenants to contribute to the cost of maintaining the parking area it has the right to use = successor covenantor cannot take the benefit of parking but avoid payment by relying on the basic common law rule of the burden not passing

Question 57

Can the successor covenantor relinquish the benefit (and so burden would not pass)??

Answer 57

Yes - unless successor covenantors submit voluntarily to the burden, they could not take the benefit

Liability is conditional

Question 58

What are the 3 requirements for the doctrine of mutual benefit and burden?

Answer 58

1. Clear link between burden and benefit (no general principle that someone taking benefit under deed must submit to the burden it imposes)
2. Must be a genuine choice re whether to take the benefit
3. The benefit and burden must have been conferred in same transaction?

Question 59

What happens where there is no real choice but to take the benefit?

Answer 59

Common law rule applies and covenantor does not take burden

Question 60

Why grant a long lease to enforce a covenant?

Answer 60

All covenants in leases except personal ones are enforceable by and against successors in title via doctrine of privity of estate

Sidesteps rule that burden of freehold covenant wont pass to successor

Question 61

How will an original and successor covenantee enforce the benefit?

To allow enforcement against original/successive covenantor

Answer 61

• Original = as a matter of contract law
• Successor = showing that benefit has passed to it in common law

Question 62

What are the two ways that the benefit can pass at common law?

Answer 62

1. Express assignment - in writing and express notice given to covenantor (so they know a new person in position to enforce covenant)
2. Implied assignment - where no express, benefit can still pass if certain conditions are met

Implied is more common

Question 63

Will implied assignment mean the benefit will pass automatically every time land is transferred?

Answer 63

Yes if conditions met

Question 64

What are the conditions of implied assignment of the benefit?

Answer 64

1. Covenant must touch and concern the land (same as usual test; affects nature/value/use of land and benefit ceases once dominant owner separates from the land)
2. Must be intention that benefit should run with dominant land
3. Original covenantee must have a legal estate in dominant land (when covenant made)
4. Successor covenantee must hold a legal estate in dominant land (at time of enforcement)

Question 65

How will intention of the parties for benefit to run be shown?

Answer 65

• Expressly (e.g. for the benefit of land known as…)
• Impliedly (unless expressly excluded)

Question 66

Must the legal estate, in which original and successor covenantees held/hold interes in, be of the same nature?

Answer 66

No - original might hold a freehold and the successor a leasehold - sucessor still entitled to benefit of covenant

Question 67

Why discharge a covenant?

Answer 67

As restrictive covenants, once validly granted, last forever, they may become obsolete and restrict use of land

Question 68

What is the difference between discharging and modifying a covenant?

Answer 68

• Discharge = covenant no longer valid
• Modification = scope of covenant is altered but not completely invalidated

Question 69

When will a covenant automatically be discharged?

Answer 69

In a merger; same person becomes owner of both dominant and servient land

Question 70

How can a dominant owner expressly agree to discharge covenant?

Answer 70

Entering into a formal release of covenant made by deed - usually in return for payment

Question 71

When will a dominant owner impliedly agree to discharge covenant?

Answer 71

By doing nothing when covenant is being breached openly

Question 72

What is stautory discharge/modification?

Answer 72

The power for the Lands Chamber to discharge/modify restrictive covenants on application by the servient owner

Question 73

On what grounds can the Lands Chamber discharge/modify a covenant?

May require compensation to be paid to owners of dominant land

Answer 73

1. Has become obsolte due to changes in character (e.g. surrounding area of property with covenant to use it only as residence has become business)
2. Its continued existence impedes reasonable use of land
3. Dominant owners expressly or impliedly agree
4. Dominant owners will not suffer injury

Question 74

When will a covenant’s existence impede the reasonable use of land?

Answer 74

Where it confers no practical value or that it is contrary to the public interest

Question 75

If dominant owners will not suffer injury, is this enough for discharge by the tribunal?

Answer 75

Not simply on this basis - will also have regard to social and economic concerns and the wider public interest rather than interest of one dominant owner