Freehold Covenants Flashcards
What are covenants?
Promises that are exchanged via a deed; they are equitable proprietary interests
A covenant is a means of private control of the land
What are the two kinds of freehold covenants?
- Positive covenants - requires expenditure of money (hand in pocket test)
- Restrictive covenant - restricts the use of land (negative covenant)
What must any covenant be?
It must benefit the land and not be personal
Who is the covenantor?
The person who agrees to the covenant (they are burdened by it)
Who is the covenantee
The person who enjoys the benefit of the covenant
Who is usually the covenantor?
The buyer because the covenantee would have made the sale of land conditional on the covenantor agreeing to the covenants
What is the dominant land?
The land owned by the covenantee that enjoys the benefit of the covenant
What is the servient land?
The land owned by the covenantor that is subject to the burden of the covenant
What are the two ways covenants can be enforced by or on third parties?
Common law or equity
How does the original covenantee enforce the covenant against the original covenantor?
The covenantee can sue the covenantor under the contract they entered into
A covenant creates a contractual relationship and a proprietary interest
Can you mix the legal and equitable rules?
NO
For the successor to the coveantee to enforce the benefit of the covenant against the original covenantor, the can use the legal OR the equitable rules
How does the burden of a restrictive covenant pass?
It can only pass under the equitable rules
This means that if the burden of the negative covenant passes under equity, the benefit of the covenant must be passed under the equitable rules
What is the general rule for passing a burden at common law
The burden of a covenant does not pass to a successor at common law. At common law the burden will not pass
This is why equity developed rules which allow the burden of certain covenants to pass
What are the requirements for Tulk v Moxhay (passing the burden in equity)
The covenant must pass the rule in Tulk v Moxhay:
1. It must be negative (restrictive)
2. It must accommodate the dominant land
3. There must be intention (express in wording of covenant, or implied, unless the covenant is personal)
4. There must be notice
What does ‘accommodate the dominant land’ for the purposes of Tulk v Moxhay second requirement mean?
i) the covenantee and successor covenantee must hold an interest in the land
ii) the covenant must touch and concern (benefit) the dominant land
iii) there must be proximity between dominant and servient land
If any one of these aspects is not met - the burden will not pass
What do you do if the covenant is positive?
It will not pass in equity. Need to consider the common law rules
What must a successor covenantee show if they want to enforce a breach against a successor covenantor?
- That the burden of the covenant has passed to the successor covenantor in equity
- That the benefit has passed to the successor covenantee in equity
What elements must be fulfilled for the benefit to pass in equity?
- The covenant must touch and concern the dominant land
- The benefit must pass by one of the three methods: annexation; assignment; building scheme
What is annexation?
The occurs when the benefit becomes a permanent part of the dominant land and it occurs at the point the covenants are created
How does a benefit pass under annexation?
It passes automatically when the dominant land is sold
What is express annexation?
Express words of the covenant make it clear that the original parties intend the benefit to become part of the dominant land
The wording must relate to the benefit
What is statutory annexation?
s78(1) LPA 1925 - operates to automatically annex the benefit, unless it is expressly excluded
In most cases, the benefit will pass by annexation
What is assignment?
The benefit is assigned when the dominant land is transferred and it must be transferred every time the land is transferred
What must the separate assignment of the benefit comply with?
s53(1)(c) LPA 1925, in writing and signed by the person transferring the benefit
What is a building scheme?
Relevant for new housing estates
- relate only to restrictive covenants
- if the conditions are met, the covenants are treated as a set of by-laws enforceable by and against all owners
A building scheme only applies where there are sales of multiple plots at the same time
What are the conditions of a building scheme?
- all buyers from the same seller
- the seller divided the estate into plots
- the covenants were intended to benefit all plots
- each buyer buys on the understanding that the covenants are intended to benefit all plots
What is the most common equitable remedy for breach of covenant?
An injunction
What are the equitable principles which apply?
Equitable remedies are awarded subject to equitable principles: delay defeats equity. A claimant must apply immediately.
Does the benefit of a covenant pass at common law?
Yes the benefit can pass at common law
When would the common law rules be used?
a) if the claimant chooses to and is enforcing a covenant against the original covenantor only
b) the burden has passed under common law under the rare exception
Does the burden pass at common law?
The general rule is that the burden does not pass at common law. This means the burden remains with the original covenantor who can be sued for damages for successors’ breaches
The original covenantor remains on the hook and they will enter into an indemnity agreement with their successors in title - chain of indemnity
Why do we need the indemnity chain?
Because the original covenantor always remains on the hook for the positive covenant - because the positive covenant can only be enforced against the original covenantor
An indemnity covenant allows the original covenantor to recover outlay if they are sued - it does not pass the burden
What remedy is available?
Damages - because the original covenantor no longer owns the land, specific performance cannot be used
What are the exceptions to the common law burden rule?
Exception in Halsall v Brizell:
a) corresponding benefit that is closely linked; and
b) benefit / burden conferred in same transaction; and
c) genuine choice whether to accept benefit
Doctrine of mutual benefit and burden
How does the benefit pass at common law?
- Express assignment: in writing and signed by the covenantee with notice in writing given to the original covenantor
Or
- Implied assignment (P&A Swift):
- the covenant must touch and concern the dominant land
- there must be intention for the covenant to run (express or implied)
- original covenantee must have held a legal estate in the dominant land and the successor covenantee looking to enforce the covenant must now hold a legal estate in the land
How can covenants be discharged?
- merger (dominant and servient land acquired by same person)
- express release / modification (deed)
- implied release / modification
- s84 LPA 1925
What is the effect of s84 LPA 1925?
A servient owner can apply to the Upper Tribunal (Lands Chamber) for the discharge or modification of a restrictive covenant.
The application made must be that the covenant is now obsolete or impedes the reasonable use of the land and does not offer any benefit anymore
How is a restrictive covenant validly created?
It must be in writing and signed by grantor (covenantor)
Does a restrictive covenant need to be registered?
No, as an equitable interest, it does not need to be registered as part of the creation
But, it should be noted on the Charges Register of the burdened land to be enforceable against a third party purchaser of the land
How is a restrictive covenant over unregistered land protected?
It is protected by entry of a Land Charge in the Land Charges Registry
What is a restrictive covenant?
It is capable of being an equitable interest in the land
- a freehold covenant is only ever capable of being an equitable right
Is a positive covenant an interest in the land?
No, it does not have proprietary status in the same way as a restrictive covenant
How is a covenant enforceable as between the original parties?
By contract law
How do you determine whether to use the equitable or common law rules?
The rules you apply depend on the rules you use to pass the burden, and you cannot mix the rules
How can the burden of a covenant run?
It can run in equity; but it cannot run in common law
Consider equitable rules first and the nature of the covenant
- if positive - look to common law
- if negative - Tulk v Moxhay
What is freehold covenant only ever capable of taking effect as (for enforcement of interest purposes)
Freehold covenant can only take effect in equity
How is a freehold covenant binding on unregistered land?
Restrictive covenant created post-1926:
- must be protected by Land Charge at the Land Charges Registry
- If protected, it will bind everyone
- If not, it will only bind a donee
Why does doctrine of notice for freehold covenant enforced over unregistered land not apply?
The doctrine of notice does not apply to interests that are capable of being registered as a land charge
