Freehold Covenants

Question 1

What are covenants?

Answer 1

Promises that are exchanged via a deed; they are equitable proprietary interests

A covenant is a means of private control of the land

Question 2

What are the two kinds of freehold covenants?

Answer 2

1. Positive covenants - requires expenditure of money (hand in pocket test)
2. Restrictive covenant - restricts the use of land (negative covenant)

Question 3

What must any covenant be?

Answer 3

It must benefit the land and not be personal

Question 4

Who is the covenantor?

Answer 4

The person who agrees to the covenant (they are burdened by it)

Question 5

Who is the covenantee

Answer 5

The person who enjoys the benefit of the covenant

Question 6

Who is usually the covenantor?

Answer 6

The buyer because the covenantee would have made the sale of land conditional on the covenantor agreeing to the covenants

Question 7

What is the dominant land?

Answer 7

The land owned by the covenantee that enjoys the benefit of the covenant

Question 8

What is the servient land?

Answer 8

The land owned by the covenantor that is subject to the burden of the covenant

Question 9

What are the two ways covenants can be enforced by or on third parties?

Answer 9

Common law or equity

Question 10

How does the original covenantee enforce the covenant against the original covenantor?

Answer 10

The covenantee can sue the covenantor under the contract they entered into

A covenant creates a contractual relationship and a proprietary interest

Question 11

Can you mix the legal and equitable rules?

Answer 11

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

Question 12

How does the burden of a restrictive covenant pass?

Answer 12

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

Question 13

What is the general rule for passing a burden at common law

Answer 13

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

Question 14

What are the requirements for Tulk v Moxhay (passing the burden in equity)

Answer 14

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

Question 15

What does ‘accommodate the dominant land’ for the purposes of Tulk v Moxhay second requirement mean?

Answer 15

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

Question 16

What do you do if the covenant is positive?

Answer 16

It will not pass in equity. Need to consider the common law rules

Question 17

What must a successor covenantee show if they want to enforce a breach against a successor covenantor?

Answer 17

1. That the burden of the covenant has passed to the successor covenantor in equity
2. That the benefit has passed to the successor covenantee in equity

Question 18

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

Answer 18

1. The covenant must touch and concern the dominant land
2. The benefit must pass by one of the three methods: annexation; assignment; building scheme

Question 19

What is annexation?

Answer 19

The occurs when the benefit becomes a permanent part of the dominant land and it occurs at the point the covenants are created

Question 20

How does a benefit pass under annexation?

Answer 20

It passes automatically when the dominant land is sold

Question 21

What is express annexation?

Answer 21

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

Question 22

What is statutory annexation?

Answer 22

s78(1) LPA 1925 - operates to automatically annex the benefit, unless it is expressly excluded

In most cases, the benefit will pass by annexation

Question 23

What is assignment?

Answer 23

The benefit is assigned when the dominant land is transferred and it must be transferred every time the land is transferred

Question 24

What must the separate assignment of the benefit comply with?

Answer 24

s53(1)(c) LPA 1925, in writing and signed by the person transferring the benefit

Question 25

What is a building scheme?

Answer 25

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

Question 26

What are the conditions of a building scheme?

Answer 26

1. all buyers from the same seller
2. the seller divided the estate into plots
3. the covenants were intended to benefit all plots
4. each buyer buys on the understanding that the covenants are intended to benefit all plots

Question 27

What is the most common equitable remedy for breach of covenant?

Answer 27

An injunction

Question 28

What are the equitable principles which apply?

Answer 28

Equitable remedies are awarded subject to equitable principles: delay defeats equity. A claimant must apply immediately.

Question 29

Does the benefit of a covenant pass at common law?

Answer 29

Yes the benefit can pass at common law

Question 30

When would the common law rules be used?

Answer 30

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

Question 31

Does the burden pass at common law?

Answer 31

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

Question 32

Why do we need the indemnity chain?

Answer 32

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

Question 33

What remedy is available?

Answer 33

Damages - because the original covenantor no longer owns the land, specific performance cannot be used

Question 34

What are the exceptions to the common law burden rule?

Answer 34

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

Question 35

How does the benefit pass at common law?

Answer 35

1. Express assignment: in writing and signed by the covenantee with notice in writing given to the original covenantor

Or

2. 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

Question 36

How can covenants be discharged?

Answer 36

• merger (dominant and servient land acquired by same person)
• express release / modification (deed)
• implied release / modification
• s84 LPA 1925

Question 37

What is the effect of s84 LPA 1925?

Answer 37

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

Question 38

How is a restrictive covenant validly created?

Answer 38

It must be in writing and signed by grantor (covenantor)

Question 39

Does a restrictive covenant need to be registered?

Answer 39

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

Question 40

How is a restrictive covenant over unregistered land protected?

Answer 40

It is protected by entry of a Land Charge in the Land Charges Registry

Question 41

What is a restrictive covenant?

Answer 41

It is capable of being an equitable interest in the land

Question 42

Is a positive covenant an interest in the land?

Answer 42

No, it does not have proprietary status in the same way as a restrictive covenant

Question 43

How is a covenant enforceable as between the original parties?

Answer 43

By contract law

Question 44

How do you determine whether to use the equitable or common law rules?

Answer 44

The rules you apply depend on the rules you use to pass the burden, and you cannot mix the rules

Question 45

How can the burden of a covenant run?

Answer 45

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