Freehold Covenants

Question 1

LPA 1925, section 3

Answer 1

Covenants are equitable proprietary rights CAPABLE of binding 3rd parties (i.e. they are not listed as rights capable of being legal at s. 1(2))

Question 2

Covenants - Schedules 1 and 3 LRA 2002

Answer 2

Covenants are not overriding interests in their own right

Question 3

For a covenant to be potentially binding on a new owner…

Answer 3

It must be protected by a notice on the property register (in the charges sector)

Question 4

Use a covenant to trigger a claim for actual occupation (Schedule 1 or 3, para. 2)

Answer 4

Difficult (not impossible like with easements) as C would not be in actual occupation of the other’s land

Question 5

Law Commission’s Consultation Paper 186 in 2008

Answer 5

suggested 80% of registered freehold titles are subject to restrictive covenants

Question 6

“easement” vs. “covenants”

Answer 6

E: right to use your neighbour’s land
C: restriction on the use of your own land

Question 7

positive covenant

Answer 7

expenditure on the part of the covenantor

Question 8

Why do positive covenants not run with the land?

Answer 8

doctrine of privity: does not allow 3rd parties to be burdened due to an essentially private contract between the original parties

Question 9

Norwich City College v McQuillin

Answer 9

Covenant to maintain a fence on the boundary of two properties = obligation to perform an act/expenditure of money = positive => not binding on 3rd parties

Question 10

Tulk v Moxhay

Answer 10

Interpret words carefully: “keep and maintain [Leicester Square] in an open state” –> court found this referred to keeping of the land as an open space - no expenditure involved = negative, binding covenant

Question 11

s. 56 of the LPA 1925 and Contracts (Rights of Third Parties) Act 1999

Answer 11

Exceptions where the complex rules of freehold covenants don’t need to be applied by successor in title - if the successors are at least identifiable at the time of the original contract

Question 12

s. 56 LPA 1925

Answer 12

“a person may take an immediate or other interest in land or other property or the benefit of any condition, right of entry, agreement over or respecting land, although he may not be named as a party to the conveyance or other instrument” –> have to be existing and identifiable at the time of the original covenant

Question 13

Re Ecclesiastical Commissioners’ Conveyance

Answer 13

s. 56 LPA 1925: owners for the time being of the adjoining land

Question 14

White v Bijou Mansions

Answer 14

A covenant which purports to include future landowners fell outside s. 56 LPA 1925 as they weren’t in existence or identifiable at the time of the covenant

Question 15

Amsprop Trading v Harris Distribution

Answer 15

Unless the covenant purports to be a grant to him or a covenant with him, s. 56 would not apply

Question 16

Contracts (Rights of Third Parties) Act 1999, s. 1(3)

Answer 16

A party may sue if they are named in the original contract or identifiable as a member of a class or description BUT they do not need to be in existence at the time of the original agreement

HOWEVER: limited remedy (damages only) and only the original covenanter can be sued

Question 17

Does the covenant run with the land and bind future successors in title - STRUCTURE

Answer 17

1) Does the benefit pass at common law?
2) Does the burden pass at common law?
3) Does the burden pass in equity?
4) Does the benefit pass in equity?

Question 18

Smith and Snipes Hall Farm v River Douglas Catchment Board - 4 conditions for benefit passing at common law

Answer 18

1) The covenant must touch and concern the land i.e. affect the land or its value (Tucker LJ)
2) Covenantee must have a legal estate in the land
3) Covenantor must also have a legal estate - however, interpretation of s. 78(1) LPA 1925 –> may have different legal estates (landlord/tenant as in this case)
4) Covenant must be intended to run with the land i.e. at the time of the covenant there must be an intention that the covenant will benefit successors in title - expressly in conveyance or impliedly through s. 78(1) LPA 1925 (“deemed”)

Question 19

Burden passing at common law

Answer 19

General rule: burden will never pass at common law (doctrine of privity) -
Austerberry
Rhone
Thamesmead

EXCEPTIONS:

1) enfranchisements
2) Commonhold
3) rule in Halsall v Brizell

Question 20

Austerberry v Oldham Corporation

Answer 20

Burden of keeping a road in good repair DID NOT PASS to the successor in title of the original covenantor

Question 21

Rhone v Stephens

Answer 21

Burden of a positive covenant did not pass at common law

Lord Templeman: “for over 100 years […] equity will enforce negative covenants […] but has no power to enforce positive covenants” = enforcing a personal obligation against a person who has not covenanted

Question 22

Thamesmead Town v Allotey

Answer 22

Allotey (successor in title) was not liable to pay services charges in relation to an earlier covenant

Question 23

3 exceptions to burden passing at common law

Answer 23

1) enfranchisement
2) Commonhold
3) Rule in Halsall v Brizell

Question 24

1) enfranchisement (exception to burden not passing at common law)

Answer 24

Where a long lease is enlarged to a freehold after the tenant used their right to buy all or part of the freehold –> any leasehold covenants that were pre-existing will then remain binding

Question 25

2) Commonhold (exception to burden not passing at common law)

Answer 25

“Commonhold scheme” (Commonhold and Leasehold Reform Act 2002): a number of unit-holders can manage their units under a commonhold scheme and contract that covenants will be permanently attached to each unit

Question 26

3) Halsall v Brizell (exception to burden not passing at common law)

Answer 26

Mutual burden and benefit rule: if benefits are enjoyed the burdens must be accepted

Question 27

Burden passing in equity: Tulk v Moxhay

Answer 27

1) The covenant must be negative (restrictive) in nature
2) The covenant must be made for the benefit of the land retained by the covenantee
3) The covenant must touch and concern the land of the covenantee i.e. the benefit cannot be personal
4) The burden of the covenant must be intended to run with the land (impliedly through s. 79 LPA 1925)
5) The burden will only pass in equity if it is protected by a notice on the register - it is not an overriding interest

Question 28

London County Council v Allen

Answer 28

The LCC didn’t have sufficiently close land capable of benefiting from the covenant

Question 29

Re Ballard’s Conveyance || Wroth Park Estate v Parkside Homes

Answer 29

Necessary to establish that the benefit is to the land but where the land is a large area, a covenant should be taken to mean a benefit each and every part of the land

Question 30

Morrells v Oxfors United Football Club

Answer 30

s. 79 LPA 1925 (burden of a covenant is deemed to run with the land) can be ousted by express words to the contrary

Question 31

Benefit passing in equity

Answer 31

Covenant must touch and concern the land and benefit must have been passed in one of three ways:

1) annexation
2) assignment
3) through a building scheme

Question 32

1) Annexation

Answer 32

Covenant is permanently attached to the land

a) express
b) implied
c) statutory

Question 33

Statutory exceptions to “touch and concern” rule for passing burden in equity

Answer 33

National Trust

Local Authority Land

Question 34

1) a) express annexation

Answer 34

Clear words - Rogers v Hosegood

Small v Oliver (following Brightman LJ’s ruling in Federated Homes v Mill Lodges Properties):
a covenant is prima facie deemed to be annexed to each and every part of the land unless otherwise stated

Question 35

1) b) statutory annexation

Answer 35

s. 78 LPA 1925 (annexation of the benefit of a covenant): deems all covenants as running with the land unless expressly stated otherwise (Federated Homes) –> express annexation is largely redundant

Question 36

Roake v Chadha || City Inn v Ten Trinity Square || Margerison v Bates

Answer 36

s. 78 LPA 1925 can be ousted by express words

Question 37

Crest Nicholson v McAllister

Answer 37

For s. 78 to apply, the land in question must be identifiable

Question 38

1) c) implied annexation

Answer 38

s. 78 makes this largely redundant but annexation can still be implied by surrounding facts of the case:
Marten v Flight Refuelling

Question 39

2) assignment

Answer 39

The successor to the original covenantee’s land can argue that there was a chain of assignments of the covenant from the original covenantee to the successor - however, there are many difficulties:
Newton Abbott Co-Operative v Williamson anf Treadgold

Question 40

3) building scheme

Answer 40

“scheme of development” - plots are laid out by the developer with the aim of selling them to individual purchasers, creating mutually enforceable covenants which will benefit all of the owners –> aiming to bind all owners and their successors in title

Question 41

Elliston v Reacher: building scheme criteria

Answer 41

1) all parties must have derived their title from a common vendor
2) prior to selling the land, the vendor must have laid out identifiable plots subject to the restrictive covenants
3) covenants must apply to all plots with intent to benefit all
4) purchaser must have bought it with full knowledge of covenants

Question 42

Re Dolphin’s Conveyance

Answer 42

More relaxed approach than Elliston v Reacher - no need for 1) and 2)

Question 43

Emile Elias v Pine Grove

Answer 43

Affirmed that building scheme covenants must apply to each plot equally 3)

Question 44

Whitgift Homes v Stocks

Answer 44

Modern approach to building schemes: there must simply be a scheme of covenants intended to apply to all

Question 45

Small v Oliver & Saunders

Answer 45

Modern approach to building schemes: there must be a pre-conceived common intention that the covenants apply equally and to all

Question 46

Turner v Pryce

Answer 46

Claimant successfully claimed an injunction in relation to preventing the defendants developing their gardens as a building scheme provided for the benefit of restrictive covenants to apply to all plots

Question 47

Ways to end a covenant

Answer 47

a) through mutual agreement
b) dominant and servient land merging back into the hands of one owner
c) s. 84 LPA 1925: Lands Tribunal has jurisdiction to discharge/vary covenants

Question 48

Remedies for breach - damages

Answer 48

contractual remedy of damages is severely limited due to the doctrine of privity - only between original parties

Question 49

Remedies for breach - injunction

Answer 49

Supreme Court Act 1981, s. 50
Covenants are equitable in nature –> usual remedy is an injunction: mandatory (to pull down) or prohibitory (to stop work)

Question 50

Wrotham Park v Parkside

Answer 50

The courts may be slow to order demolition: here damages were awarded (5% of expected profits)

Question 51

Surrey County Council v Bredero Homes

Answer 51

The courts may be slow to order demolition, here nominal damages were awarded as there were no tangible losses

Question 52

Jaggard v Sawyer

Answer 52

Damages were awarded as an injunction would have been “too oppressive”

Question 53

Pam O’Connor: “Be careful what you wish for: positive freehold covenants”

Answer 53

• Statutory exceptions to allow public authorities to take the benefit of positive obligations running with land – these are rare and limited exceptions
• Since the 1960s, there has been a growing dissatisfaction with the Austerberry rule and many countries (Northern Ireland, New Zealand, Ireland) enacted legislation allowing private positive freehold covenants to run with land
• Similar recommendations have been made by the Law Commission for England and Wales
• O’Conner proposes: where the need to impose continuing positive obligations on owners of land, the obligations should be imposed only by or under legislation and nobody should have a property right to enforce them
• The refusal of courts to allow positive obligations to run as freehold covenants is doctrinally coherent and based on sound policy: it accords with the general resistance of both civil and common law systems to allowing land titles to be encumbered with enduring positive obligations enforceable by other land owners as a property right
• Lord Templeman in Rhone: restrictive covenants subtract specified use rights from the landowner’s original endowment, while positive obligations add a burden to landownership which was never part of their endowment
• Austerberry rule serves to balance competing interests: “freedom of contract” vs. “freedom of transaction”
• Human Rights: the need to provide compensation for extinguishment of property rights will significantly limit the ability of future legislators to protect purchasers and to relieve against onerous covenants –> might explain, according to O’Connor, the reluctance to abolish the Austerberry rule

Question 54

Law Commission Paper No. 327 (2011)

Answer 54

The need for Reform - flaws identified by the Law Commission:

1) The burden of positive covenants will not run with land unless complex drafting devices are employed, which do not often work satisfactorily
2) Burdens can run but only in equity and only if complex and technical conditions are met
3) While the benefit of covenants can run with land in both law and equity, different rules apply to both and the rules are even more complicated than those applying to burdens
4) There is no need for the document creating an easement to describe the benefited land without doubt, as extrinsic evidence can be introduced in the case of conflict in order to establish what vague wording means reduces certainty!
5) There is no need for benefits to be registered in any way, which makes it difficult to establish at a later date what benefits to attach to land
6) The original parties to a covenant remain contractually bound and benefited even after they have disposed of the affected land because they are bound to one another in a contractual agreement. This can leave a covenantor who has disposed of the burdened land at risk of being sued if there is a breach of covenant by the new owner

Question 55

Martin Dixon: “Is there any value in restrictive covenants? Enforceability and Remedies”

Answer 55

Small v Oliver & Saunders:
• Case illustrated a willingness to minimise the proprietary impact of restrictive covenants in favour of a money award

• £3720 paid were a small price to pay for Oliver & Saunders’ development which Mr Small would never have accepted if he had been seeking a ransom
• Risk: the defendants (Oliver & Saunders) might have to pay out the 47 other people entitled to the benefit of the covenant
• However: profit would still be larger and most forfeited their right to enforce the covenant through delay or acquiescence

• The deputy judge favoured an injunction – rules of English land law ‘speak with a forked tongue’ he should have had the right to enforce a restrictive covenant (with the practical outcome an injunction would have given him)
weakness inthe approach now favored by thecourts (substituting damages and then measuring them by apercentage ofdevelopment profit):itfailstotally torecognisethatrestrictive covenants were designed to stop things happening and that, in some cases, no amount of money can compensate for theloss ofa proprietary restriction

Question 56

Swift v Combined English Stores

Answer 56

Covenant must touch and concern the land -“mode or use or value”

Question 57

American Colonial Distributers v Lewin

Answer 57

Promise not to employ named person on the land - seemed personal but touched and concerned the land