Freehold Covenants Flashcards
For unnamed (non-express) persons
LPA 1925, s. 56.
Re Ecclesiastical Commissioners for England’s Conveyance [1936]: held that the effect of s. 56 was that a person expressed in the conveyance to gain the benefit was to regarded as an original covenantee, even though not party to the covenant.
Amsprop Trading Ltd v Harris Distribution Ltd [1997]: Neuberger J said that s. 56 was only effective in a case in which the covenant purported to be made with the person seeking to enforce and not merely for their benefit. May not overrule Re Ecclesiastical when limited to the facts.
Alternative to s. 56 LPA is the Contracts (Rights of Third Parties) Act 1999 - relieving some of the rules on privity of contract.
Common law allows the benefit of a covenant to pass if four conditions are met:
- The covenant must ‘touch and concern’ the land of the covenantee;
- At the time when the covenant was made, it must have been the intention of the parties that the covenant should run with the land to the successors in title;
- At the time when the covenant was made, the covenantee must have held the legal estate in the land to be benefitted;
- The claimant must derive his title from or under the original covenantee.
‘Touch and concern the land’
This rule distinguishes between covenants which confer a benefit upon the land and those that confer a personal benefit.
Swift Investments v Combined English Stores Group [1998], Lord Oliver provided a working test.
1. Covenant must benefit the estate owner for the time being and would cease to be of benefit were it to be separate from the ownership of the benefitted estate.
2. The covenant must affect the nature, quality, mode, of use or value of the benefitted land.
3. Even if it satisfies the first two, a covenant will not be regarded as ‘touching and concerning’ benefitted land if the benefit is in some way expressed to be personal to the covenantee.
The claimant must derive his or her title from or under the original covenantee, info:
A tenant may claim the benefit of a covenant which is attached to the freehold estate in the land of which he or she is a tenant, because in Smith and Snipes Hall Farm Ltd v River Douglas Catchment Board [1949], it was held that LPA 1925, s. 78, has the effect of extending the right to enforce a covenant to such a person.
Basic rule for burden passing to new owner
Basic rule is that covenants do not run at common law - dislikes restraints being placed on your use of your own estate.
Austerberry v Coporation of Oldham (1885) - at common law, the obligation to make up a road and keep it in good repair could not pass to the successor in title of the original covenantor.
This position was reaffirmed by the House of Lords in Rhone v Stephens [1994], in the case of a covenant to maintain a roof.
Burden of certain covenants can run in equity:
Tulk v Moxhay (1848) - equity took note that where a purchaser acquired the burdened land with the knowledge of the covenants it was quite fair that he or she should be bound to observe them.
In this case, the owners of the neighbouring benefitted land had a right in equity to enforce the covenant against the purchaser of the burdened land, because he had known of the restriction when he acquired his estate.
The rules which must be satisfied in equity for the burden of a covenant to pass under the Tulk v Moxhay doctrine:
- The covenant must be negative;
- At the date of the covenant, the covenantee must have owned land which was benefitted by the covenant;
- The original parties must have intended that the burden should run to bind successors (LPA 1925, s. 76);
- As the rule is equitable, general equitable principles apply.
The rule that a covenant must be negative, case:
Haywood Brunswick Permanent Benefit Building Society (1881): Lindley J held that ‘only such covenant as can be complied with without expenditure of money will be enforced’ against a successor in title.
Reaffirmed in Rhone v Stephens [1994], ‘to enforce a positive covenant would be to enforce a personal obligation against a person who has not covenanted. To enforce negative covenants is only to treat the land as subject to a restriction.’
Where the burden runs in equity, the benefit must be made to run in equity:
Three ways in which a purchaser of the benefitted land can acquire the right to enforce the covenant:
1. By annexation (express/implied/statutory);
2. By express assignment of the benefit of the covenant;
3. Under the special rules relating to building schemes.
Must also ‘touch and concern’ the land, and the successor to the covenantee must have a legal estate in the land.
Annexation, expressed:
Where ‘words of annexation’ are used, the benefit of the covenant is annexed or attached to the land, so that it passes automatically. The words of the covenant should show the original parties intended the benefit to run.
Lamb v Midas Equipment: “to his heirs, executors, administrators, and assignees.”
Rogers v Hosegood: must be ‘for benefit of land’, but held can refer to claimant if benefit ‘touches and concerns’.
Problem if annex to an area of land so large it cannot reasonable confer an actual benefit. Re Ballard’s Conveyance [1937], a covenant was said to be for the benefit of a whole large estate. In fact, it could only confer a benefit for a small portion of the estate. Could not run on sale.
Annexation, implied:
Where ‘words of annexation’ are lacking, some cases suggest that it may still be possible.
In Marten v Flight Refuelling Ltd [1962], there had been no assignment for the benefit, and the court looked at the burdened land and the surrounding area, and came to the conclusion that the covenant had been taken for the benefit of the land.
Wilberforce J mentioned with approval that: “an intention to benefit may be found from surrounding or attending circumstances.”
Annexation, statutory, basic:
Federated Homes Ltd v Mill Lodge Properties [1980] - introduced the idea that in certain cases statutory annexation may be effective. Where it is clear which land was intended to benefit, the covenant was annexed to that land by the LPA 1925, s. 78(1).
This interpretation renders obsolete many of the traditional difficulties associated with express annexation, including the need to annex to the ‘whole or any part’ of the benefitted land.
Annexation, statutory, elaborated:
Crest Nicholson Residential (South) Ltd v McAllister [2004] is authority for two further propositions following Federated Homes:
- The land benefitted must be identifiable from the documents creating the covenant and not just from extraneous facts;
- The effect of s. 78 gives way to anything in the documents that suggests that it was not intended that the benefit should be annexed so as to run with the land after sale.
Small v Oliver & Saunders (Developments) Ltd [2006] has suggested that the Federated Homes rule applies equally to all covenants, whenever made and is not restricted to covenants made after 1925.
Assignment:
Even where the benefit has not been expressly annexed, it has always been the case that the covenantee could transfer that benefit by express assignment. Like the benefit of any other contract, is a chose in action and can be assigned at will. Necessary to show that there is an unbroken chain of assignments, so that on each sale of the benefitted land the benefit has been passed to the new owner.
Building scheme:
Elliston v Reacher [1908], in which a building society had laid out an area with separate plots and had sold these using identical conveyances and imposing identical covenants upon each purchaser. Covenants were enforceable, four rules:
- The purchasers must derive their titles from a common vendor;
- Before selling, the vendor must have laid out the land in plots;
- On sale, the same restrictions must be imposed on all lots, and it must be clear that those restrictions are intended to be for the benefit of all the lots sold;
- Each purchaser must have acquired a lot on the understanding that the covenants were intended to benefit all the other lots in the scheme.
