Freehold Covenants

Question 1

What is a Covenant

Answer 1

A covenant is a promise generally contained in a transfer deed. It is enforceable without the need for consideration,

Question 2

Terminology

Answer 2

Covenantor - The person who gives the promise. They are said to undertake the burden of the covenant, which means that they are at risk of being sued if the covenant is breached.

Servient Land - The land owned by the covenantor (and his successors in title), suffers the burden of the covenant

Covenantee - The person who receives the benefit of the promise. This person has the right to sue if the covenant is breached.

Dominant Land - The land owned by the covenantee (and their successors in title i.e. new owners) enjoys the benefit of the covenant

Question 3

Positive /Negative in Nature

Answer 3

A covenant can be positive or negative in nature. A positive covenant requires the covenantor to do something in order to keep the promise, for example a promise to maintain a boundary fence. A negative covenant is one that can be satisfied by mere inaction on the part of the covenantor and typically involves a promise to refrain from doing something, for example a promise not to build.

Question 4

Further Classification of covenant

Answer 4

A covenant can also be classified as one that is purely personal to the covenantee (i.e. entered into simply for that person’s benefit) or one that ‘touches and concerns’ the land (i.e. made for the benefit of the covenantee but in his/her capacity as owner of that particular property). The latter is not intended to be personal to one person only.

Question 5

Personal Covenant

Answer 5

Where a covenant is given by one freeholder for the benefit of another freeholder, this creates a personal contractual relationship between them. The performance of the covenant between the original covenantor and covenantee is governed by the law of contract.

Question 6

Interests in Land

Answer 6

Remember that covenants can also be proprietary interests. This effect of this is that a covenant may be ‘attached’ to the land and thus enforcement of it may extend beyond the original parties and contract law.
Freehold Covenants.

A person who buys the burdened servient land may take that land subject to the burden of covenants created over that land and be required to observe those covenants. Likewise, a subsequent owner of the benefitted dominant land may take the land together with the benefit of any covenants created in relation to that land and would then be able to enforce the covenant.

Question 7

Enforcement between Original Parties while still in Possession

Answer 7

A enters into a covenant with B. This covenant creates a legally binding contract between A, the original covenantor, and B, the original covenantee, and thus performance of the covenant is enforceable between these parties by virtue of their ‘privity of contract’ relationship. All covenants are enforceable between them as a matter of contract law.

Question 8

What is the position when the original parties sell their land on to successors?

Answer 8

If the original covenantor, A, sells the servient land to X, and the original covenantee, B, sells the dominant land to Y, would Y be able to enforce non-performance of the covenant, originally entered into between A and B, against X? This would depend upon:

1. Whether the benefit of the covenant B enjoyed passed to Y upon purchase of the dominant land; and
2. Whether the burden of the covenant A agreed to passed to X upon purchase of the servient land.

The rules for the passing of the benefit and burden of covenants are separate and need to be discussed independently of one another. In considering these issues, it is also necessary to distinguish between the approach taken by common law and that adopted in equity.

Question 9

Transmissibility of Rights in Contract Law

Answer 9

at common law the benefit, but not normally the burden, of a freehold covenant can pass to a successor in title. the burden of a covenant, positive or negative, can never pass with freehold land; it remains personal to the covenantor - this is what is often presented as some curious defect in the common law approach (Austerberry v Corporation of Oldham (1885) 29 ChD 750)).

Question 10

Transmission of the Benefit of a Covenant at Common Law

Answer 10

Express Assignment or Implied Passing of the Benefit

Question 11

Express Assignment

Answer 11

the benefit of a covenant may be expressly assigned by the original covenantee (here B) to their successor (here Y) under the LPA 1925, s 136. This will occur, provided that:

1. the assignment is in writing; and
2. express notice in writing of the assignment is given to the covenantor.

However, it will often not be necessary to expressly assign the benefit of most covenants due to the ‘implied passing of the benefit’ that sometimes takes place.

Question 12

Implied Passing of the Benefit

Answer 12

Where there is no evidence of an express assignment, the benefit of a covenant may pass with the land of the covenantee (B’s land), so as to be enforceable by his successor in title (here Y), if certain conditions are met:

• The covenant must touch and concern the land,
• The covenant must show original parties’ intention that the benefit should run with the land retained by the covenantee
• At the time the covenant was made, the covenantee must have a legal estate in the land
• Successor in title must hold a legal estate in the land

These conditions were confirmed by the House of Lords in P & A Swift Investments v Combined English Stores Group plc [1989] AC 632.

Question 13

The covenant must touch and concern the land

Answer 13

Whilst the benefit of both positive and negative covenants can pass to successors in title of the original covenantee (such as Y), the covenant must be one that touches and concerns the land of the covenantee. The benefit cannot be passed on if it confers a mere personal privilege.

Question 14

The covenant must show original parties’ intention that the benefit should run with the land retained by the covenantee

Answer 14

Evidence of such an intention may be provided in the original transfer deed between the original covenanting parties, by the use of a formula such as ‘the Purchaser hereby covenants with the Vendor for the benefit of the Vendor’s retained land known as Blackacre’, or by the covenantor covenanting with ‘the covenantee, his successors in title to land known as Blackacre, and those deriving title under him or them’.
If the covenant does not expressly state that it is to benefit the land or successors in title to the land, the intention will be implied as a result of the LPA 1925, s 78(1).

Question 15

At the time the covenant was made, the covenantee must have a legal estate in the land

Answer 15

At common law, covenants attach to the legal estate and pass with it. It is therefore essential that the covenantee owned a legal estate in the dominant land at the time the covenant was made.

Question 16

Successor in title must hold a legal estate in the land

Answer 16

The successor in title must also own a legal estate in the dominant land. Historically, this meant ownership of the same legal estate as that owned by the original covenantee, for example, the fee simple. This position, however, has since been modified

Question 17

Original Covenantee

Answer 17

Where the original covenantee has disposed of the land, at common law, the original covenantee may still be able to enforce the covenant. This will be possible provided:

1. the right has not been expressly assigned to his successor under the LPA 1925, s 136; and
2. the covenant was not drafted so as to apply only while the covenantee continued to own the dominant land.

Question 18

Pursuing the Original Covenantor for burden f covenant where land has been disposed?

Answer 18

The burden of a covenant will not pass to a successor in title to the original covenantor at common law. The original covenantor still remains liable on all the covenants to whosoever has the benefit of the covenant, even once they have parted with the land. The covenantee will want to take action against the current owner of the land (X) and, if possible, obtain an injunction or specific performance against them. If they sue the original covenantor (A), they can only obtain damages. Therefore, the value of being able to pursue the original covenantor is limited, although damages may be better than nothing.

Question 19

Indirect Enforcement via a chain of Indemnity Covenants

Answer 19

It may be the case that when A sold the land to their successor, X, he extracted an indemnity covenant from X. This is a separate covenant between A and X. In the circumstances where A is found liable for damages as a result of X’s breach, A could enforce this indemnity covenant against X and recover from X the damages A paid out in respect of X’s breach of covenant. This will mean that A will no longer be out of pocket for a breach he did not commit. But, in addition, and relevant to the means of enforcing covenants at common law, the presence of an indemnity covenant between A and X might indirectly encourage X to observe the covenant, since, if X does not, he could in theory be made to reimburse damages paid by his predecessor. Where indemnity covenants are present, therefore, they can act as a means of indirect enforcement.

Remember, an indemnity covenant is not a means of shifting liability (i.e. passing the burden) from A to X.

Question 20

Exception to the general rule that the burden of a covenant cannot pass to a successor in title at common law

Answer 20

Halsall v Brizell - Mutual Benefit and Burden -

only applies where the dominant owner grants to the servient owner a benefit in the nature of a service or facility (maybe a right to use a drain across the land or a right of way over a driveway). The rule states that where a deed grants a benefit, but also imposes a connected burden (for example, a corresponding obligation to contribute to the cost of maintaining the drain or road), the servient owner cannot take the benefit and ignore the burden, even if they are not an original party to the deed. Consequently, any later owner of the land will also be subject to the burden of the covenant if he wishes to enjoy the benefit of the service or facility. This is a way of enforcing the burden of a covenant against a successor where he enjoys a related benefit.

Question 21

Other method of enforcement?

Answer 21

Restriction under s.40 LRA 2002

The covenantee could put a restriction on the proprietorship register of the burdened land to the effect that no transfer of the burdened land may be registered without the consent of the covenantee. As a condition of giving his consent to the transaction, the covenantee asks for a direct covenant from the buyer, thereby creating a new privity of contract between the covenantee and the buyer.

Question 22

Transmission of the Burden of a Covenant in Equity

Answer 22

Tulk v Moxhay - if equity did not enforce the covenantor’s promise then it would be ‘impossible for the owner of land to sell part of it without incurring the risk of rendering what he retains worthless’.

Requirements for transmission as follows:

• The Covenant must be Negative
• The Covenant must Accommodate a Dominant Tenement
• The original parties must have intended the burden to run
• Notice

Question 23

The Covenant must be Negative

Answer 23

It is the effect of the covenant, rather than its wording, which determines whether it is negative or positive - a question to ask is whether the covenant can be complied with by doing nothing. If the answer is ‘yes’, then the covenant is negative. Another test often used is to ask whether performance involves the expenditure of time, money or energy (‘hand in pocket test’): Haywood v Brunswick Permanent Benefit Building Society (1881) 8 QBD 403. If so, it is positive.

This means that in equity, as well as at common law, there is an inability to enforce breaches of positive covenants directly against successors in title to the servient land.

Question 24

The Covenant must Accommodate a Dominant Tenement

Answer 24

There are three aspects to this rule.

the original covenantee and his successor(s) in title must have retained an interest in land at the date of the covenant and at the time of enforcement respectively (London County Council v Allen [1914] 3 KB 642).

the covenant must ‘touch and concern’ the land. This means that the land retained by the covenantee (the dominant land) must benefit from the covenant

both the servient and dominant lands must be sufficiently proximate to each other (see Bailey v Stephens (1862) 12 CB (NS) 91).

Question 25

The original parties must have intended the burden to run

Answer 25

It is not compulsory for restrictive covenants entered into by two land owners to create an interest in land binding upon successors in title to the original covenantor - Since 1925, covenants relating to the covenantor’s land are deemed to be made by the covenantor on behalf of themself and their successors in title, unless a contrary intention appears (LPA 1925, s 79). Express words evidencing an intention for the burden to run are not, strictly speaking, now necessary, although they are often included.

Question 26

Notice

Answer 26

Where title to the land is registered at the Land Registry, a restrictive covenant must be entered as a notice in the charges section of the register of the servient property (LRA 2002, s 32). If it has been so entered, the covenant will be binding upon everyone, including a purchaser for value (LRA 2002, s 29(2)). If it has not been entered, then a purchaser for valuable consideration will take free of it (LRA 2002, s 29(1)), although anyone who is a volunteer will still be bound (LRA 2002, s 28).
Where title to the land is unregistered, a covenant imposed after 1925 must be registered as a Class D(ii) land charge under the Land Charges Act 1972. Registration as a Land Charge gives the requisite notice (LPA 1925, s 198). If not registered, it is void against a purchaser for money or money’s worth (including nominal but excluding marriage consideration) of a legal estate (LCA 1972, s4 (6)).
The equitable doctrine of notice still applies to restrictive covenants in unregistered land created before 1 January 1926 which consequently bind the world

Question 27

Position of the Original Covenantor

Answer 27

even once the original covenantor has parted with the servient land burdened by the covenant, he generally remains liable on all the covenants to whomsoever has the benefit of the covenant.

Question 28

Transmission of the Benefit of a Covenant in Equity

Answer 28

For successor in title of title of dominant land to be able to enforce a breach in equity, it is necessary to show that the benefit of the covenant which has been breached has passed to him. It would not be sufficient to show that the benefit of this covenant has passed using the common law rules. Where he wishes to enforce a covenant in equity, he must show that the benefit of that covenant has passed to him in equity.

There are two conditions for the benefit to pass in equity:

1. the covenant must touch and concern the land; and
2. the successor in title to the covenantee must have become entitled to its benefit by either annexation, assignment or a scheme of development, as set out by Sir Charles Hall V-C in Renals v Cowlishaw (1878) 9 ChD 125 at 129.

Question 29

Annexation - Entitlement to benefit of a covenant

Answer 29

Once annexed, the benefit of a covenant will pass automatically on a transfer of the land without specific mention, because it is part of the land. This takes effect at the date the covenant is created and may be express, implied or by statute.

Question 30

Express Annexation

Answer 30

This occurs where the language of the covenant makes it sufficiently clear that the parties intend the benefit to become part of the land of the covenantee rather than an advantage personal to the covenantee.

Question 31

Does Express Annexation fail if the area of land is too large to be capable of being benefited?

Answer 31

Marten v Flight Refuelling Ltd [1962] Ch 115, a covenant was held capable of benefiting a 7,500 acre plot of land. In Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798, a covenant not to build on servient land other than in accordance with specified conditions was held to be capable of benefiting a 4,000 acre plot of land.

Question 32

Express Annexation - the benefit of a covenant is expressly annexed to the whole of the land, does this mean that a successor in title to part of the dominant land cannot claim to benefit?

Answer 32

In Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 WLR 594, Brightman LJ could not understand how a covenant annexed to land as a whole is not annexed to individual parts of it. He declared a presumption that a covenant would be annexed to each and every part of the land without the need for any express provision to do so.

Question 33

Implied Annexation

Answer 33

The court may in certain limited circumstances imply annexation from the conveyance in situations where there is neither a statutory or express annexation in equity. This is very rare.

Question 34

Annexation by Statute

Answer 34

The LPA 1925, s 78(1) provides that a covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and their successors in title.

Question 35

Entitlement to Benefit through Assignment

Answer 35

Where the benefit of a covenant has not been annexed to the land at the time the covenant was made, it can nevertheless be expressly assigned when the land is transferred, which may be a long time afterwards. For the assignment to be effective in equity, the land with the benefit must be properly identified and the assignment can only be made at the time of the conveyance of the land (see Miles v Easter [1933] Ch 611). The assignment must also comply with the provisions of LPA 1925, s 53(1)(c) as it represents the disposition of an equitable interest.

Question 36

Entitlement to Benefit through Building Scheme

Answer 36

Where there is a scheme, the restrictive covenants are treated as being the equivalent of a set of bylaws
binding on and enforceable by all purchasers, together with their successors.

The traditional conditions to be met, if there is to be a valid building scheme, were laid down in Elliston v Reacher [1908] 2 Ch 374:

1. both claimant and defendant must derive title from a common vendor;
2. prior to the sale of both plots, the common vendor must have laid out the estate in plots subject to similar covenants and intended them to be imposed on all of
   the plots;
3. the restrictions must have been intended to benefit all the plots sold; and
4. the claimant and defendant must both have purchased on the basis that the restrictions were to benefit the other plots.

A further condition was added by Reid v Bickerstaff [1909] 2 Ch 305: the area of the scheme must be clearly defined.

Question 37

Remedies

Answer 37

 The remedy wanted by the injured party (i.e. the landowner with the benefit of the covenant) would be an injunction to stop the continued breach. However, if the party being sued is not in control of the servient land, the remedy would be damages as monetary compensation.

 An injunction is a discretionary remedy and will not be granted automatically by the court. It will consider the behaviour of the party asking for the remedy, such
as if they have delayed in seeking an award. It may award damages in lieu of an injunction too.

Question 38

Discharge/Modification of Covenants

Answer 38

A covenant can be discharged or modified by:

 Express agreement from the land owner with the benefit.

 Application to the court for a declaration as to the status of the covenant.

 Application to the Land Chamber of the Upper Tribunal for an order that the covenant be released, or modified or declared obsolete because one of the circumstances exist under s.84(1) of the LPA 1925

 Common ownership, where the dominant and servient land come into the same ownership.

Question 39

Circumstances existing under s.84(1) of the LPA 1925 to discharge/modify Covenant

Answer 39

o The covenant is obsolete due to change in the character of the property or the neighbourhood;

o The continued existence of the covenant would prevent reasonable use of the land;

o The person entitled to the benefit of the covenant has expressly or impliedly consented to its discharge

o The discharge or modification will not injure the person entitled to the benefit of the covenant.