Freehold covenants

Question 1

Covenant definition

Answer 1

A promise relating to land. They are usually contained in a transfer deed made when someone sells part of their land and wants to control what happens on the land sold off. The seller makes it part of the sale deal that the buyer will enter into covenants. They are in effect a means of private control of land use.

Question 2

Covenantee

Answer 2

The person who has sold part of their land and has required the buyer to enter into the covenant. The covenantee benefits from the covenant, and is entitled to enforce the covenant in the event of it being breached. The land owned by the covenantee is benefitted by the promise; it is the dominant land.

Question 3

Covenantor

Answer 3

The person who gives the promise or enters into the covenant. Sometimes referred to as the grantor of the covenant. The person who must observe the terms of the covenant and can be sued if the covenant is breached. Their land is burdened by the covenant, and so is the servient land.

Question 4

Successors

Answer 4

• Successor-in-title/successor covenantee: a new owner of the dominant land
• Successor covenantor: a new owner of the servient land

Question 5

Two main types of obligation imposed by covenants

Answer 5

Positive and negative covenants

Question 6

Positive covenant

Answer 6

A promise actively to do something. This will usually involve spending money. It could be a direct obligation to do so e.g. pay money towards the upkeep of a shared facility like a driveway/parking area/communal garden. It could be money which is not directly stated e.g. an obligation to maintain a fence/wall/roof which inevitably involves expenditure of money or time.

Question 7

Negative/restrictive covenant

Answer 7

A promise not to do a specific thing on the land. Restricts use of the land in some way.

Question 8

What covenants are enforceable against successor covenantors?

Answer 8

‘Only such a covenant as can be complied with without expenditure of money will be enforced against a successor covenantor’ (Lindley LJ, Haywood v Brunswick Permanent Benefit Building Society)

Therefore only restrictive covenants are enforceable in equity against successor covenantors.

Question 9

Mixed covenants

Answer 9

A promise which has positive and restrictive elements, e.g. a covenant not to build on the land without the consent of the owner of the dominant land (restrictive = not to build on the land, positive = asking consent of the owner of the dominant land)

Question 10

Test for determining whether a covenant is positive or restrictive

Answer 10

Haywood v Brunswick Permanent Benefit Building Society:

• The ‘hand in pocket’ test. If covenantors have to find money to spend to perform the covenant, it is positive.
• ‘Time is money’ so any covenant which requires expenditure of money, effort or time falls within the definition of positive covenants.
• It is a matter of looking at the substance and not the form, i.e. looking beyond the words and at the essence of the obligation
• e.g. a covenant not to allow a building to fall into disrepair: appears to be restrictive as it is written in negative form, but the underlying obligation is a positive one, to maintain the building.
• e.g. a covenant to keep land as open space: appears to be positive but is restrictive, underlying obligation is not to build.

Question 11

Interpretation of mixed covenants

Answer 11

Can be interpreted two ways:

(1) as separate covenants
(2) as one obligation with a condition attached

Question 12

Mixed covenant interpretation: separate covenants

Answer 12

Shepherd Homes Ltd v Sandham:

• If the positive and restrictive aspects of the obligation can be separated to create two ‘stand alone’ covenants; one positive and one restrictive
  e. g. a covenant to paint the exterior or a building every two years and not to paint the door red.
  (1) to paint the exterior every two years: positive
  (2) not to paint the front door red: restrictive

Question 13

Mixed covenant interpretation: as one obligation with a condition attached

Answer 13

Powell v Hemsley

• If the mixed covenant cannot be split
• The covenant is interpreted as being overall positive or restrictive
• The additional element which cannot stand alone as a covenant is viewed as simply being a condition attached to the overall positive/restrictive obligation
  e. g. A covenant not to build on the servient land without the consent of the dominant owner. Main covenant is restrictive: not to build. ‘Without consent’ is not a stand alone obligation, so there is this positive condition attached.

Question 14

Legal problem of enforceability of covenants between freehold owners who were not parties to the original covenant

Answer 14

• A sells part of their land to B.
• A requires B to enter into covenants in the transfer deed to restrict B’s use of the land
• If B were to breach either of the covenants, A will have no problem enforcing them directly against B. This is because there is privity between A and B, and basic contractual principles apply.
• A will be able to request an injunction against B or an order for specific performance
• Problems arise when A/B transfer their land, e.g. A to C, and B to D.
• There is now no direct legal relationship between C and D; no contract between them.

Question 15

Requirements for new owners to be able to enforce covenants made by the original owners

Answer 15

C can enforce the covenants against D if two things are shown:

(1) It must be shown that C has the benefit of the covenants
(2) It must be shown that D has the burden of the covenants

Question 16

Two sets of rules to see whether the benefit and burden have passed to the successor covenantee and covenantor

Answer 16

(1) The rules of equity

(2) The common law rules

Question 17

Things to be aware of using the rules of equity or the common law rules

Answer 17

• These rules should not be muddled or used on a mix and match basis. It is not possible to apply the common law rules for the benefit to pass to C but the rules of equity for the burden to pass to D.
• If it can be shown that the benefit of the covenants has passed to C and the burden has passed to D, under either the rules of equity or common law but not both, then C can enforce the covenants directly against D.

Question 18

General rule at common law

Answer 18

As a general rule, the burden of a covenant does not pass to a successor at common law (Austerberry v Oldham Corporation)

• This means at common law the covenant is unenforceable against the successor in title to the covenantor.
• In essence, the original covenantor remains liable for breaches of covenant by successors in title at common law

Question 19

Equitable rules for passing on the burden

Answer 19

Equity has developed rules which allow the burden of certain covenants to pass to successors, which allows the covenant to be enforced directly against the person in breach.

• It is equity’s intervention that has created the proprietary right known as the restrictive covenant.
• The formalities for creating a restrictive covenant are set out in LPA 1925, s 53(1)(a): in writing and signed by the grantor.
• A restrictive covenant is a proprietary right (LPA 1925, s 1(3))

Question 20

Equitable rules for passing the burden - the rule in Tulk v Moxhay

Answer 20

Four aspects to the rule:

(1) The covenant must be restrictive
(2) It must accommodate the dominant tenement
(3) There must be intention for the burden to run
(4) There must be notice of the covenant

Question 21

Equitable rules for passing the burden - (1) The covenant must be restrictive

Answer 21

Rhone v Stephens - ‘For over 100 years it has been accepted law that equity will enforce negative covenants against freehold land but has no power to enforce positive covenants against successors in title of land.’

• The substance of the covenant must be restrictive
• If a covenant is positive, then the common law rules will apply to its enforcement. Positive covenants can only be enforced at common law.

Question 22

Equitable rules for passing the burden - (2) It must accommodate the dominant tenement

Answer 22

3 aspects:

(a) The covenantee and successor covenantee must hold an interest in land at the time of creation and enforcement.
(b) The covenant must touch and concern the land
(c) The dominant land and the servient land must be in proximity

Question 23

Equitable rules for passing the burden - (2) It must accommodate the dominant tenement - (a) The covenantee and successor covenantee must hold an interest in land at the time of creation and enforcement.

Answer 23

LCC v Allen
FACTS: Allen bought land from LCC and covenanted not to build on it. He sold the land to his wife who started to build. LCC tried to enforce the covenant against her.
HELD: The court refused to enforce the covenant as LCC had retained no land capable of being benefitted when it sold the land to Allen.

Question 24

Equitable rules for passing the burden - (2) It must accommodate the dominant tenement - (b) The covenant must touch and concern the land

Answer 24

• It is the land, and not simply the dominant owner, which must benefit from the covenant (P&A Swift Investments v Combined English Stores plc)
• e.g. a covenant not to use servient land for industrial purposes would benefit the dominant land. Not having industrial use nearby would make the dominant land more enjoyable, peaceful and valuable.

Question 25

Equitable rules for passing the burden - (2) It must accommodate the dominant tenement - (c) The dominant land and the servient land must be in proximity

Answer 25

The two pieces of land must be near to each other, although they do not need to share a common boundary, or be directly next to each other (Bailey v Stephens)

Question 26

Equitable rules for passing the burden - (3) There must be intention for the burden to run

Answer 26

This can be shown in one of two ways:

(1) Expressly - The covenant is worded in such a way as to make it clear that successors are to be bound e.g. ‘A hereby covenants with B and his successors in title to land known as…’ or ‘A covenants with the intention of binding land known as…’
(2) Impliedly - LPA 1925, s 79 states that a covenant relating to land shall be deemed to be made on behalf of his successors in title, unless a contrary intention is expressed.

Question 27

Equitable rules for passing the burden - (4) There must be notice of the covenant

Answer 27

Unregistered land: The covenant must be entered as a D(ii) Land Charge (LCA 1972 s 2(5)(ii)). If so, a purchaser will be deemed to have notice of the covenant (LPA 1925, s 198). If the covenant has not been protected by entering a D (ii) Land Charge, a purchaser of a legal estate will take the land free of the covenant (LCA 1972, s 4(6)). However, if the successor covenantee has been gifted or inherited the estate, they will still be bound despite the fact it has not been properly protected.

Registered land: The covenant must be protected by the entry of a notice in the Charges Register of the servient title (LRA 2002, s 32). If so, everyone, including a purchaser for valuable consideration, will be bound (s 29(2)). If not, a purchaser for valuable consideration will take the land free of it and would not be bound (s 29(1)), but a successor who has been gifted or inherited the land (a volunteer) would still be bound (s 28)

Question 28

‘Touching and concerning the land’ - P&A Swift Investments v Combined English Stores Group plc

Answer 28

FACTS: A landlord tried to sue a guarantor for the tenant’s arrears of rent. The guarantor argued that the covenant guaranteeing the rent did not touch and concern the land.
HELD: The covenant did not touch and concern the land. It was purely personal and therefore could not be enforced by a subsequent landlord.

Question 29

‘Touching and concerning the land’ - P&A Swift Investments v Combined English Stores Group plc: Lord Oliver’s four-part test

Answer 29

1) The covenant benefits only the dominant owner whilst they own the dominant land. Once the dominant owner has parted with the land, the covenant ceases to be of benefit to them.
2) The covenant affects the nature, quality, mode of user or value of the dominant land, i.e. it benefits the dominant land itself in some way
3) The covenant is not expressed to be personal, i.e. it doesn’t state that it is intended to be between the original parties e.g. ‘the covenantor hereby covenants with the covenantee’, ‘this covenant is expressed to be personal to the covenantor’.
4) The fact that a covenant is to pay a sum of money will not prevent it from touching and concerning the land - Generally, a covenant to pay money is interpreted as a personal covenant, but not always, e.g. a covenant to maintain a driveway could be held to benefit the land itself

Question 30

Case example of a covenant which does NOT ‘touch and concern’

Answer 30

Cosichome Limited v Southampton City Council
FACTS: The dominant owner in was Southampton CC. It tried to enforce a covenant which restricted the use of the servient land to broadcasting by the BBC. The covenant could be lifted by payment of a ‘development charge’ to the dominant owner.
HELD: The covenant did not touch and concern the dominant land and could not be enforced. It was not imposed to preserve the amenity or value of the dominant land itself.

Question 31

Case example of a covenant which DOES ‘touch and concern’

Answer 31

Newton Abbott Co-operative Society Ltd v Williamson & Treadgold Ltd
FACTS: The dominant land was an ironmonger’s. When part of the dominant land was sold off, the servient owner covenanted not to use that land as an ironmonger’s. The covenant was breached by the new owner of the servient land and the dominant owner sought an injunction.
HELD: A covenant not to compete with a business being carried out on the dominant land can improve the enjoyment and utility of the dominant land. The injunction was granted.

Question 32

Equitable rules for passing the benefit

Answer 32

Two elements must be fulfilled for the benefit to pass in equity:

1) The covenant must ‘touch and concern’ the dominant land
2) The benefit must pass by one of the methods in Renals v Cowlishaw

Question 33

Renals v Cowlishaw - three ways in which the benefit of a covenant can pass to a successor covenantee in equity

Answer 33

1) Annexation
2) Assignment
3) Building scheme

Question 34

Equitable rules for passing the benefit - Methods - 1) Annexation

Answer 34

• Occurs when the covenant is made in such a way that the benefit becomes a permanent part of the dominant land itself
• It thereby passes automatically when the dominant land is sold, without being specifically mentioned in the transfer deed.
• One of two ways
  (a) Express annexation
  (b) Statutory annexation (LPA 1925, s 78)

Question 35

Equitable rules for passing the benefit - Methods - (1)(a) Express annexation

Answer 35

• The words of the covenant are sufficient to make the benefit part and parcel of the dominant land from the outset.
• Occurs where the express words make it clear that the original parties intend the benefit to become part of the dominant land, rather than simply a personal advantage
• Rogers v Hosegood: a covenant made ‘for the benefit of the owners and successors in title’ to named land, was enough to demonstrate express annexation.
• Renals v Cowlishaw: a covenant stated to be made with the covenantees, their heirs, executors and assignees was not enough to show express annexation because the benefit was stated to be for people, not for land.

Question 36

Equitable rules for passing the benefit - Methods - (1)(b) Statutory annexation

Answer 36

• LPA 1925, s 78(1) operates to annex the benefit of a covenant to land, unless it is expressly excluded.
• LPA 1925, s 78(1) as interpreted in Federated Homes v Mill Lodge Properties provides that a covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and his successors in title of the land intended to be benefitted.
• This would appear to make express words of annexation unnecessary, as it seems to make annexation automatic.
• However, Roake v Chadha held that s 78(1) can be expressly excluded. This can happen if an alternative method of passing the benefit is stipulated in the original transfer deed.

Question 37

Equitable rules for passing the benefit - Methods - 2) Assignment

Answer 37

• The express transfer of the benefit of a covenant alongside a transfer of the dominant land.
• Occurs when the benefit of the covenant has not been annexed at the outset; the benefit can be assigned when the dominant land is transferred. As the benefit exists separately from the land itself, it is treated as a separate interest in the land and must be transferred every time the land is transferred.
• The separate assignment must comply with the formalities in LPA 1925, s 53(1)(c): in writing and signed by the person transferring the benefit.

Question 38

Equitable rules for passing the benefit - Methods - 3) Building scheme

Answer 38

• If the parties intended to create a scheme of reciprocal local laws, the benefit of restrictive covenants passes to all new owners.
• When a new housing estate is built, all houses are sold subject to the same covenants. New owners who wish to enforce a covenant against a neighbour may struggle to show that the benefit has passed to them.
• Building schemes resolve this problem for restrictive covenants only.
• If the conditions of a building scheme are met, the covenants are treated as a set of by-laws enforceable by and against all owners.

Question 39

Ellison v Reacher - Conditions required for a building scheme

Answer 39

1) All buyers buy from the same seller
2) The seller divided the estate into plots
3) The covenants were intended to benefit all the plots
4) Each buyer buys on the understanding that the covenants are intended to benefit all plots.
- Later cases have interpreted these rules as guidelines rather than strict requirements.
- A court will need to be satisfied that it was the intention of the parties to create a scheme of mutually enforceable obligations.

Question 40

The position of the original covenantee

Answer 40

• When dominant land is sold, the original covenantee technically still has the benefit of the covenant and can sue on it; this is based on contractual principles.
• However, it is highly unlikely any original covenantee would wish to enforce a covenant or even if they did, what loss they could be shown to have suffered.

Question 41

Problems with (passing benefit in equity) express annexation

Answer 41

• Where the terms of the covenant purport to annex the benefit of a covenant to a large area of land, does the annexation fail if the area of land is too large to be benefitted?
• Where the benefit of a covenant is expressly annexed to the whole of a piece of land, does it mean that a successor covenantee of only part of the dominant land cannot hold a benefit?

Question 42

Problems with (passing benefit in equity) express annexation - Re Ballard’s Conveyance

Answer 42

FACTS: A covenant which restricted building work was purportedly annexed to a piece of land extending to 1700 acres. The question arose as to whether the benefit had actually been annexed to the whole estate.
HELD: The covenant did not touch and concern the whole of the land and the attempted annexation failed. The court refused to annex the benefit to part of the land only.

Question 43

Problems with (passing benefit in equity) express annexation - Marquess of Zetland v Driver

Answer 43

FACTS: A covenant was drafted in terms which expressly annexed the benefit of ‘each and every part’ of a large area of land. The successor covenantee had bought part of the original benefitted land and wished to enforce the covenant.
HELD: The successor could enforce the covenant as the precise drafting made the intention of the parties to annex the benefit.
- After this case, the benefit will only be annexed to land if the wording of the document made it clear that the benefit was intended to be annexed to that particular land.

Question 44

Express annexation: the current position

Answer 44

• The requirement for very precise drafting seems to have been relaxed in Federated Homes Ltd v Mill Lodge Properties Ltd. ‘I would have thought, if a covenant is, on a proper construction of a document, annexed to the land…it is annexed to every part unless a contrary intention appears’ (Brightman LJ)
• Small v Oliver & Saunders (Developments) Ltd followed Brightman LJ’s approach.

Question 45

Statutory annexation: Federated Homes v Mill Lodge Properties

Answer 45

• LPA 1925, s 78(1) as interpreted in this case provides that a covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and his successors in title of the land intended to be benefitted.
• FACTS: Mill Lodge Properties was a development company which bought part of a larger site. In order to preserve the value of the retained land, it covenanted with the owner to build no more than 300 houses on the land purchased. Federated Homes bought the remainder of the site and was therefore successor covenantee. Federated Homes learned that Mill Lodge Properties planned to build 32 houses in breach of covenant, it sought an injunction to prevent the breach.
• ISSUE: whether the benefit of the covenant had been annexed to the land owned by Federated Homes
• HELD: The benefit was expressly annexed but in any event LPA 1925, s 78 annexes the benefit of the covenant by statute. ‘if…there exists a covenant which touches and concerns the land of the covenantee–that covenant runs with the land…’ (Brightman LJ). So s 78 has the effect of annexing by statute the benefit of the covenant to the covenantee’s land if it touches and concerns the land.

Question 46

Statutory annexation - Federated Homes: Problems

Answer 46

• Federated Homes was a controversial decision.
• Three arguments have been made which question the interpretation of s 78:
  (1) Parliament intended the provision as a word-saving provision for conveyancers. It does not mention the word ‘annexation.’
  (2) The interpretation of s 78 is inconsistent with the interpretation of LPA 1925, s 79 which relates to the burden of covenants
  (3) s 79 gives rise to a presumption that the burden is intended to pass; it does not automatically pass the burden. It has been argued that s 78 should be read the same way.
• s 78 as interpreted in Federated Homes effectively makes statutory annexation automatic and compulsory, which may not be what the parties intend.

Question 47

Statutory annexation - Roake v Chadha

Answer 47

FACTS: Land was divided into plots and sold. Each plot was subject to a covenant not to build more than one house on it. In each transfer, was a clause which stated that the benefit of the covenant would not pass to a successor covenantee unless it had been expressly assigned. The Chadhas acquired a plot and wanted to build two houses on it. The Roakes had bought another plot, but the benefit of the covenant had not been expressly assigned to them.

ISSUE: The court was asked to determine if LPA 1925, s 78 operated to annex the benefit by statute.

HELD: The benefit had not passed to the Roakes. The judge said that where a covenant specifically stated the benefit could not pass except by express assignment, this had the effect of excluding the operation of s 78.

Question 48

Statutory annexation - Crest Nicholson Residential Ltd v McAllister

Answer 48

FACTS: Land was sold in plots, subject to covenants restricting use and development. Some covenants were expressly annexed; some were not. Crest owned several plots and planned to develop them. McAllister, who owned another plot, claimed to have the benefit of the covenants either by express annexation or under LPA 1925, s 78.

HELD: There was nothing in the original transfer selling the plots that enabled identification of which land was to have the benefit of the covenants. For s 78 to operate to annex the benefit, the land benefitted must be identifiable preferably by description, plan or other reference in the transfer itself. At the very least it must be identifiable by external evidence. It is not enough to say that the covenant is for the benefit of ‘nearby land’.

Question 49

Equitable remedies for breach of freehold covenants

Answer 49

• As a restrictive covenant is an equitable interest in land, equitable remedies are available to enforce the breach against the current owner.
• These remedies are discretionary; there is no automatic right to them.
• The most common remedy is an injunction.
• Either a prohibitory injunction, an order requiring a person to refrain from doing a particular act, or a mandatory injunction, an order to undertake a particular act.

Question 50

Equitable remedies: Prohibitory v. mandatory injunction

Answer 50

• Typically, if the breach is threatened or ongoing, the claimant can apply for a prohibitory injunction, ordering the breach to cease.
• If the breach has already occurred, the claimant can apply for a mandatory injunction, ordering the person in breach to do something.

Question 51

Equitable remedies: equitable principles

Answer 51

• Equitable remedies are awarded subject to general equitable principles and maxims.
• e.g. ‘delay defeats equity’: a claimant must not wait too long before applying for an injunction.
• A claimant who wishes to apply for an injunction in respect of building work being carried out in breach of covenant must act immediately. If the claimant waits untilt he building work is complete and then applies for a mandatory injunction, the application is likely to be refused.

Question 52

Equitable remedies: damages in lieu of injunctions

Answer 52

• Equitable damages are not awarded as of right. They may be awarded in lieu of injunction, as an injunction may be refused where it would be oppressive to gran tit.

Wrotham Park Estate Co Ltd v Parkside Homes
FACTS: There was a breach of covenant not to develop land without approval.
HELD: The court refused to grant a mandatory injunction to demolish the houses built in breach of covenant. They said it would be ‘an unpardonable waste of much needed houses.’ Instead, it awarded equitable damages. It awarded damages calculated as a percentage of the profit made by the developer, reflecting the amount which would theoretically have been paid to the owner of the dominant land to secure a release from the covenant.

Question 53

When do the common law rules have to be used?

Answer 53

• The rule in Tulk v Moxhay must be used to pass the burden of a covenant in equity. The first aspect of it is that the covenant must be negative/restrictive.
• Therefore the rules in equity cannot be used to enforce positive covenants (or indeed any restrictive covenants which fail any of the other Tulk v Moxhay tests). Only the common law can be used in these circumstances

Question 54

Common law rules

Answer 54

• It is fairly easy to show that the benefit passes at common law.
• It is the general rule at common law that the burden of the covenant does not pass (Austerberry v Oldham Corporation, Rhone v Stephens)
• The effect of the rule is that at common law, a new covenantor cannot be sued directly because the burden of the covenant has not passed to them. The burden remains with the original covenantor permanently, known as ‘the continuing liability of the original covenantor.’
• This continuity is often found expressly stated in the wording of the covenant e.g. ‘the covenantor covenants for himself, his successors in title, and all those deriving title under him’
• Even if there is no such express wording in the covenant itself, LPA 1925, s 79(1) can be used to imply such wording. The case of Topham Ltd v Earl of Sefton confirms this. The effect is that the original covenantor will be liable for any breach of covenant by anyone who holds the servient land in the future.

Question 55

Problem with the common law rules

Answer 55

The problem from the covenantee’s point of view is that the only remedy available against the original covenantor is damages. This may not be what the covenantee wants, e.g. if the successor covenantor has breached a covenant to maintain a fence, the covenantee wants to force them to maintain the defence.

Question 56

Common law rules - Reimbursement for the original covenantor

Answer 56

• Original covenantors may have awards of damages made against them for breaches of covenant they did not commit, did not know about, and had no power to stop.
• As part of the transfer deed, the original covenantor should insist that the new covenantor enters into an indemnity covenant in their favour. In the transfer deed, the new covenantor promises that in the event of the original covenantor being sued for breach of covenant, the new covenantor will reimburse any damages they have to pay out
• This is called ‘indirect enforcement.’
• If the servient land changes hands several times, there is potentially a ‘chain of indemnity’ as each new servient owner makes an indemnity covenant with the previous servient owner.
• One of the problems with these chains is they can be broken if one servient owner does not ask for an indemnity covenant, and so there is no incentive for the next person to not break the covenant.
• Another problem is if a covenantor has been declared bankrupt, has died or is untraceable.

Question 57

Passing the burden at common law: exception

Answer 57

• Halsall v Brizell - gives a limited exception to the general rule, enabling the burden of a covenant to pass to a successor covenantor at common law.
• Known as the ‘mutual benefit and burden’ rule, and applies where the covenantee grants to the covenantor a benefit in the nature of an easement, and imposes a connected burden.
• e.g. in the transfer deed selling part of a piece of land, a covenantee grants the covenantor a right to park on the covenantee’s land. In the same deed, the covenantor covenants to contribute to the cost of maintaining the parking area.
• In a case such as this, a successor covenantor cannot take the benefit of parking but avoid payment by relying on the basic common law rule of the burden not passing.

Question 58

Passing the burden at common law: exception - Halsall v Brizell

Answer 58

FACTS: A transfer deed relating to a plot of land granted rights of way and drainage over private roads and drains. In the deed, the original purchasers covenanted to contribute to the cost of maintaining the roads and drains. A successor covenantor relied on the common law rule and refused to pay, while still enjoying the benefit.

HELD: Unless successor covenantors submitted to the burden voluntarily, they could not take the benefit. If the successor covenantor is happy to relinquish the benefit, the burden cannot be enforced.

Question 59

Passing the burden at common law: exception - 3 conditions

Answer 59

(1) There must be a clear link between the burden and the benefit (Rhone v Stephens)
(2) There must be a genuine choice as to whether or not to take the benefit. If there is no real choice but to take the benefit, then the normal common law rule applies and the successor covenantor does not take the burden. (Thamesmead Town Ltd v Allotey)
(3) The benefit and burden must have been conferred in the same transaction (Davies v Jones)

Question 60

Other ways of enforcing covenants

Answer 60

Grant of long lease; all covenants in leases except personal ones are enforceable by and against successors in title via the doctrine of privity of estate.

Commonhold development; A way of holding land in units e.g. a block of flats. Each unit owner has obligations such as contributing towards maintenance. The rights and obligations attach by statute (Commonhold and Leasehold Reform Act) to each unit, so all obligations are enforceable against all unit holders at all times.

Restriction LRA 2002, s 40; A covenantee can put a restriction on the Proprietorship Register of the burdened land. This states that no transfer of the burdened land can be registered without the consent of the covenantee. As a condition of giving consent, the covenantee takes a direct covenant from the purchaser. This creates a new privity of contract between the covenantee and the purchaser, enabling direct enforcement. This is adopted frequently in practice, esp. for positive covenants.

Question 61

Two ways the benefit can pass at common law

Answer 61

1) Express assignment
2) Implied assignment (P&A Swift Investments v Combined English Stores Group plc)
- There is no annexation at common law.

Question 62

Benefit passing at common law - express assignment

Answer 62

• Under normal contractual principles, the benefit of a covenant is a chose in action and can be expressly assigned to a successor.
• LPA 1925, s 136:
• the assignment must be in writing and signed by the covenantee who is selling the land and;
• express notice of the assignment must be given to the covenantor, to ensure that the covenantor realises that a new person is in a position to enforce the covenant.

Question 63

Benefit passing at common law - implied assignment

Answer 63

• It is not usually necessary to assign the benefit expressly in most cases. Where there is no express assignment, the benefit of a covenant may pass to a successor covenantee if certain conditions are met.
• This could be said to be the equivalent of annexation in that it involves the benefit automatically passing every time the land is transferred.
• Requirements set out in P&A Swift Investments:
  (1) The covenant must touch and concern the dominant land
  (2) The original parties must intend the benefit to pass
  (3) The original covenantee must have held a legal estate
  (4) The successor covenantee must hold a legal estate

Question 64

Benefit passing at common law - implied assignment - (2) Intention of the parties can be shown expressly or impliedly through statute

Answer 64

• e.g. ‘for the benefit of land known as 5 High Street’ and ‘with the covenantee and successors in title to land known as 5 High Street’ shows express intention
• If there is no express intention, LPA 1925 s 78 implies an intention for the benefit to pass unless it is expressly excluded.

Question 65

Benefit passing at common law - implied assignment - 3) the original covenantee must have held a legal estate and 4) the successor covenantee must hold a legal estate

Answer 65

• At common law, covenants attach to and pass with a legal estate. It is therefore essential that the covenantee owned a legal estate when the covenant was made, and that the successor owns a legal estate at the time of enforcement.
• The legal estate does not need to be of the same nature (Smith and Snipes Hall Farm v River Douglas Catchment Board - in this case the original covenantee held a freehold and the successor held a leasehold)

Question 66

Other methods of passing the benefit - LPA 1925, s 56

Answer 66

LPA 1925, s 56

• ‘a person may take…the benefit of any…covenant or agreement over or respecting land,…although he may not be named as a party to the conveyance or instrument.’
• Beswick v Beswick: this was held that for a non-party to take the benefit of the covenant, they must be existing and identifiable from the wording of the covenant, which restricts the scope of this section.
• e.g. a covenant made by A who owns 5 High Street and B who owns 6 High Street is expressed to be ‘for the benefit of the owner of land known as 7 High Street.’ The owner of 7 High Street at the time it was made would be able to sue. Future owners would not as they are not identifiable.

Question 67

Other methods of passing the benefit - Contract (Rights of Third Parties) Act 1999

Answer 67

• It may be possible for a person to take the benefit of a covenant even though they are not party to the contract in which the covenant is contained.
• This applies to all contracts entered into on or after 11 May 2000.
• This provision may make s 56 redundant, although it has not yet been tested in relation to freehold covenants. It is likely that s 56 will be used in practice in most cases.

Question 68

The position of the original covenantee

Answer 68

• When the dominant land is sold, the original covenantee technically could still have the benefit of the covenant and sue on it.
• This may be possible, provided that:
  (1) The right has not been expressly assigned under LPA 1925, s 136
  (2) The covenant was not drafted so as to apply only whilst the covenantee holds the dominant land
• In reality, the original covenantee is unlikely to want to.
• Any remedy, if sought, would likely be limited to nominal damages.

Question 69

The problem with old covenants

Answer 69

• Restrictive covenants, once validly granted, last forever. Over time, they can become obsolete and unduly restrict use of the servient land.
• There are various ways in which a covenant can be discharged or modified.
• Discharge means the covenant is no longer valid
• Modification means the scope of the covenant is altered

Question 70

Methods of discharging/modifying covenants

Answer 70

(a) A covenant will be automatically discharged if the same person becomes the owner of both the dominant and servient land (Re Tiltwood, Sussex). This is known as a merger.
(b) A dominant owner may expressly agree to discharge the covenant and will enter into a formal release of the covenant, usually in return for payment. This must be done by deed.
(c) The dominant owner may impliedly agree to discharge the covenant by doing nothing when the covenant is being breached openly.

Question 71

Statutory discharge or modification of covenants

Answer 71

• The dominant owner could hold the servient owner to ransom by asking for a large sum of money to discharge an obsolete covenant. To avoid this, the servient owner can apply to the Upper Tribunal (Lands Chamber) for the discharge or modification of any covenant.
• LPA 1925, s 84(1): gives the Lands Chamber the power ‘wholly or partially to discharge or modify any…restriction’ This provision only applies to restrictive covenants.
• LPA 1925, s 84(1)(a): a servient owner may apply to the tribunal for such a declaration on the basis that the covenant has become obsolete due to changes int he character of the property or the neighbourhood.
• LPA 1925 s 84(1)(aa) enables an application to be made on the basis that the covenant impedes reasonable use of the servient land. The applicant must show either that the covenant confers no practical value, or that it is contrary to public interest.
• The tribunal must be satisfied that financial compensation would be adequate for the dominant owner.
• LPA 1925 s 84(1)(b) applies where the dominant owners have agreed, expressly or impliedly, to discharge.
• An application here may be appropriate where the parties have expressly agreed a release in principle, or where the dominant owner has tolerated a long-term breach. The tribunal will decide the level of compensation to be paid, thereby preventing the dominant owner from holding the servient owner to ransom.
• LPA 1925, s 84(1)(c) enables an application to be made where discharge of a covenant will not ‘injure’ the dominant owners, preventing spurious or frivolous objections.
• The tribunal has a balancing act to do: being wary of discharging covenants on the basis simply because discharge will not injure the current dominant owner. It will also have regard to social and economic concerns: the wider public interest rather than the interest of one particular dominant owner.