Structure: Freehold Covenants

Question 1

1. Define issues

Answer 1

A) issues with freehold covenants often arise when one freeholder sells part of his land and wants to restrict new owner’s use of that land
- covenant = a promise made by one party (the “covenantor”) for benefit of another party (the “covenantee”) which is (usually) contained in a deed (MacKenzie)

B) begin by identifying benefited and burdened tenements, then identify original covenantees and covenantors and successor covenantees and covenators

• benefited land = land which benefits from covenant, it is owned by covenantee
• burdened land = bears burden of carrying out covenant, owned by covenantor - landowner who made promise of covenant to original owner
• draw a rough diagram to prevent basic errors

C) state what issue is i.e. may be with enforceability: successor covenantees will only be able to enforce performance of covenants if benefit enjoyed by predecessor covenantees passes, and if burden agreed to by predecessor covenantors passes to successor covenantors, because no longer privity of contract between parties

Question 2

1. 2 Explain what covenants are and what potential breaches are

Answer 2

A) point out whether covenants are positive (do something) or negative (to not do something)
B) successor covenantee may be able to choose who to sue: original covenantor or successor covenantor
- original covenantor can be sued for damages at common law
- but only successor covenantor can be ordered to remedy breach in equity
… SO preferable to sue successor covenantor, and that to have this option, both benefit and burden must pass in equity, or both must pass at common law
- cannot mix and match
C) it is unlikely burden will have passed at common law (Austerberry v Oldham Corporation and Rhone v Stevens), so first consider whether burden has passed in equity.
- note equitable remedies are preferable as injunctions are available to prevent or remedy a breach, whereas damages are only available at common law.

Question 3

2. has burden passed in equity?

Answer 3

4 requirements set out in Tulk v Moxhay:

1. covenant is NEGATIVE in substance:
   - test: covenant will be negative if it can be complied with by doing nothing i.e. by not expending money, time or effort - “hand in pocket” test (Haywood v Brunswick)
   - if result unclear, may be possible to sever it into two or more covenants, allowing just negative part to pass test (Shepherd Homes v Sandham No 2)
   - alternatively consider whether, as a whole, covenant can be seen as mainly positive or negative
   - may be negative with positive condition attached (e.g. covenant not to build without first informing dominant owner) or vice-versa)
   - if this is case the covenant will be viewed entirely as positive or negative, despite contrary minor condition (Powell v Helmsley)
   - equity will never enforce positive covenants against successors-in-title (Rhone v Stephens)
2. covenant must ACCOMMODATE benefited tenement:
   …three parts:
   i) original covenantee had an estate in benefited tenement at time covenant was created, and successor has estate in benefited tenement at time of enforcement (London City Council v Allen)
   ii) covenant touches and concerns benefited land - explained by Lord Oliver in P&A Swift Investments v Combined English Stores as affecting “the nature, quality, mode of use, or value of covenantee’s land”, and is not expressed to be personal - must only benefit landowner for as long as own benefited land… this could include restrictions on business use i.e. no ironmongery (Newton Abbott Coop v Williamson & Treadgold Ltd)… remember test is whether it BENEFITS THE LAND, not just the landowner
   iii) benefited and burdened tenements are sufficiently proximate i.e. neighbouring or at least closely adjacent (Bailey v Stephens)
3. original parties INTENDED burden to pass:
   - can be shown through express words of title deed
   - if it is not shown in deed, it will be implied by s79 LPA 1925, unless it is expressly excluded
4. notice provisions:
   - s32 notice must have been entered on charges register of burdened freehold for registered land (or class D(ii) at LCR for unregistered land) prior to sale of burdened land
   - if notice is entered, covenant will bind successor purchaser
   - if not, only volunteer successor (someone given land as gift or inheritance) will be bound

Question 4

3. Has benefit passed in equity?

Answer 4

A) Requirements:

i. covenant touches and concerns benefited tenements (P&A Swift)
ii. covenantee’s successor-in-title became entitled to benefit of covenant either by annexation, assignment or scheme of development (Renals v Cowlishaw):

1. ANNEXATION
   - means benefit of covenant is tied to land at time covenant is made
   - becomes incorporeal hereditament that passes automatically with the land
   - may be achieved expressly, impliedly, or by statue
   - does not matter how large parcel of land is (Wrotham Park Estate v Parkside Homes)
   - annexation means annexation to each and every part of land (Federated Homes v Mill Lodge Properties)
   a) express - clear language stating benefit is annexted to land, not to persons (Wrotham Park) e.g. “to vendor’s assignees and heirs” is not express language as it refers to persons instead of land (Renals v Cowlishaw)… for there to be annexation it is not essential for Land Registry to have entered burden on charges register of servient land (Rees and another v Peters)
   b) implied: rare, so unlikely to be relevant
   c) statutory: express language not always necessary, as annexation will be assumed under interpretation of s78 LPA 1925 given in Federated Homes, unless expressly excluded (Roake v Chadha)
2. ASSIGNMENT
   - if not annexed on creation, benefit can be assigned (transferred) to successor expressly
   - any assignment must be in writing and signed (s53(1)(c) LPA 1925)
   - benefit must be assigned every time property is transferred (Miles v Easter)
3. SCHEME OF DEVELOPMENT
   - only mention this where property developer subdivides large plot of land and creates covenants that bind all plots and are enforceable by and against all purchasers
   - conditions for benefit to pass come from Elliston v Reacher:
   i) benefited and burdened tenements must derive title from one seller
   ii) common seller divided land, intended covenants to apply to plots
   iii) all plots are burdened for benefit of all other plots
   iiii) benefited and burdened tenements were purchased on that basis; and
   Reid v Bickerstaff added scheme of development must be clearly defined on a plan

Question 5

4. Draw interim conclusion

Answer 5

• for which of the covenants has both passed in equity?

- only discuss passing at common law for covenants which have not passed in equity

Question 6

5. has burden passed at common law?

Answer 6

• general rule: burden does not pass at common law (Austerberry v Oldham Corporation)
• only exception: mutual benefit and burden rule (Halsall v Brizell)
• where benefit is use of something and burden is cost of maintenance
• benefit and burden must be explicitly interlinked i.e. not possible to take benefit without also having to take burden (Rhone v Stephens)
• principle does not apply in reverse, no authority to suggest “he who bears burden” is entitled to benefit (Parker v Roberts)
• benefit and burden must pass in same transaction (Davies v Jones)
• successor covenantor must also have genuine choice to take both benefit and burden or to take neither (Thamesmead Town v Allotey), if there is no choice then burden will not pass (e.g. covenant to maintain road which is only means of access to covenantor’s land, would not pass: covenantor has no real choice as would need to maintain road to get access to own land

Question 7

5. has burden passed at common law?… if burden has not passed, there are other options for successor covenantee

Answer 7

1. pursue original covenator
   - original covenantor remains liable under common law for any breaches of covenant, even if it is successor that commits breaches (Tophams v Earl of Sefton, applying s79 LPA 1925)
   - however, original covenantor can only pay damages - he is no longer in occupation so cannot remedy breaches - so this is of limited use to successor covenantee
2. indirectly pursue successor covenantor by chain of indemnity covenants
   - if original covenantor ensrued on sale of estate that successor provided indemnities against any breaches, successor would have to reimburse original covenantor for any losses arising from breaches
   - so if original covenator were pursued successfully, there would be claim for damages back from successor
   - again, only damages are available but threat of damages might deter successor covenantor from starting or continuing to breach covenant
3. covenantee could place s40 LRA 2002 restriction on register of servient land so no transfer of burdened land can take place without covenantee’s consent
   - what this means in practice is that covenantee will ask for new covenant directly from potential successor covenantor
   - this is a new covenant, so all issues of burden passing are irrelevant - burden will be taken by successor covenantor

Question 8

6. Has benefit passed at common law?

Answer 8

REQUIREMENTS:

• benefit may be expressly assigned under s136 LPA 1925 - original covenantee must do so in writing and give this to successor covenantee
• written notice must also be given to covenantor
• alternatively, benefit could be impliedly assigned (P&A Swift Investments v Combined English Stores) which requires that the covenant:
  1. “touches and concerns” benefited tenement