5 - FREEHOLD COVENANTS
Introduction
A covenant is a promise made in a deed. In respect of land covenants may be either positive (a promise by one party to the other to do something) or negative/restrictive (a promise by one party to another not to do something). There is a benefit and a burden to every covenant. Covenants for land are created when one person sells a part of his or her land to another and in the contract the parties place obligations upon one another e.g. the seller may insert a clause that prohibits the buyer from building on the land or using the land for a business or requiring the buyer to build and maintain a fence between the properties. The land with the benefit is known as the dominant land and the land with the burden is known as the servient land.
Enforcement under Privity of Contract
Between the original covenanting parties there will be a contract and under the common law doctrine of privity of contract the party with the benefit will be able to enforce the covenant against the party with the burden. With most contracts the subject matter remains with the original contracting parties but this is not so with land. Both the original parties will pass the land to their successors either by sale or by inheritance. Under the doctrine of privity of contract the benefit may be assigned but the burden cannot pass. Therefore the successor to the owner of the land with the benefit of the covenant cannot enforce the covenant against the successor to the owner of the land with the burden.
Enforcement under Privity of Estate
The common law doctrine of Privity of Estate enables the benefit and burden of leasehold covenants to pass and the courts have allowed the doctrine to enable the benefit of a freehold covenant to pass but have not allowed burden to pass. Therefore the successor to the owner of the land with the benefit of the freehold covenant cannot enforce the covenant against the successor to the owner of the land with the burden.
N.B. If only the benefit of a covenant runs with the land and not the burden as with Privity of Contract and Privity of Estate, it means the original covenantee's successor can only sue the original covenantor, if he or she could be found, for a breach committed by the successor who held the land now. Therefore when the covenantor sells his or her estate to another he or she will usually include an indemnity clause.
Equitable Interests
As neither of the common law doctrines of Privity of Contract and Estate permit the burden to pass Equity has been applied. Equity has overcome the problem by recognising the covenant as an equitable interest however this only applies to restrictive covenants. Provided the covenant satisfies certain criteria, the successor to the original covenantor who presently holds the dominant tenement may enforce the covenant against the successor to the original covenantee who presently holds the servient tenement. Therefore both the benefit and burden of a restrictive covenant may run with the land.
Positive Covenants
The benefit of a positive covenant will pass from one owner of the dominant property to another under privity of estate in the following circumstances:
1. The covenant must touch and concern the land;
2. It must have been intended that the benefit of the covenant should run with the covenantee's land.
3. The original covenantee must own the legal estate in the land to be benefited when the covenant was created.
The benefit of a covenant can also be enforced against the original covenantor by covenantees who although they receive the benefit of the covenant are not actually parties' to it provided the contract expressly provides or a term in the contract purports to confer a benefit. E.g. "the purchasers hereby covenant with the vendors and their successors and with the owners for the time being of the land adjoining or adjacent to the land hereby conveyed". S 1(1) Contracts (Rights of Third Parties) Act 1999
See: Re Ecclesiastical Commissioners for England's Conveyance [1936] Ch 430 cf. White v Bijou Mansions Ltd [1938] Ch 351, [1938] 1 All ER 546 CA
The burden cannot pass under privity of contract or privity of estate. In Austerberry v Oldham Corporation (1885) it was held that the burden cannot run with the land under privity estate except under the case of Halsall v Brizell [1957] Ch 169 where it was held that a person who covenants to contribute to the cost of providing or maintaining a service is bound by that covenant if he or she receives a benefit from the provision of that service e.g. a road or water pipe. Note also Tito v Waddell (no.2) [1977] Ch 106. The original covenantor remains liable.
Comment
Therefore a burden of a covenant can only be enforced directly against the original covenantor but not his or her successor in title. However the covenant may be enforced by the original covenantee or his or her successors in title provided that the successor seeking to enforce the covenant presently holds the land and therefore has privity of estate. The effect of this is that a successor in title to the original covenantor may be in breach of the covenant and yet it is the original covenantor who may be sued. Rhone v Stephens (1994) 2 All ER 65
To protect him or herself the original covenantor may create a chain of indemnity between him or herself and successive subsequent owners.
Restrictive Covenants
Equity has made restrictive covenants into equitable interests. These are therefore become attached to he land provided the following conditions are fulfilled.
Benefit
To claim the benefit of a restrictive covenant as an equitable interest the following essentials must exist:
1. the covenant must touch and concern the land;
2. the original parties must have intended the covenant to run with the land;
3. the benefit must be "attached" to the land by annexation or assignment.
1. Annexation
This is where the wording of a covenant in a deed indicates that the covenant is annexed to the land. There must be an intention to annex the benefit to the land rather than grant a purely personal right. The wording of the covenant must make it clear that all subsequent owners of the land are intended to benefit Rogers v Hosegood [1900] 2 Ch 388; Renals v Cowlishaw (1878) 9 Ch D 125. At one time it was necessary to either state that particular land was to be benefited or that the covenant was to benefit the covenantee in his or her capacity as owner of a particular area of land. Since Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 All ER 371 this is no longer necessary as it was held that the "word saving provisions" of S.78 of the Law of Property Act applied to annex to the land the benefit of any covenant. It is suggested by some commentators that this goes too far in that:
- it not only saves words but positively annexes covenants;
- it makes it more difficult to distinguish between cases where there is an intention to annex the benefit and those where there is not.
Under S.78 LPA 1925 it is no longer necessary to expressly state that the covenant is for the benefit of the original covenantee and his or her successors since this will be implied unless there is precise wording to the contrary. Roake v Chadha [1983] 3 All ER 503. Also under S.78 of the Law of Property Act 1925 the benefit of a covenant annexed to the land is in the absence of any contrary intention is annexed to each any every part of that land and will pass with each part of the land that is disposed off separately.
There can be no effective annexation if the land is larger than can be reasonably benefited. This is usually overcome by the addition of the words "and any part thereof" in the deed creating the covenant. The courts take a flexible approach to this requirement: Re Ballard's Conveyance [1937] 2 All ER 691 cf. Wrotham Park Estate Co v Parkside Homes Ltd [1974] 2 All ER 321; Miles v Easter [1933] Ch 611
2. Assignment
It will be implied by virtue of S.78 LPA 1925 that the benefit of any restrictive covenants contained in the original conveyance and thereby annexed to the land will be transferred to any subsequent holder of the land. However if the effect of S.78 has been excluded then the benefit of the restrictive covenants will have to be expressly assigned each time the land is conveyed as they will not be annexed.
For an assignment to be effective the following conditions must be satisfied:
a) The covenant must have been taken for the benefit of the land of the covenantee.
b) The dominant land must be identifiable with reasonable certainty. Newton Abbot Co-operative Society Ltd v Williamson and Treadgold Ltd [1952] Ch 286, [1952] 1 All ER 279.
c) The dominant land must be retained in whole or in part by the covenantee. It should be noted that the whole purpose of equity allowing restrictive covenants to be enforced is to protect the land of the covenantee. Therefore once the covenantee has parted with the land he or she no longer requires its protection and the right to enforce the covenant passes to the new owner/covenantee of the dominant land. (Compare with common law where the original covenantee can enforce the covenant against the original covenantor at any time by reason of privity of contract but successors can only enforce the covenant against the original covenantor by reason of privity of estate while he or she holds the land. Also only the original covenantor can be sued at common law whereas in equity the successors may be sued - see below)
d) The covenant must be capable of benefiting the land.
e) The assignment of the covenant must take place at the same time as the conveyance of the land to the covenantee; usually the assignment will be contained in the deed of conveyance.
f) Provided the covenant benefits all and every part of the dominant land then Equity allows the benefit of the covenant to be assigned when part of the dominant land is sold off. Stilwell v Blackman [1968] Ch 508 [1967] 3 All ER 514, 84 LQR 29
Once an assignment of the covenant contained in the original conveyance has taken place that assignment will not annex the covenant to the land if the annexation wording is not contained in the covenant or if annexation is excluded. If assignment is relied upon then the covenant will have to be assigned every time the land is conveyed. Therefore for a successor to enforce the covenant he or she will have to show a chain of assignments. Re Pinewood Estate, Farnborough [1958] Ch 280, [1957] 2 All ER 517
Burden
In Tulk v Moxhay (1848) 41 ER 1143 sets out the conditions which a covenant must satisfy before the benefit will run with the land:-
a) the covenant must be negative in nature;
b) there must be a dominant and servient tenement;
It should be noted that, apart from the original covenantee who can sue the original covenantor for breaches of covenant at any time by reason of privity of contract, a covenant cannot be enforced against an occupier of the servient land who is in breach unless the person seeking to enforce the covenant holds the legal estate of the dominant land. LCC v Allen [1914] 2 KB 642
Note also however that a landlord's reversion on a lease is a sufficient interest and may entitle him or her to enforce a restrictive covenant against a sub-lessee (against who he or she could not enforce the covenant any other way as there would be no privity of contract).Hall v Erwin (1887) 37 Ch D 74.
c) the covenant must touch and concern the dominant land;
d) the covenant must have been intended to run with the covenantor's land;
e) protection of the interest
• if the covenant was created before 1925 the doctrine of notice applies;
• if the covenant was created after 1925 and the land is Unregistered then the covenant must be registered at the Land Charges Registry as a D(ii) Land Charge;
• if the covenant was created after 1925 and the land is Registered then it must appear on the register as a minor interest.
Development Scheme
Where there is a housing development or shopping precinct equity will enable the restrictive covenants which relate to each and every plot on the estate to be enforced by all who currently own any land within the scheme. Thereby a local law is created. A covenant entered into by the purchaser of the plot is enforceable both by those who have previously bought plots and by those who subsequently buy plots and by their successors in title.
The conditions of a Scheme of Development were laid down in Elliston v Reacher [1908] 2 Ch 374 and Reid v Bickerstaff [1909] 2 Ch 305; Dolphin's Conveyance [1977] Ch 654
a) Both covenantee and the covenantor or their successors must have derived their titles to their respective properties from a common vendor.
b) Before the sale of the plots to the covenantee and covenantor the vendor must have laid out the estate in plots subject to restrictions which it was intended should be imposed on all the plots and which were consistent with a general scheme of development.
c) The restrictions were intended by the common vendor to be for the benefit of all the plots sold. Jamaica Mutual Life Assurance Society v Hillsborough Ltd [1989] 1 WLR 1101
d) The covenantee and covenantor or their successors purchased their respective plots with full knowledge of the restrictions and in the knowledge that the benefit of the restrictions was to be enjoyed by all the plots in the Scheme.
e) There must be a clearly defined area within which the Scheme is operative.
In equity the community of interest imports the reciprocity of obligation.
However over the years the courts have been prepared to acknowledge a scheme if:
a) there is a clear definition of the scheme; and
b) there was an intention by the original vendor and purchasers that all purchasers should be mutually bound by, and mutually entitled to enforce, a defined set of restrictions. Baker v Four Oaks Properties Ltd [1965] Ch 816, [1965] 1 All ER 906; Re Dolphin's Conveyance [1970] Ch 654, [1970] 2 All ER 664; Elias & Co Ltd v Pine Groves Ltd (1993)
Although the Vendor is bound by the scheme he or she may reserve the power to waive or vary the restrictive covenants.
The restrictive covenants under building schemes must be registered in the same way as other restrictive covenants.
Registered Land
The Burden of a restrictive covenant that is to run with the land of the covenantor should be protected by notice on the charges register of the title of the servient land.
The Benefit of a restrictive covenant is not in practice entered on the dominant land.
Positive Covenants are not distinguished from restrictive covenants when the land is registered and so appear on the charges register with the restrictive covenants.
Unregistered Land
Covenants created before 1926 bind all persons who acquire the burdened land except a bona fide purchaser for value of the legal estate without notice.
Covenants created after 1926 are void against a purchaser of the legal estate in the burdened land for money or money's worth unless they are registered at the Land Charges Registry in the appropriate register (D(ii)). Therefore a restrictive covenant will still bind the purchaser of an equitable interest or a purchaser of the legal estate who does not give money or money's worth. Restrictive Covenants between lessors and lessees are not registerable because they can be found out from the lease.
Planning and Restrictive Covenants
Private control of the use of land by restrictive covenants and public control by planning permission operate side by side. A purchaser must satisfy him or herself in respect of both. However it should be noted that where planning permission has been granted for a use in contradiction to a restrictive covenant this, in the event of an application to the Lands Tribunal for the discharge of the covenant, will go to show that the discharge of the covenant is reasonable.
Release, Variation and Discharge of Restrictive Covenants
Express release or modification
A Restrictive covenant may be expressly released or from land or modified if the covenantee and covenantor or their successors agree:
• The release or modification must be by deed
• The benefited land is precisely identified
• All persons interested persons must be parties
Lands Tribunal
S 84(2) LPA 1925 Declaration by the court as to validity
S 84(1) LPA 1925 Lands Tribunal have a discretion to modify or discharge a covenant with or without compensation in the following circumstances
If the covenant:
a) is obsolete due to a change in the character of the neighbourhood, property or material circumstances
b) impedes the use of the land
c) if the persons entitled to the benefit: o have agreed o will not be injured. • Related Searches:
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