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Freehold covenants

Previous: Easements

A covenant can simply be defined as a promise made in a deed by a covenantor for the benefit of a covenantee. In land law, covenants are used to protect land. There are two type of covenants: positive covenants, such as a covenant to contribute the repair costs of a road, and restrictive covenants, such as a covenant not to use land for anything other than residential purposes. It is the effect of a covenant that categorises it as a positive or restrictive covenant, not its phrasing. For example, a covenant to use land for residential purposes only is in reality a restrictive covenant preventing other uses, just as a covenant not to fail to contribute to a road’s repairs costs is a positive covenant in disguise.

Effect of covenants

Once created by deed, covenants may be thought of as enforceable contracts between the promisor (covenantor) and the beneficiary (covenantee). They are always enforceable between these two parties, unless expressly excluded. The real use of covenants is their (potential) enforceability against successors of the covenantor and covenantee. This makes covenants useful for protecting a covenantee’s land after the covenantor has sold his land to someone else.

Liability of original covenantor

If a covenant provides that a covenantor would do or not do something, the covenant will be enforceable only against that covenantor. And if a covenant provides that the covenantor’s land would never be used to do something, that covenantor will be liable even if he no longer lives on that land. Section 79(1) of the Law of Property Act (LPA) 1925 confirms that the original covenantor will remain liable even if it is his successors who breach his covenant unless the covenant expressly excludes his liability.

Right to sue of original covenantee

Similarly, even if no longer living on the original benefiting land, an original covenantee may sue for breach of the covenant. A covenantee is, according to s 56 LPA 1925, need not be named as benefiting from a covenant. He may be anyone with whom the covenant was made, identifiable at the time of creation. This may be one particular owner of land, or the owners of any land on the same street as the covenantor’s land, for example. If an original covenantee seeks to sue whilst no longer living on the benefiting land, he may only obtain nominal damages (as he will have suffered no loss), and an injunction will be unavailable.

Remedies

A present owner of benefiting land may request damages and/or an injunction to prevent burdened land (that of the original covenantor) from breaching a covenant. A court will consider any permission given by benefiting land to breach that covenant, but there is no time limit on a claim for breach of covenant. Although, a covenant may be altered or revoked by negotiation for release or by application to the Upper Tribunal (Lands Chamber).

Successors

The controversial aspect of covenants is not usually between the original covenantor and covenantee. It is usually the case that either the covenantor, covenantee or both have sold their land, and their successors seek to enforce (or avoid) the implications of the covenant. For a covenantor’s successor to be sued, it must be shown that the burden of the covenant has passed to him. For a covenantee’s successor to sue, it must be shown that the benefit of the covenant passed to him. If both parties to a dispute are successors, it must be shown that both the benefit and burden of the allegedly breached covenant passed to the relevant parties.

Equity vs common law

The benefit and burden of covenants may pass either at common law or in equity. There are different requirements for each. There is obiter authority from that Court of Appeal in Miles v Easter [1933] that, if the benefit or burden of a covenant passes to a successor in one of equity or common law, in order to sue or be sued on that covenant, the other of benefit or burden must also pass by the same method. Previously, Rogers v Hosegood [1900], also in the Court of Appeal, suggested that equity and common law could be mixed, making it easier to sue or be sued as a successor. For greater certainty, it shall be assumed here that Miles v Easter [1933] is the correct authority on this point.

Passing of the benefit at common law

As illustrated by Smith and Snipes Hall Farm v River Douglas Catchment Board [1949], the benefit of a covenant can pass at common law. In order to pass the benefit of a covenant at common law, the covenant must: touch and concern the covenantee’s land (as explained by Swift Investments v Combined English Stores Group [1989]); have been made between two legal estates (even if lesser estates); have a benefit intended to run with the covenantee’s land (now an easy requirement to satisfy as a result of Federated Homes v Mill Lodge Properties [1980]‘s interpretation of s 78(1) LPA 1925; and have identified benefiting land, as must be proved as a matter of fact.

If benefiting land is subdivided, a covenant may no longer pass its benefit at common law, according to Miles v Easter [1933]. Although this is not the case in equity, according to Federated Homes v Mill Lodge Properties [1980].

Passing of the burden at common law

The burden of a covenant cannot pass at common law. This was said in Austerberry v Oldham Corporation (1885). Rhone v Stephens [1994] confirmed that Parliament may change this rule, but can do so prospectively. If a court were to reverse this rule, it would apply to covenants already in existence, which would undermine the principle of legal certainty. It is, therefore, impossible to directly sue a covenantor’s successors at common law, making the common law only useful if the original covenantor still lives on the original burdened land.

It is possible, however, for there to be a chain of indemnity covenants effective at common law. If, when the covenantor sells his land, he requires his successor to indemnify him against any breach of covenant, a benefiting successor at common law may sue the original covenantor at common law, but that covenantor would be shielded (financially) by the indemnity provided by his successor. This is, however, an unreliable method of enforcement, as it requires the vendor of burdened land to remember to obtain such an indemnification.

Passing of the burden in equity

Tulk v Moxhay (1848) provides authority for the proposition that the burden of a covenant will pass in equity if a purchaser has actual notice of the covenant at the time of his purchase. This requirement has now been replaced by a requirement of registration for covenants created since 1926, either as a class d(ii) land charge under the Land Charges Act 1972 in the case of unregistered land, or as a notice on the charges register of the burdened land in the case of registered land.

In addition to this requirement of registration, only the burden of restrictive covenants can pass in equity, according to Rhone v Stephens [1994]; a requirement of expenditure will not pass. There must also have been benefiting land at the time the covenant was granted, as illustrated by London CC v Allen [1914], and the burden must have been intended to run with the land. This final intention requirement is presumed by s 79 LPA 1925, which provides that if not excluded, successors of a covenantor will also be bound by a covenant. Morells of Oxford v Oxford UTD FC [2001] illustrates that this exclusion may be implied.

Passing of the benefit in equity

As seen above, the benefit of a covenant may pass at common law; however, equity will be required if a covenantee only has an equitable interest in the benefitted land; the benefitted land has been subdivided, or the burden could only pass in equity (i.e. there was no chain of indemnification, nor did the benefit and burden doctrine apply – see below). There are several methods by which equity may pass the benefit of a covenant.

Express annexation

If equity can find that the benefit of a covenant has been attached, or annexed, to the benefiting land, the benefit of a covenant will automatically pass to any successors in title of that land. There are two requirements for express annexation to operate.

Firstly, the benefiting land must be identified. This means that it must be easily ascertainable, according to Marquess of Zetland v Driver [1939], and is required so that a covenantor (or his successors) can identify who may sue him for breach of covenant, according to Crest Nicholson Residential (South) v McAllister [2004]. Secondly, it must be clear that the benefit is to be part of the land (not a personal benefit). This requirement was satisfied by the words “successors in title to the land adjoining” in Rogers v Hosegood [1900], but not by the words “vendors and heirs” in Renals v Cowlishaw (1879).

A benefit will not be expressly annexed to a very large area of land, according to Re Ballard’s Conveyance [1937]. If the benefiting land is subdivided after the covenant is made, express annexation to each part of the original land will occur without contrary intention, according to Federated Homes v Mill Lodge Properties [1980]. This is a relaxation of the stricter rule in Marquess of Zetland v Driver [1939], which required a covenant to explicitly state that subdivision would be acceptable.

Implied annexation

Although it is possible that a benefit could be impliedly annexed to land, the possibility of which was stated in Marten v Flight Refuelling [1962], this possibility will likely never be tested courtesy of statutory annexation.

Statutory annexation

Where there an intention to do so, s 79 LPA 1925 allows the burden of a covenant to bind successors of a covenantor. Section 78 LPA 1925 makes the passing or annexation, of the benefit of a covenant even easier. With generous interpretation in Federated Homes v Mill Lodge Properties [1980], s 78 LPA 1925 reads into any covenant that it will be deemed to also be made with the successors in title of the covenantee(s). It is only required that: the covenant touches and concerns the benefitted land, as per the test laid out in Swift Investments v Combined English Stores Group [1989], and the land benefitted is expressly identified in the covenant, according to Crest Nicholson v McAllister [2004]. Section 78 does not contain a provision relating to contrary intention (unlike for the passing of the burden in s 79); this distinction was highlighted in Roake v Chadha [1984]. If a covenant was made prior to 1925, s 78’s predecessor did not automatically annex the benefit of a covenant, according to J Sainsbury Plc v Enfield LBC [1989].

Assignment

It is also possible for the benefit of a covenant to be expressly assigned with and at the same time as the covenantee’s land. Here, it is only required that the covenant was made with the intention of benefitting the covenantee’s land, and that the benefiting land is identifiable – a fairly easy test to pass, as illustrated by Newton Abbott Co-operative Society v Williamson & Treadgold [1952]. To pass by assignment, each successor must, in turn, assign the benefit, whenever the land is transferred.

Scheme of development

This method of passing the benefit of covenants in equity is designed to make it easy for a developer of plots of land to create a set of ‘local laws’, whereby every house in the development should be able to both enforce and comply with those rules (covenants). Originally, Elliston v Reacher [1908] set out an exhaustive set of 4 requirements before such a system could work. There are now only 2 requirements. Firstly, there must be an intention that a well-defined area of land is to be sold off in plots. These plots can have different vendors, according to Re Dolphin’s Conveyance [1970], and the plots need not be laid out in advance, according to Baxter v Four Oaks Properties [1965]. Secondly, there must be a mutual intention that purchasers will be bound and benefit from the common restrictions in place.

Benefit and burden doctrine

Besides the passing of the benefit and burden or covenants at common law and in equity, it is also possible for covenants to pass through the benefit and burden doctrine, which provides for the passing of linked benefits and burdens, and is illustrated by Halsall v Brizell [1957]. For the doctrine to operate, there are a number of requirements.

Requirements

Firstly, there must be an arrangement which imposes a benefit and burden. Although firmly required to be in deed form by Halsall v Brizell [1957], this requirement has arguably been relaxed by Ives Investment v High [1967].

Secondly there must be a real and substantial benefit, unlike in Rhone v Stephens [1994].

Thirdly, there must be no other right to the benefit without taking the burden.

Fourthly, there must be a theoretical opportunity to reject both the benefit and the burden. This requirement was satisfied in Halsall v Brizell [1957], even though a rejection would have left the defendant’s land landlocked. This was dismissed as a non-issue by Thamesmead Town v Allotey (2000), but the requirement was not passed in Rhone v Stephens [1994], where the burden was to support another property, which is difficult to opt-out of.

Fifthly, there must be a link between the benefit and the burden, which, according to Halsall v Brizell [1957], will constitute more than just separate obligations in a deed. This link may be implied, however.

Sixthly, the burden must be relevant to the exercise of the right. In Rhone v Stephens [1994], maintenance was not relevant to a right of support, but in Tito v Waddell (No 2) [1997], it was clear that restoring land back to its former state after completing mining operations was relevant to the right to extract minerals from that land. It is possible that this requirement may be avoiding in light of Ives Investment v High [1967], in which the right to cross land was linked to, but not relevant to permission to trespass. It may be arguable that these two requirements could be merged.

Finally, both parties must know of both the benefit and the burden.

There is no requirement that the benefit or the burden need be registered, according to Goodman v Elwood [2013].

Effect

If the benefit under the doctrine is accepted, the burden must be complied with. Although the burden must only apply to the area of benefit. In Thamesmead Town v Allotey (2000), a burden claim was reduced to reflect only the area of benefit to the burdened land, and in Goodman v Elwood [2013], liability was only found for part of the benefiting land. This rule will, however, be displaced where the burden cannot be easily divided, such as in Wilkinson v Kerdene [2013], where a holiday village fee could not be easily divided to accommodate a defendant who wished not to use the village’s recreational facilities.

The original contracting party to a benefit and burden claim will not be released from a claim for his successor’s non-compliance: he will be joined to the dispute as a co-defendant.

Commonhold

It is also possible to pass the burden of covenants throughout a single development (such as a block of flats) through the use of a commonhold arrangement. However, due to its complexity, since its introduction by the Commonhold and Leasehold Reform Act 2002, it has rarely been used, so will not be discussed.

Reform of covenants

In its 2011 report (LC327), the Law Commission recommended that covenants should be replaced by ‘land obligations’ (which would also apply to easements). It would only be possible to expressly create these obligations when benefiting land was touched and concerned. This creation would then be registered, whether legal or equitable; would automatically pass to successors in title, and would absolve predecessors in title from liability after sale.

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