Transcript Slide 1

Freehold Covenants
•What are freehold covenants?
•Enforcement – original parties
•Enforcement – successors in title
•Positive covenants
•Discharge/modification
What are Freehold
Covenants?
• A covenant is a promise in a deed.
• Covenants may be:
– Restrictive
– positive
• A potential buyer of land will need to know
whether there are any covenants relating to
the land that could be enforced against
him/her if they buy the land.
Enforcement – Original
Parties
• A sells part of his land to B
• In the transfer B promises not to carry on any
trade or business on the land.
• A (the original covenantee) has the benefit of
the covenant and can enforce the covenant
against B
• B (the original covenantor) has the burden of
the covenant and is liable to A for any breach
of covenant.
Enforcement – Original
Parties
• The original covenatee can always enforce
the covenant against the original covenantor
as a matter of contract.
• What is the position if the covenantee no
longer owns the land to which the covenant
relates?
• What is the position if the covenantor no
longer owns the burdened land?
Enforcement – Original
Parties
• Note that the class of original covenantees
can be extended to person who were not
parties to the original deed.
– S.56 Law of Property Act 1925
– Re Ecclesiastical Comms for England’s
Conveyance [1936] Ch 430
– White v Bijou Mansions Ltd [1937] Ch 610
– Amsprop Trading Ltd v Harris Distribution Ltd
[1997] 1 WLR 1025
– Contracts (Rights of Third Parties) Act 1999
S.56 LPA 1925
PLOT 1
(Mr Green)
PLOT 2
(Mr White)
PLOT 3
(Mr Pink)
PLOT 4
Contracts (Rights of Third
Parties) Act 1999
• S.1(1): A third party may enforce a term of a
contract if:
– The contract expressly provides that s/he may, or
– The term purports to confer a benefit on him/her.
• S.1(3): The third party may be expressly
identified in the contract but need not be in
existence when the contract is entered into
Enforcement – Successors
in Title
• If A sells his retained land to X, can X then
enforce the covenant not to carry on any
trade or business on the land against B?
– Does the benefit of the covenant pass to X?
• If B sells the burdened land to Y, does Y have
to comply with the covenant?
– Does the burden of the covenant pass to Y?
Enforcement – Successors
in Title
• Different rules apply at common law and
in equity
• Different rules apply for the running of
the benefit and the burden
• Different rules apply for restrictive and
positive covenants
• Adopt a clear structure!
Common Law:
1. The Benefit
• The benefit of both restrictive and positive
covenants runs at common law if:
– The covenant touches and concerns the land of
the original covenantee
• P&A Swift Investments v Combined English Stores
Group [1989] AC 632
– At the time the covenant was made it was
intended to benefit the covenantee’s land
• S.78(1) Law of Property Act 1925
Common Law:
1. The Benefit
• At the time the covenant was made the
covenantee held a legal estate in the
benefited land.
• The claimant must derive their title from or
under the original covenantee but does not
need to hold the same legal estate as the
original covenantee.
– Smith & Snipes Hall Farm Ltd v River Douglas
Catchment Board [1949] 2 K.B. 500
Common Law:
2. The Burden
• The burden of a covenant does not run
at common law.
– Austerberry v Oldham Corporation (1885)
29 ChD 750
– Rhone v Stephens [1994] 2 AC 310
Common Law:
2. The Burden
• The effect of this is that a covenant can be
enforced at common law only where a
remedy is sought against the original
covenantor.
• The claimant must consider the rules in
equity where:
– He seeks to enforce the covenant against a
successor in title to the original covenantor, or
– He requires an equitable remedy (i.e. an
injunction)
Equity:
1. The Burden
• Tulk v Moxhay (1848) 2 Ph 774
The burden runs in equity provided:
– The covenant is negative in substance
• Haywood v Brunswick Permanent Building Society
(1881)8 QBD 403
– At the date of the covenant the covenantee must
have owned benefited land
• London County Council v Allen [1914] 3 KB 642
• The covenant ‘touches and concerns’ the land of the
covenantee
Equity:
1. The Burden
• The burden is intended to run:
– S.79 Law of Property Act 1925
• The rules for registration or notice are
satisfied:
– Doctrine of notice (if created pre 1.1.1926)
– D(ii) Land Charge (if created on/after
1.1.1926)
– Notice on the Register
Equity:
2. The Benefit
• If the burden of the covenant has run in
equity, the benefit must also run in
equity to enable the claimant to obtain a
remedy.
• The benefit may run by:
1. Express annexation
• Rogers v Hosegood [1900] 2 Ch 388
• Renals v Cowlishaw (1878) 9ChD 125
• Re Ballard’s Conveyance [1937] Ch 473
Express Annexation
The buyer with the intent and so as to
bind the Property into whosoever hands
the same may come and to benefit and
protect the land retained by the Seller
(hereinafter called ‘the Retained Land’)
or any part thereof hereby covenants
with the Seller to observe and perform
the following stipulations and
restrictions in relation to the Property…
Equity:
2. The Benefit
2. Statutory annexation
– S.78(1) Law of Property Act 1925:
A covenant relating to any land of the
covenantee shall be deemed to be made
with the covenantee and his successors in
title and the persons deriving title under
him or them, and shall have effect as if
such successors and other persons were
expressed.
Statutory Annexation
• Federated Homes Ltd v Mill Lodge Properties
Ltd [1980] 1 WLR 594
Held: Provided the condition precedent of
s.78 is satisifed, i.e. provided there is a
covenant which touches and concern’s the
covenantee’s land, the benefit of the
covenant is annexed to and runs with every
part of the land.
– Roake v Chaddha [1984] 1 WLR 40
Equity:
2. The Benefit
3. Express Assignment
– Unbroken chain of assignments
– Assignment to purchaser must be made at
time of conveyance/transfer to them
Equity:
2. The Benefit
4. Building Scheme
– Derive title from a common seller
– Land must be laid out in plots before sale
– Same restrictions imposed on each sale &
clear that for benefit of all plots
– Purchasers acquire plot on understanding
that covenants intended to benefit all other
plots in scheme
• Elliston v Reacher [1908] 2 Ch 374
Equity:
2. The Benefit
• How strict are the requirements?
– Re Dolphin’s Conveynace [1970] Ch 654
– Baxter v Four Oak Properties Ltd [1965] Ch 816
– Emile Elias v Pine Groves Ltd [1993] 1 WLR 305
Positive Covenants
• The burden of covenants (positive or
negative) does not run in law.
• The burden of a positive covenant does
not run in equity.
• There are a number of indirect methods
of ensuring that a positive covenant can
be enforced against the owner of the
burdened land
Positive Covenants
• Mutual benefit & burden:
– Halsall v Brizell [1957] Ch 169
– Rhone v Stephenson [1994] 2 AC 310
• A chain of indemnity covenants
Discharge & Modification
• Burdened & benefited land in same
ownership
• Discharge/modification – s.84 LPA 1925:
– Obsolete due to changes in the character of
property/neighbourhood
– Impedes a reasonable user and provides no
practical benefit/value to any person or is against
public policy
– Agree/implied discharge
– Discharge cause no loss to the person entitled to
the benefit