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Covenants: Overview

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  • covenant is a promise contained in a deed
  • promise amounts to a contract & so governed by contract law, except consideration not essential
  • covenant also used to describe any enforceable promise about use of land even when not contained in deed
  • general contract rule: privity of contract means only parties to a contract may sue or be sued on it
  • contract rules have to be adapted to enable successive landowners to enforce by and against successors in title: landowner covenanted on behalf of himself & successors in title
  • threat of development: A sells B part of land
    A concerned if B wishes to develop land may block light & view
    A could not simply impose an easement: easement cannot protect view or necessarily same amount of light
    A could seek to get B to agree to restrictive covenant in transfer deed
    A could alternatively seek to rely on planning restrictions
  • restrictive covenant can place restriction on:
    building (buyer to covenant not to erect any building)
    use (general: buyer not to do anything which amounts to nuisance or specific: buyer only to use as flower garden)
    type of building (buyer not build above certain height or not to build except in accordance with plans approved by you)
    siting of building (buyer not to build within certain distance of your land, or not in a particular direction)
  • positive covenants: buyer must erect fence or wall along common boundary & maintain afterwards
    contribute to shared drainage costs of cleaning, maintenance, repair & renewal
  • covenantor: landowner making promise (land burdened by promise)
  • covenantee: landowner promise is made to (land benefitting from promise)

Enforcement: original parties

  • original covenantee can enforce positive or negative covenant against original covenantor using doctrine of privity of contract
  • if covenantor breaches contract covenantee can seek damages or an injunction
  • leasehold covenants: positive & negative covenants enforceable against a successor in title to the original landlord or original tenant

Enforcement successors in title: common law

  • when freehold land that benefits from covenant & land that is burdened by it changes hands enforceability becomes more complicated

Common law: benefit of covenant

  • question: whether benefit of covenant passes to successor in title of original covenantee
  • statutory provision for passing of benefit of covenant to successors in title of legal estate
    • s.78(1): covenant relating to land of covenantee deemed to be made with covenantee & his successors in title & persons deriving title under him or them, & shall have effect as if such successors & other persons were expressed
  • covenant annexed to the land & benefit passes to any person who has appropriate legal estate if three requirements satisfied:c covenant touch and concern land of covenantee
    original covenantee & person now seeking to enforce covenant must have legal estate in the land
    parties must intend benefit of covenant to run with land
  • common law requirements must be met in order for benefit to pass

    Smith & Snipes Hall Farm v River Douglas Board [1949] 2 KB 500

    • touch and concern: covenant must affect mode of occupation of the land or by itself affect the value of the land
    • therefore, covenantee must at date of deed own land capable of benefiting from covenant & land must be identifiable did not matter whether covenantor was party to conveyance of the estate or a stranger to the estate)
    • both original covenantee & person now seeking to enforce covenant must have a legal estate in the land - under s.78 LPA 1925 not necessarily same legal estate as original owner (original covenantor may have been freehold owner & new leasehold owner)
  • express annexation: original parties may expressly attach benefit to the land on creation of covenant
  • statutory annexation: intention to attach benefit to land may be implied under s.78 LPA 1925
  • if intention not found benefit of covenant may still pass:
    if covenantee transferred the property to new owner together with the benefit of the covenants
    covenant confers a right to enforce it by way of action so is a thing in action
    assignment of a thing in action is effective if complies with s.136 LPA 1925
  • benefit of covenant may pass under common law whether positive or negative covenant

Common law: burden of covenant

  • question: whether burden of covenant passes to successor in title of original covenantor

    Rhone v Stephens [1994] 2 AC 310

    • under common law burden of the covenant does not run with the land
  • A (covenantee) enters into covenant with B (covenantor)
    B sells burdened land to C
    C breaches covenant but A can only enforce against B
    when B sells land, he can require C to enter an indemnity covenant
    if A enforces covenant against B, B can sue C (using chain of indemnity)
  • only rely on chain of indemnity covenants if original covenantor & each person giving an indemnity covenant obtains an indemnity covenant from person to whom they sell
  • principle of mutual benefit & burden: exception to burden of a covenant not running at law

    Halsall v Brizell [1957] Ch 169

    • person given rights to use roads & sewers were bound by covenant to contribute towards cost of maintenance although not original covenantor
    • principle: a man cannot take benefit under a deed without subscribing to obligations thereunder
  • however exception narrowly construed

    Rhone v Stephens [1994] 2 AC 310

    • if deed confers benefit on a person not necessarily mean all burdens imposed by that deed are enforceable
    • only enforceable if burden in way relates to benefit conferred
    • not enforceable if covenantor can make a choice between accepting benefit & burden or rejecting benefit & being released from burden

    Thamesmead Town v Allotey (1998) 79 P & CR 557

    • burden not imposed: not required to pay maintenance costs for facilities not used (no benefit derived)
  • general rule: burden not run with the land of the covenantor unless limited exception applies or alternatively chain of indemnity can be utilised

Enforcement successors in title: equity

  • different rules apply in equity than the common law, in relation to the passing of covenants

Equity: benefit of covenant

  • question: whether benefit of covenant passes to successor in title of original covenantee
  • equity (like the common law) requires covenant to be one which touched and concerned the land & can pass by annexation or assignment

    Federated Homes v Mill Lodge Properties [1980] 1 WLR 594

    • MH owned site consisting of our areas of land (red, green, pink & blue)
    • MH obtained planning permission to build approx. 1250 private residential houses on land
    • MH sold to ML, deed contained covenant:
      The purchaser [ML] covenants with the vendor [MH] ... in carrying out the development of the ‘blue’ land the purchaser shall not build at a greater density than a total of 300 dwellings so as not to reduce the number of units which the vendor might eventually erect on the retained land under the existing planning consent...
    • conveyance did not define retained land but document referenced any adjoining or adjacent property retained by the vendor
    • retained land: red & green land (as blue & pink were sold at same time)
    • therefore red & green land found to have benefit of covenant
    • FH became owner of red & green land
    • ML sought to build more than 300 properties on blue land
    • could FH enforce covenant to prevent ML?
    • benefit of covenant passed with green land to FH by express assignment
    • break in chain of assignments for red land but found that s.78 LPA 1925 annexed covenant to red land
    • outlined possible interpretation of s.78 LPA 1925:
      1. time-saving: incorrect as inconsistent with wording
      2. only operates to annex if document showed land was intended to have benefit of it
      3. only operate to annex if covenant touched and concerned land of covenantee (whether apparent from document or circumstances)
    • not necessary to distinguish between interpretation 2 & 3: both produced same result in instant case
    • reasoning for effecting annexation:
      differently worded than predecessor (s.58(1) Conveyancing Act 1881)
      & covenant deemed to be made covenantee & covenantee's successors in title
      if enforceable by successor in title must run with land
    • rejected argument benefit only ran with land as a whole & not annexed to part, when that part was sold
    • correct interpretation: benefit of covenant annexed to every part land, unless contrary intention expressed.
  • recently Court of Appeal reconsidered interpretation and limited operation of statutory annexation under s.78 LPA 1925

    Crest Nicholson Residential v McAllister [2004] 1 WLR 2409

    • land intended to be benefited by covenant must be mentioned or defined in document creating covenant & could not be identified merely from extraneous facts
  • whilst decision in Federated Homes v Mill Lodge Properties remains unchallenged, annexation will be simple to prove, but to be sure express annexation is preferable
  • assignment may still be relevant in some cases

    Roake v Chadha [1984] 1 WLR 40

    • clause provided: benefit of covenant was not to pass unless there was express assignment
    • was effect of s. 78 LPA 1925 (as interpreted in Federated Homes v Mill Lodge Properties) capable of being overridden by express wording?
    • not accept that express wording of covenant could be ignored, reading as a whole it was clear benefit was not annexed & assignment had to occur on each sale
  • in most cases: in equity benefit will be annexed (either expressly or under s.78 LPA 1925) but parties may preclude annexation to insist on assignment

Equity: burden of covenant

  • question: whether burden of covenant passes to successor in title of original covenantor

    Tulk v Moxhay (1848) 2 Ph 774

    • T owned open square land in Leicester Square
    • T sold land to E with covenant in conveyance:
      to keep & maintain land in its then form and in sufficient and proper repair, as a square garden and pleasure ground, in an open state and uncovered with any buildings, in a neat and ornamental order
    • negative covenant (land to be kept open & uncovered with building)
    • M acquired the land under a conveyance without mention of covenant, although M was aware of covenant
    • M intended to build on the land
    • T (who still owned land in area) sought to prevent M
    • could T enforce covenant against M?
    • accepted burden of covenant did not run at law
    • however, considered not right that M (with full knowledge of covenant) could simply ignore
    • consequence of allowing covenant to be ignored: would allow covenantor to sell free of covenant to obtain better price
    • therefore anyone buying with knowledge of covenant in no better position than original covenantor & should be bound to same extent
  • negative covenant in Tulk v Moxhay: person could be bound in equity despite not enforceable at law
  • in equity, positive covenants are treated differently

    Austerberry v Oldham (1885) 29 ChD 750

    • A's predecessors in title & others conveyed land to trustees with aim of forming new road
    • trustees covenanted to make the road & carry out repairs (costs met by imposition of a toll
    • trustees made the road but ownership passed to C
    • C sought to recover costs of repairs from A & others owning of property fronting road
    • A claimed burden of covenant passed to C, so he was not liable for repair costs
    • was the positive covenant enforceable?
    • if covenant did not run at law, it would not run in equity unless it was a restrictive covenant
    • in instant case, as covenant was positive (required trustees to spend money) equity will not enforce covenant so as to require a successor in title (C) to pay out
  • approach to positive covenants in equity confirmed by House of Lords

    Rhone v Stephens [1994] 2 AC 310

    • reasoned difference between restrictive & positive covenant
    • restrictive covenant deprives covenantor of rights he would have had but for the covenant
      if person buys land not subject to covenant, he can use as wishes
      so effect of restrictive covenant is take away some freedom
      in enforcing a restrictive covenant: prevents person exercising right they never acquired
    • effect of equity enforcing positive covenant: compel successor in title to original covenantor to perform contract to which not been a party

Breach of covenant

  • injunction is principle remedy: must be sought quickly
  • if claimant not seek interim injunction, defendant may raise equitable defence of laches (delay), acquiescence or estoppel
  • grant of injunction is at court's discretion

    Wrotham Park Estate v Parkside Homes [1974] 1 WLR 798

    • injunction refused where houses had been built & sold on land, in breach of covenant: an unpardonable waste of much needed houses to direct that they now be pulled down
    • warned decision did not provide charter to others to breach valid covenant: a developer attempting that may be in for a rude awakening
    • if damages warded in lieu of injunction, asses on figure could have obtained as quid pro quo for release of covenant
  • covenantor may seek from covenantee an express release of the covenant by deed (usually involves paying)
  • express release cannot be forced on covenantee
    • s.84: covenantor can apply to Lands Chamber of the Upper Tribunal for order discharging or modifying a covenant
  • if covenantee cannot be identified insurance can used to cover risk
  • if covenantor acquires land which is benefitted by covenant, land benefitted & burdened in common ownership & covenant extinguished
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