#4647 - Freehold Covenants - GDL Land Law

• Promise usually contained in a deed and enforceable without the need for consideration

Terminology

• Covenantor: Burden: Servient Land

• Covenantee: Benefit: dominant land

• Purely personal or ‘touches and concerns’ the land - i.e. made for the benefit of the covenantee but in his/her capacity as the owner of that particular property

Covenants can be proprietary interests: a purchaser may buy the land subject to/with the benefit of covenants

Enforcement between original parties while still in possession

A enters into covenant with B: creates legally binding contract: enforceable between these parties (privity of contract): enforceability under usual rules of contract

• N.B.: s. 56 LPA 1925: ‘a person may take the benefit of a covenant even though he is not named as a party to the conveyance’: but in case law this has been limited in its application: would only apply, for example if A made the covenant to M and ‘to owners of adjacent properties for the timebeing’: only those adjacent landowners not as parties to the deed, would have the right

  • Beswick v Beswick – for a non-party to take the benefit he had to be identifiable from the original covenant

Essentially, at common law, the benefit passes but the burden does not. In equity, the benefit passes, and the burden of a restrictive, but not a positive covenant, does pass where the successor has notice

Transmission of Covenants at Common Law

• Common law rules were inadequate so equity intervened – especially regarding passing the burden

The Benefit

Express assignment

• Benefit must be expressly assigned by the original covenantee (B) to his/her successor (Y) under S136 LPA 1925 as a chose in action

• Following conditions:

1. The assignment is in writing; and

2. Express notice in writing of the assignment is given to the original covenantor

Implied passing of the benefit: benefit may still be enforceable if certain conditions met: confirmed by HL in P & A Swift Investments v Combined English Stores Group plc

1. Touches and Concerns the Land

2. Original parties’ intention that the benefit should run with the land retained by the covenantee

3. At the time the covenant was made, the covenantee must have a legal estate in land

4. Successor in title must hold legal estate in land

1. Touch and concern the land

• Must show objectively that the covenant benefits the nature, quality, mode of use or value of the land rather than the owner personally

• P & A Swift Investments v Combined English Stores plc [1989] (HL): Concerns a leasehold covenant, but ratio still applicable: Lord Oliver drew on the test of touch and concern from Rogers v Hosegood to establish fully comprehensive test for where a covenant does touch and concern the land: in this case conditions were satisfied

1. Covenant benefits only the reversioner for time being, and if separated from the reversioner ceases to be of benefit to the covenantee; and

2. The covenant affects the nature, quality, mode of user or value of the land of the reversioner; and

3. The covenant is not expressed to be personal

• Covenant not to compete with a business being carried out on the covenantee’s land may touch and concern the dominant land – it may be argued that such a covenant improves the enjoyment and utility of the dominant land – Newton Abbot Cooperative Societ Ltd v Williamson & Treadgold Ltd

2. Must show original parties’ intention that the benefit should run with the land retained by the covenantee

• Evidence may be in original transfer deed: e.g. ‘the Purchaser hereby covenants with the Vendor for the benefit of the Vendor’s retained land known as Blackacre’ or by the covenantor covenanting with ‘the covenantee, his successors in title to land known as Blackacre, and those deriving title under him or them’

• If the covenant does not expressly state that it is to benefit the land or successors in title – intention will be implied as a result of s78(1) LPA 1925

3. At the time the covenant was made, the covenantee must have held a legal estate in the land

• At CL: covenants attach to the legal estate and pass with it: must have legal estate at time of covenanting

4. Successor in title must hold a legal estate in the land

• Successor in title must also own a legal estate – historically this meant ownership of the same legal estate – but his has now been modified: Smith and Snipes Hall Farm Ltd

Contracts (Rights of Third Parties) Act 1999

• Under this, a person may take benefit of covenant under certain circumstances – even though not party to the original contract

• Applies to all contracts after 11 May 2000 - may have usurped function of s56 above but has yet to be tested in relation to freehold covenants in land: not usually used in tort, more of a last resort

Position of the original covenantee

• At common law, the original covenantee may still be able to enforce the covenant if:

1. The right has not been expressly assigned to his/her successor under s136 LPA 1925; and

2. The covenant was not drafted so as to apply only while the covenantee continued to own the dominant land

• But: unlikely to want to enforce it and unlikely to have suffered any loss (so nominal damages)

The Burden

Doesn’t pass at common law

At common law, the burden, positive or negative, can never pass with the freehold land; it remains personal to the covenantor (Austerberry v Oldham Corporation)

• Breach cannot be enforced directly vs. a successor who commits a breach, but the burden doesn’t disappear

Rhone v Stephens: considered and confirmed the rule that the burden doesn’t pass

• Covenant to keep the common roof over the properties in good repair: should not pass on

Ways to circumvent the common law rule on “burden”

Pursue the original covenantor: original covenantor remains liable on all covenants to whomsoever has the benefit

• Idea of continuing liability can be conveyed expressly with words such as ‘the covenantor covenants for himself, his successors in title and all those deriving title under him or them’ – extended by s79(1) LPA 1925 which implies certain wording into covenants

• The effect of this is to make successors shoulder liability: Tophams Ltd v Earl of Sefton

But value is limited as can only claim for damages rather than for specific performance, injunction etc.

Indirect enforcement via a chain of Indemnity Covenants

• When the original covenantor sells his land – he can extract an indemnity covenant from the purchaser – a separate covenant btw A (original covenantor) and X (purchaser) : so where A is liable for X’s breach – A could enforce the indemnity covenant vs. X and recover from X the damages A paid out in respect of X’s breach of covenant: Means of indirect enforcement

• Need to extract indeminity covenants from each successor for the threat of indirect enforcement to work: problematic if it has passed through numerous successors: need a complete chain of indemnity covenants

Mutual benefit and burden: Halsall v Brizell

• Cannot take the benefit of a right over your neighbours land without taking the corresponding burden

• Halsall v Brizell: owner of a house, had a right to use the roads and sewers on the estate together with a covenant to pay his proportion to the maintenance of the roads and sewers: held that if a successor wanted to take the benefit of the right to use the roads and sewers, he had to take the burden of paying for the covenants.

BUT –CONDITIONS FOR THE RULE

• Restricted in Rhone v Stephens

1. Only applies if there is a close correlation btw the burden and the benefit

2. And only where there is a choice to take the benefit

• Rhone v Stephens: owner sold off cottage and covenanted to keep the common roof in good repair: held that the burden of that covenant was not enforceable: but argued that the covenant to repair the roof was enforceable under the rule in Halsall v Brizell as he was taking the ‘right of support’ from the other side of the roof – so if he wanted to take the benefit then he should take the burden:

  • NO – covenant was independent (no correlation between the benefit and the burden) – Lord Templeman – ‘the condition of discharging the burden must be relevant to the exercise of the rights which enable the benefit to be obtained’ - here ‘the mutual obligation of support was unrelated to and independent of the covenant to maintain the roof’

  • And: absence of practical choice to take the benefit of the support: had to take the benefit of the support so the burden of the covenant to repair his side couldn’t be forced on him

• Point also arose in Thamesmead Town v Allotey: restricting the rule: Lord Justice Peter Gibson approved narrow application of the rule

Other methods of enforcing covenants

1. The grant of a long lease

• All covenants which touch and concern the land enforceable under the doctrine of privity of estate – or if after 1 January 1996 under Landlord and Tenant (Covenants) Act 1995

2. The creation of a commonhold development

• Commonhold and Leasehold Reform Act 2002 : Effect of the Act is that covenants will be enforceable by and against successors in title to the different units: hasn’t been taken up

3. Enlargement of a long lease

• s153LPA 1925 – creates a fee simple subject to all the same covenants and provisions relating to use and enjoyment as are contained in the lease (s153(8)): artificial device which is hardly ever used

4. Creating estate rentcharges (not on the syllabus)

5. Restriction – S40 LRA 2002: Adopted frequently in practice

• Restriction on the proprietorship register of the burdened land to the effect that no transfer of the burdened land may be registered without the consent of the covenantee

• As a...