#3525 - Covenants - Land Law

COVENANTS

• Problem Framework

1. Has the benefit run to C in law or equity

2. Has the burden pass to D in law or equity

• Nature of Covenants

• May be an important source of private planning law b/c can be used to preserve the character of neighbourhood by preventing activity contrary to status quo (e.g. no trade) or limiting the impact of development

• Particular importance in large scale developments where a web of interlocking covenants may be used for benefit of all future Ps of land within development

• B/c may be able to run w/land, obligation may assume permanence which endures irrespective of change of ownership of burden & benefited land

• Covenants = promises made by deed binding & enforceable as a matter of contract law b/w parties, irrespective of consideration. Now regarded as equitable proprietary interests in land as well

• Tulk v Moxhay – covenant not to build on open land in Leicester Sq. enforced against D who wasn’t the original covenantor but a purchaser.

• Key difference b/w law & equity

1. Claim in law against covenantor = damages for breach of contract

2. Equity = greater range of potential Ds + discretionary measures

1. Positive covenant – decree of specific performance

2. Restrictive covenant – injunction

• C may choose to sue in equity b/c he isn’t suing the original covenantor or b/c doesn’t want mere damages registered & unregistered land principles come into operation.

• Summary

1. Benefit

• Positive & restrictive covenants - can run in law & equity

2. Burden

• Positive covenants – can never run

• Restrictive covenants - can run only in equity

3. Typical dispute involves these claims:

1. Benefit has passed in equity

2. Covenant is restrictive

3. Burden has passed in equity

• Key: there must be duality of burden & benefit = burden & benefit passed in equity or in law. B/c burden of positive covenants can’t run at all, C must sue original covenantor on contract in damages if he’s to have any remedy at all or use one of the alternatives (below)

• Creation

1. Ways to create

1. Intentional conferral as part of a transfer of land (most common)

• E.g. A transfers part of it to B, retaining the other part for himself

2. Ad hoc – as between neighbours

3. Proprietary estoppel(not prescription)

2. Formalities

1. Creation by intentional conferral must be in writing (s53 (1)(a)LPA 1925)

2. Transfer must be by deed (s52 LPA 1925)

3. If not made in the course of transfer, only writing’s required

   1. Leasehold Covenant

• Landlord and Tenant (Covenants) Act 1995; ss2,3,5-8, 16,23, 25, 28) – promises which take effect as a term of lease b/w original landlord & tenant, usually referring to land which is the subject matter of the lease.

  1. Freehold Covenants

1. Enforcing covenant in action b/w original covenantor&covenantee

• A contract -sue for damages for breach or in equity for specific performance/injunction

• Defining original covenantor&covenantee

1. Look at the deed – most common

2. S56 LPA 1925 –a person may enforce the covenant even if they aren’t the actual party, provided the covenant was intended to confer a benefit on the person by making him a party + the person was in existence @ the time covenant was made.

• Where original covenantor is not in possession = remains liable under contract

• normally, covenantee will want more than damages, in which case remedy available will be of little practical use

• Where original covenantee isn’t in possession – may enforce against owner of burdened land in theory but is likely to have assigned the right to sue in damages to new owners of benefited land (and in any event damages may be nominal b/c not in possession, so doesn’t suffer real loss!) + court likely to refuse discretionary remedy.

• Where original covenantor has no land at all –covenantor is liable on the covenant @ law (not equity) even if he’s never had any land burdened by it (b/c of contractual nature)

• Smith and Snipes Hall Farm - covenant by water authority to keep river banks in repair held to run w/ land. Not apparent whether words/express annexation needed but sufficient that language of agreement was such that it affected value of land & showed intention that obligation should attach.

2. Running of Burdens

1. Positive Covenants

• Can never run in law or equity

• Rhode v Stephens- cottage attached to large house, sold separately, seller covenanted to repair shared roof. Both properties sold b/f could honour the obl. New owner sought to enforce the covenant against old owner but failed. HL unwilling to make such radical change in the law + covenant to repair the roof was not a part of a mutual obligation, in contrast to the covenant to pay for upkeep of roads& sea wall.

• Unless successor in title has chosen to take the benefit = can’t renounce it & escape the burden

• Alternatives

1. Chain of covenants – each P of burdened land covenants separately w/immediate predecessor (seller) to carry out the positive covenant

• Chain is only as strong as its weakest link – death, insolvency etc. may break it

2. Artificial long lease – by artificially creating a long lease containing positive covenant and enlarging it into a freehold under s158 LPA it will bind successors

3. Mutual benefit & burden doctrine – the person who takes the benefit of a deed of a covenant must also take the inherent burden (Thamesmead Town Ltd v Allotey)

4. Constructing s79 LPA – in terms not ltd to rest. covenants but this is an argument effective in principle only b/c in practice s79 has been construed narrowly for reasons of policy

5. Contracts (Rights of Third Parties) Act 1999 – enables a person other than covenantee to sue if term purports to confer a benefit on him

• may apply even if covenant doesn’t touch and concern land

• may be affected by variation or rescission so preferable to rely on s56 instead

2. Restrictive covenants

• Subject to conditions being satisfied, can be enforced against anyone in possession of burdened land

• B/c may severely limit the uses to which the burdened land may be put by successors in title (thus reducing value), conditions are restrictive

1. Dominant and servient tenements

• Doesn’t have to be separate plots – different estate on same land suffices

• LCC v Allen- LCC sold a large amount of land to builder A who covenanted not to build on small part of it, as intended to be open space for local residents. LCC retained no other land in the vicinity. A sold that part to his wife, who started building work. LCC unsuccessfully sought injunction: no dominant land so no benefit of restrictive covenant.

2. Obligation touches & concerns the dominant &servient tenement

• Duties created concern the use of land & benefits owner of dominant land in his capacity as owner, not personally

3. Burden is intended to run w/land

• In absence of contrary intent, burden is deemed to attach to the land (s79 LPA); i.e. statutory annexation

4. The obligation is negative in substance (Haywood v Brunswick Permanent Benefit Building Soc)

• Depends on effect & wording isn’t conclusive (Gomm)

• If covenant imposes negative & positive obligations, law treats the negative aspect as covenant & the positive as contractual obligation in personam (Tulk v Moxlay)

5. Registration

1. Registered land – if the successor of covenantor is a purchaser of registered title under registered disposition, the covenant must have been protected by registration of Notice against the burdened title in order to be enforceable. If it’s not, it loses priority & can’t be enforced (s29 LRA)

2. Unregistered land – if the successor of covenantor is a purchaser of legal estate in the burdened land for money, the covenant must have been registered against the name of the original covenantor as a class D charge. If not, it’s void.

3. Running of Benefits

• Can run in law & equity but b/c burden can only run in equity and b/c there has to be duality (both in law or in equity), C will normally claim that benefit has run in equity & he’ll claim it ran at law if the claim is against original covenantor + C only wants damages (rare). Claim in equity much more common.

  1. In equity

1. Covenant must touch & concern the land (Rogers v Hosewood)

2. C has legal title in land but not necessarily the same estate as the original covenantee (s78 LPA)

• Any occupier, even squatter, can enforce!

3. The benefit has been annexed to the legal estate in land, either expressly or by implication

1. Express annexation – by words which make it clear that the covenant is for the benefit of certain land, intended to benefit owner & successors.

• Land must be readily identifiable + capable of benefiting

• assumed to benefit where affects value, method of enjoyment, use

2. Statutory annexation – s78 implies into covenant words required by express annexation where:

1. Land is readily identifiable

2. Capable of benefiting

• Federated Homes Ltd v Mill Lodge Properties Ltd

• Crest Nicholson Residential v McAllister– in order for s78 to apply, covenant must describe land which is readily ascertainable, albeit w/use of some extrinsic evidence.

• Essentially, will apply unless contrary intent is shown!

3. Building Scheme – allows common vendor to transfer the benefit of any covenants received by him from purchasers of a plot of land to every other purchaser of a plot of that same land. Represents common sense + attempt to create mutually enforceable obligations (Wrotham Park Estate v Parkside Homes)

• Conditions (Elliston v Reacher)

1. Ps & Ds derived title under common vendor;

2. Prior to selling, vendor laid out the estate for sale in lots, subject to restrictions...