Freehold covenants

• Freehold covenants


  Promises extracted by one freehold owner (covenantee) from another freehold owner (the covenantor) whereby the latter promises either to do (positive covenant) or not to do (negative covenant) something over their land
• Servient tenement


  • Piece of land burdened by proprietary right
• Dominant tenement


  • Land benefiting from the promise
• Covenants


  Arise when a freehold owner is selling off part of their freehold and wishes to maintain some degree of control over the land being sold in order to preserve value and enjoyment of land
• Enforcement of covenants


  • Between the original parties to the covenant
  • Between successors in title
• Privity of contract


  Exists between original covenanter and covenantee, only the parties to a deed/contract can enforce the terms of that deed/contract
• Exceptions to privity of contract

  • Section 56 Law of Property Act (LPA) 1925 - a third party can sue over a covenant if it was specifically intended to involve them, rather than just benefiting some unnamed third party
  • Contracts (Rights of Third Parties) Act 1999 - a third party may enforce terms of a contract to which he was not a party where the contract expressly provides that he can or a term of the contract is granting a benefit upon him
• Benefit of a covenant

  It's the new owner of the land that benefits from the covenant who will be affected by any breaches and would want to take action, but they can only do so if they can show that the benefits of the covenant were passed on to them when they got ownership of the land
• Burden of a covenant


  Although the original covenantor remains liable for subsequent breaches committed after they have transferred the servient tenement to a successor, they may not be the best person to pursue for the breach since it's difficult to trace them and any remedy would be limited because they no longer own the servient tenement, pursuing them wouldn't stop the successor from actually committing the breach unless there are indemnity covenants
• Passing the burden of a covenant in equity

  • The covenant must be negative in nature
  • The covenant must accommodate the dominant land
  • The original parties must have intended for the burden to pass with the servient land
  • The purchaser of the servient land must have had notice of the covenant
• Negative covenant


  Compliance with the covenant shouldn't necessitate spending money or taking specific actions, it focuses on the substance of the covenant rather than just its wording
• Covenant accommodating the dominant land


  • There must be identifiable land that can enjoy the benefit of the covenant, both at the time of creation and the date of enforcement
  • The covenant must relate directly to the land it benefits, contributing positively to the value, use, or enjoyment of the dominant land
  • There must be sufficient proximity between dominant and servient lands
• Where the dominant land is very large, it can be difficult to determine whether a covenant benefits the entire estate
• A covenant should be presumed to benefit the entirety of the dominant land unless there are compelling reasons to believe otherwise
• Intention for burden to pass with servient land

  May be expressed in the wording of the covenant or implied by virtue of s 79 LPA 1925, subject to contrary intention
• Notice of covenant for purchaser of servient land

  • For registered land, the burden of the covenant can only be enforced if a notice has been officially recorded, with exceptions where the covenant maintains priority regardless
  • For unregistered land, the covenant must have been registered as a Class D(ii) land charge to be enforceable, with some exceptions
• Passing the benefit of a covenant

  • The covenant must touch and concern the land
  • The benefit can pass by annexation, express assignment, or scheme of development
• Annexation


  The benefit of the covenant is permanently attached to the dominant land at the time of the covenant's creation, and it automatically transfers to all future owners of the land
• Express annexation


  The wording of the covenant shows that the benefit is being attached to the actual dominant land, by ensuring the covenant is expressly made 'for the benefit of' the dominant land or any reference to the covenantee is done in their capacity as owner of the dominant land
• Covenant


  A promise made in a deed that binds the person who made it and their successors in title
• Wording of the covenant

  • Ensures the benefit is attached to the actual dominant land
  • Can be achieved by expressly stating the covenant is 'for the benefit of' the dominant land
  • Any reference to the covenantee must be in their capacity as owner of the dominant land
• Once the benefit is expressly linked to the dominant land, it's considered attached to the entire property
• Challenges with large estates or when the benefited land is divided and sold separately

  • Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] - a covenant should generally benefit the entire dominant land, regardless of its size
  • Marquess of Zetland v Driver [1939] - if a covenant is explicitly tied to every part of the land, the benefit will pass to each part upon sale
• Statutory annexation


  S 78 LPA 1925 operates to automatically annexe the benefit of a covenant to a dominant land, without the need for express words
• Implied annexation


  Where the court may not find sufficient words of express annexation, it may look at the surrounding circumstances and imply annexation
• Express assignment


  The benefit of the covenant is expressly assigned to the successor, must occur contemporaneously with the transfer of the dominant land
• Scheme of development


  • A large estate is divided and sold in parts, the original owner may ask each buyer to promise to maintain the value of the entire estate
  • Two key requirements: 1) Identifiable scheme 2) Mutual intention to establish a scheme
• Remedies


  • Injunction
  • Damages in lieu of an injunction
• The burden of a covenant will never pass to a successor of the servient land at common law
• Indemnity covenants


  The person who made the covenant remains responsible even after selling the land, can make the new owner promise to cover any costs if the covenant is breached
• Halsall v Brizell rule

  • A person who wishes to claim the benefit of a deed must also submit to any corresponding burden which is imposed by that deed
  • 3 conditions: 1) Benefit and burden in same transaction 2) Correlation between burden and benefit 3) Successor had opportunity to elect whether to take benefit or renounce burden
• To enforce covenants indirectly through indemnity agreements or Halsall v Brizell, the successor must demonstrate they received the benefits of the covenants using common law methods
• Express assignment of covenant benefit

  Satisfies requirements under s 136 LPA 1925: in writing and express notice given to covenantor
• Implied assignment of covenant benefit

  • Requirements: 1) Covenant touches and concerns dominant land 2) Original parties intended benefit to pass to successors 3) Covenantee held legal estate in dominant land 4) Successor also holds legal estate in dominant land
• Extinguishment of covenant


  Covenant no longer enforceable where dominant and servient lands cease to be in separate ownership/occupation
• Discharge of covenant


  Can be done by deed or by the court (for restrictive covenants only) under s 84(1) LPA 1925
• The Law Commission Report No 327 recommends creating a new legal interest called a 'land obligation' to incorporate both positive and negative obligations