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Land Law - Freehold Covenants

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FREEHOLD COVENANTS

Creation of freehold covenants * Not capable of being legal interest in land (s. 1(2) LPA 1925), can only be equitable (s. 1(3)) * Invariably created expressly by deed. However, as an equitable interest the minimum formality requirement is that it is created by signed writing (s. 53(1)(a) LA 1925) * Usually imposed when a person sells part of the land that he owns and are therefore contained on the transfer. Covenant Terminology * Covenantor * Person who makes the promise / has burden of covenant * Covenantee * Person to whom the promise is made to / has benefit of covenant * Annexation * Benefit of covenant is attached to the land of the covenantee so that it passes automatically to successors of the covenantee * Benefit of covenant occurs at the time of creation of the covenant * Can be express in the deed or implied into deed under s. 78 LPA 1925 * Assignment * Express transfer of the benefit of a covenant to a successor * Benefit of covenant may occur at the same time as the transfer of the land to a successor |

Step 1: Draw an annotated diagram showing the various events and benefited / burdened land

Step 2: Analyse the types of covenant that exist

* Positive Requires expenditure or labour by the covenantor (e.g. repair / maintenance) * Restrictive Requires the covenantor to refrain from a particular action (e.g. user) * Touch and concern land * Personal

Step 3: Identify the breaches and which parties C can sue

Step 4: Who can sue? Does C have benefit of each covenant breached

Note: C is usually the aggrieved owner of the benefited land, but not always the case

State: the claimant can consider suing X, as original covenantor, or Y as successor covenantor. Y can be sued if the claimant has the benefit of the covenants and if Y has the burden of the covenants

Step 5: Have the benefit and burden passed? The benefit and burden MUST match both in common law or both in equity.

Original Parties Benefit * Original covenantee has benefit of all express covenants (positive, restrictive, real or personal) * Can enforce any express covenant against anyone who has the burden of the covenant, including successors in title. * Cannot sue successors in title once he has parted with all the land Burden * Original covenantor remains liable for breach of covenants relating to the land, even for breaches by successors in title, unless the deed contains a statement to the contrary privity of contract (s. 79 LPA 1925) * s. 79 LPA 1925 – does NOT apply to personal covenants, although the original covenantor may be liable in CONTRACT LAW, despite the breach not being his own * Liability will last as long as the contract – e.g. if a freehold estate, liability has the potential to last forever * For protection, usual for the original covenantor to require the SIT to enter into a covenant with him to perform the covenants and to indemnify him against any future breach. Potential claim on indemnity acts as an incentive for SIT to comply with the covenants. * SIT may seek a similar indemnity, building up a chain of indemnity covenants covenant to which indemnity applies will be noted in the Charges Register of the title affected * BUT sometimes individual = untraceable, bankrupt or a company may have gone into liquidation (∴ no longer an entity to sue), resulting in a break in chain of indemnity covenants and someone in the middle has to pay. | Successors in title: COMMON LAW Benefit * May pass to successor covenantee at common law in one of two ways: 1. Express assignment (s. 136 LPA 1925); OR * Must occur at the same time as the transfer of the land * Must be in signed writing by the assignor (e.g. original covenantee); and written notice of assignment must be given to person with burden of the covenant 2. Automatically if THREE conditions are met (Smith and Snipes Hall Farm): * Covenant must ‘touch and concern’ land of the covenantee (Apply P& A Swift Investments test) * Would not be beneficial is separated from the land * Affects nature, quality, mode of user or value of land * Not personal * Covenant to pay money relates to something to be done on the land AND conditions 1-3 are satisfied * Original covenantee and person seeking to enforce the covenant must have a legal estate in the land (e.g. tenants holding a leasehold estate are included) * Original parties must intend benefit of covenant to run with the land 1. This can be either through EXPRESS annexation (saying so in the deed); OR * Charges Register: “for the benefit of each and every part of the retained land” 2. Implied by statute DEEMED annexation (s. 78(1) LPA 1925) (apply only to post-1925 covenants) Burden 1. Does NOT run at common law – a person cannot be made liable upon a contract unless he was a party to it no privity of contract (Austerberry v Oldham) 2. Exceptions – it may be possible to achieve desired result by indirect means: * Using a chain of indemnity covenants (although not always satisfactory – see above) * Halsall v Brizell – a SIT who takes the benefit of rights, e.g. easements, contained in a deed must accept the burden of covenants in that deed (principle of mutual benefit and burden) Note: rule applies to POSITIVE covenants only * Rhone v Stephens makes it clear that Halsall doctrine is limited to where the burden and benefit are related. | Successors in title: EQUITY Benefit * May pass to successor covenantor in equity where: 1. Covenant ‘touches and concerns’ land of the covenantee’; AND 2. Benefit of covenant has passed either by: * Express assignment (which must be at the same time of the transfer – s. 136 LPA 1925 formalities don’t apply); OR * Annexation * This is a Q of intention. (check deed for EXPRESS wording to this effect) * If not, it will be implied / deemed by s. 78 LPA 1925 (Federated Homes) there is a risk that SC may overrule decision, therefore preferable to annex expressly Burden * Equity will NOT assist in relation to POSITIVE covenants * May pass where four conditions in Tulk v Moxhay (Leicester Sq) apply * Covenant must be RESTRICTIVE in nature; * Covenant touches and concerns covenantee’s land; * Original parties intended the burden to run with covenantor’s land (annexation) * May be done expressly in deed creating covenant; OR * Implied by statute (s. 79 LPA 1925) * (Restrictive) covenant must be registered on appropriate register * REGISTERED land: IARE must be registered as notice on Charges Register (s. 32 LRA 2002) of the title of the burdened land, by date of registration of new buyer of the burdened land (s. 29 LRA 2002) * UNREGISTERED land Protected by entry of a Class D (ii) Land Charge against the name of the original covenantor on the Land Charges Register at Plymouth before the date of completion of a sale to a successor * Pre-1926 restrictive covenants cannot be registered as land charges ∴bind everyone except equity’s darling |

Step 6: Consider appropriate remedies for C

Think about who C is suing – does D still control the land or not? What outcome would C like to achieve?

Common Law * DAMAGES only against an original covenantor if he no longer owns the land.

Equity * INJUNCTION / SPECIFIC PERFORMANCE against the current owner of the land (but equity may award damages in lieu. * Specific Performance (covenantor doesn’t take positive action to comply with [positive] covenant, e.g. repair) * Injunction (to prevent covenantor from beaching a restrictive covenant) * For a POSITIVE covenant, the only option is to sue original covenantor for damages so that he can put pressure on successor covenantor indirect enforcement by an indemnity covenant

Notes:

Ways a covenant can be discharged: Express release | Covenantee can agree to the modification or release of the covenant by deed. This is done voluntarily and usually in return for payment | Common ownership | Where burdened and benefited land come into the same ownership, the covenant will be extinguished. | s. 84 LPA 1925 | By application to the Lands Chamber of the Upper Tribunal. Tribunal has power to release or modify restrictive covenants, if certain grounds can be made out. Slow and expensive route – must demonstrate that covenant is no longer relevant / obsolete (Re Vince’s Application) | Breach Insurance | This does not remove the covenant but covenantor will be able to recover insurance for any loss incurred by the enforcement of that breach. |

Proposals for Reform – Freehold Covenants
It has been recognised that many aspects of the law relating to freehold covenants are now outdated and a cause of difficulty. Law Commission Report ‘Making Land Work: Easements, Covenants and Profits a Prendre’ proposes a more coherent scheme of covenants, together with easements.…...

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