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Freehold Covenants

What are covenants?

  • Promises between 2 parties owning the freehold of 2 lands
  • Control of land in relation to promises made
  • Effect the value of land 
  • Can be negative or positive

Examples....

1. Control the use of the land

2. Mend the fence

3. Refrain from keeping animals

4. Contribute to upkeep of road

5. Not cause a nuisance

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C&G Homes v Secretary of State for Health (1991)

C&G Homes v Secretary of State for Health (controversial case)

Facts: 2 properties on a housing estate purchased by secetary of state for use in community for mental health patients as hospitals closing down. Covenants on the property not to allow any act which 'may become a nuisance,danger,annoyance or detriment' to C&G Homes or others living on the estate and must be used as private dwelling houses only. Neighbours didn't want care communities and tried to stop the use.

Outcome: Court of Appeal found that no business was being conducted but the other covenant was breached as used for public not private means. Unfortunate exercise of covenants being used for anti-community care.

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KEY TERMINOLOGY....

IMPORTANT TERMS TO REMEMBER:

Convenantor: person who grants/makes the promise not to do or to do something

Convenatee: person who receives/accepts the promise 

Burden: complying with promise. Has the 'burden' of the adhering to the convenant

Benefit: has the 'benefit' of the promise

Dominant land: land that has benefit of covenant

Servient land: land that is limited or restricted by the promise

Positive covenant: promise to do something i.e. paint door white (normally costs)

Negative covenant: promise to not to something i.e. not build a shed

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Examples of covenants... number 4 is most likely f

C'tee = covenantee      

C'tor = covenantor 

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Original Parties Covered by Contract Law

Convenantee = person making the covenant on the land

Conventantor = person restricted by covenant on the land

THERE ARE DIFFERENT RULES FOR LAW AND EQUITY FOR COVENANTS

LAW OF CONTRACT = APPLIES WHEN ORIGINAL PARTIES ONLY (NO ONE SELLS):

Law of contact is covered by: Section 56 of LPA 1925

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BOTH PARTIES CHANGE?.....

When covenantee sells his land to 'Y' AND when the convenantor sells his land to 'X'

BOTH THE BENEFIT AND THE BURDEN MUST PASS TO Y AND X FOR THE CONVENANT TO STILL BE ENFORCED.....

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1st..... How to pass the BURDEN of the covenant...

1st:

PASSING THE BURDEN

CAN ONLY PASS IN EQUITY, NOT COMMON LAW


  • Many times that the law has nearly reformed and enabled burden to pass at common law but NOT YET as the law doesn't want to OVERBURDEN the land with obligations



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Passing burden at common law = IMPOSSIBLE

Austerberry v Oldham (1885)

Facts: There was a covenant to keep the road in good repair. The burden of the land was subsquently sold.

Decision: Court refused to enforce covenant against new owner

Rhone v Stephens (1994)

Facts: 1960 owner of Walford house sold part of the property off and was called Walford cottage. Owners of house would keep part of roof over cottage in 'wind and water tight condition'. House and cottage sold to new owners. Roof leaked and wanted repair

Decision: Court of appeal refused to enforce covenant as owners with burden could not pass burden at common law (Austerberry case applied) but the court said the House of Lords were able to abolish the impossibility of passing the burden at common law. House of Lords FAILED to do so and held that PARLIAMENT should change the law. 

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Ways around passing the burden at common law...

BURDEN OF A COVENANT CANNOT BE PASSED AT LAW, BUT THERE ARE EXCEPTIONS:

1. Chains indemnity clauses (original convenator remains liable. indemnity cover. If person has no money or missing, cannot sue!)

2. Rights of re-entry (1925 method, if default in complying with covenant, can claim possibly rights of re-entry as a threat) this is very criticised!

3. Doctine of mutual benefit and buden (where conveyance gives the purchaser benefits and burdens, in some circumstances, it is unfair to have benefit if won't take the burden of the property. Must be on the property NOT individuals themselves!

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Doctrine of mutual benefit and burden cases

Halsell v Brizell

Facts: Development of plot of estates. Plots sold but roads kept. Promised to let owners of plots use the road and the plot owners promise to contribute to maintain the roads. New owners of plots refused to contribute to maintance of road but still wanted to use the road.

Decision: Court held as wanted to use the road 'BENEFIT' had to pay the maintance and take the BURDEN too.

Rhone v Stephens

Facts: 1960 owner of Walford house sold part of the property off and was called Walford cottage. Owners of house would keep part of roof over cottage in 'wind and water tight condition'. House and cottage sold to new owners. Roof leaked and wanted repair.

Judgement: Lord Templeman Limitations on the doctrine of mutual benefit and burden: 

  • Limitation 1: burden must be relevant to enjoyment of benefit
  • Limitation 2: new owner must have some choice (option to reject burden/benefit)

Repairing roof was independent, impractical to deny right to support cottage (benefit)

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Passing the burden in EQUITY

  • Cannot pass burden at common law (per case of Austerberry)
  • CAN pass burden in equity in some circumstances....

TULK V MOXHAY

Facts: Freehold of center of Leicester Square. Freehold sold to 'A' and 'A' promised would keep unbuilt. 'A' sold on to 'B' and 'B' sold to 'Moxhay'. 'Moxhay' wanted to build even though knew of covenant and wanted to breach it. 

Decision: Court held that if a low price is paid due to the covenant, its unfair to not enforce the burden. Covenantee given injunction to prevent Moxhay and burden passed! Case introduced the 4 hurdles required to pass the burden in equity!

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Tulk v Moxhay hurdles.. jump ALL 4!!!!

  • 1st hurdle: covenant must be NEGATIVE only i.e. don't cost £ (can't be positive ever £!)
  • 2nd hurdle: common intention of both parties that burden should run with land
  • 3rd hurdle: covenant must benefit the dominant tenant
  • 4th hurdle: notice/registration requirements need to be met
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2nd hurdle

2nd hurdle: common intention of both parties that burden should run with land

1. EXPRESSLY (written)  OR

2. IMPLIEDLY (post 1925 LPA, presume covenant intended to run, under section 79)

Re Royal Vic: case states must look at wording and content of the deed for express

Rhone v Stephens: case confirmed s.79 can operate in this way and was intended to remove difficulties/complications UNLESS can rebut with evidence!

Morrells v Oxford United Football Club

Facts: Morrells sought to enforce an injunction against building a pub within half a mile of it, against Oxford UFC, which was proposing a stadium with leisure facilities. This came from a covenant in 1962, and it was argued that it bound successors under section 79.

DecisionRobert Walker LJ stated the absence of such words in the clause in question showed a contrary intention. The covenant was personal in nature and couldn't be enforced


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3rd hurdle

3rd hurdle: covenant must benefit the dominant tenant

  • Both parties must hold land capable of being dominant and servient land which must be close enough (land in London benefiting covenant of land in Brighton is not close enough in proximity)

London County Council v Allen:

Facts: stated road wouldn't be built on in covenant but 3 houses were errected.

Decision: Allen succesfully argued not bound by covenant becuase the council didn't own any of the land anymore. The covenant was a personal covenant which did not run with the land. It was also argued that the covenant was in the form of a negative easement, which required a dominant and servient estate, and the Plaintiff did not own any of the land in question. The covenant amounted to an easement in gross, which did not run with the land, but terminated when the land was assigned to another by Mr. Allen.

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4th hurdle...

4th hurdle: notice/registration requirements need to be met

Registered land: Covenant must be recorded as a minor interest on the land registry under section 32 (1) of Land Registry Act 2002.

Unregistered land: Covenant must be recorded on land charges site under section 198 of LPA 1925.

If not registered, will be void under section 4 sub-section 6 Land Charges Act 1972 (class Dii = restrictive covenants)

If pre-1925, will apply under doctrine of notice and the old covenant will only be binding if equities darling.

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Passing the BENEFIT...

BENEFIT:

The benefit can pass at:

  • Common law (expressly or impliedly)

or

  • Equity (assignment, annexation, building scheme)
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Passing the benefit at common law...

Benefit at Common law: EXPRESSLY or IMPLIEDLY

IMPLIEDLY:

4 requirements per: 

 Smith v River Douglas Catchment Board:

Denning LJ:

1) The covenant must touch and concern the land

2) The conventee must have a legal estate in the land benefited

3) The assignee must have a legal estate in the land benefited

4) The benefit of the covenant must be intended to run with the covenantee's land



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Passing the benefit impliedly at common law cont'd

IMPLIEDLY:

Requirement 1: the covenant must touch and concern the land

How to tell if the covenant touches and concerns the land....

PA Swift Investments v Combined Egnlish Stores (1989)

A further 3 requirements:

1. Covenant must benefit the covenantee for the time being

2. Covenant must affect the nature, quality, mode of user or value of land

3. Covenant must not be expressed to be personal

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Passing the benefit impliedly at common law cont'd

IMPLIEDLY:

Requirement 2: the coventee must have a legal estate in the land benefited

MUST BE LEGAL, EQUITTABLE NOT ENOUGH!

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passing the benefit impliedly at common law cont'd

IMPLIEDLY:

Requirement 3: The assignee must have a legal estate in the land benefited

Assignee (new owner) must have LEGAL estate (thought can be part sale of land)

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passing the benefit impliedly at common law cont'd

IMPLIEDLY:

Requirement 4: The benefit of the covenant must be intended to run with the covenantee's land

This can be inferred by the courts. 

Smith v River Douglas Board

 (Lord Denning)

Facts: paid to undertake work to prevent flooding and 8 years later land flooded. 2 separate claims to sue the board. 1 was freeholder of land and 1 was leaseholder of land.

Decision: Court held under s78 LPA, both parties could bring a claim even though their legal estates were different to that of convenatee. Covenant was made with the original owner AND subsquent purchasers. 

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Passing the benefit at common law EXPRESSLY

Passing the benefit at common law: Expressly or impliedly...

EXPRESSLY:

USE:

Section 136 LPA 1925

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To use common law or equity to pass the benefit?

If the benefit passes at common law AND equity, which one to use?

'it is generally accepted that, if the person seeking to enforce the covenant is a successor in title of the orginal covenatee, he must show that the benefit has passed to him according to the equitable rules' 

Gravells Land Law or Re Union of London & Smith's Bank, Miles v Easter 1933

THEREFORE...SNAP!!!!!!

If you can pass the burden in equity, you must pass the benefit in equity!!!!!

BUT.....

Rogers v Hosegood (1900) shows a different approach that doesn't have to be 'snap'! (see also Gray & Gray)

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Passing the benefit in equity ...

Passing the benefit in EQUITY:

THREE WAYS:

1. ASSIGNMENT

2. ANNEXATION

3. BUILDING SCHEME

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Passing the benefit in equity: ASSIGNMENT

Passing the benefit in equity: ASSIGNMENT

TWO  methods of assignment:

1. Implied Assignment

2. Express Assignment (used rarely)

3 CONDITIONS FOR IMPLIED ASSIGNMENT:

a. the convenant iteself should have been taken to benefit the land i.e. touch land

b. the dominant land should be identifiable (circumstantial)

c. the assignment of the covenant should occur as the same time as the transfer of the land (requires express words normally found in deeds)

A, B & C must be repeated each and everytime the land transfers!!!!!!!

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Use of s62 LPA 1925......

CAVEAT:

Can Section 62 of LPA 1925 be used?

  • Applies when transferring land and passes on rights and interests in transfer
  • In easements, this section transfers licences automatically into easements

Academic commentary about this.....

Can covenants be squeezed into this section?..... DEBATABLE EITHER WAY!

Look at cases of:

1. International Tea Stores v Hobbs

2. Roake v Chadha

3. Kumar v Dunning

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Passing the benefit in equity: ANNEXATION

ANNEXATION:

 3 METHODS OF ANNEXATION:

1. EXPRESS

2. IMPLIED

3. AUTOMATIC

'Think of annexation as : 'nailing to the land'

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Passing the benefit in equity: EXPRESS ANNEXATION

EXPRESS ANNEXATION:

  • Words expressly stated i.e.

'with the vendors, their heirs...and assigns'

  • Form of words demonstrating the covenant is meant to be permanently attached to the land (the intention and to benefit subsquent owners too!)
  • Look at the DETAIL of the words......
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Passing the benefit in equity: IMPLIED ANNEXATION

IMPLIED ANNEXATION:

(rarely use and controversial)

 -Very controversial as allows the courts to infer/imply annexation which may be contrary to intention!!! 

-Supporters of implied annexation rely on the cases of:

 Shropshire CC v Edwards

J.Sainsbury v Enfield

Professor Sparks said 'it would not survive a trip to the Court of Appeal' !!!

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Passing the benefit in equity: AUTOMATIC ANNEXATIO

AUTOMATIC ANNEXATION:

KEY CASE: Federated Homes v Mill Lodge (1980) (refers to section 78 (1) LPA 1925)

Facts: Large area of land to be developed. Area was subdivided into red, green, blue and pink land. Owners of land successfully applied for planning permission for 1250 houses on all colours. In 1971, owners sold blue land to Mill Lodge who entered into a covenant that would not build more than 300 houses on blue land to preserve value and planning permission not exhausted. The claimants were owners of the red and green land. Each conveyance of green land contained express assignment of Mill Lodge's covenant. Red land didn't and had transferred to many before finally transferring to Federated Homes. Mill Lodge were given planning permission for 352 houses. FH restricted how many could build!

Decision: Court of Appeal decided FH had benefit of covenant orginally from Mill Lodge which restricted building to 300. Green land covered by assignment but Brightman LJ held enough evidence to give an injunction and red land was annexed to land via section 78 of LPA 1925, which was held as a GENEROUS interpretation of section 78 and the covenant was 'automatically annexed'. Automatic annexation was created and still stands to date!

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Criticism of Federated Homes...

Various opinions of Federated Homes case....

  • Reports that Federated Homes simplified the law aka 'a revolutionary case'
  • D.J. Hayton (1980)
  • P.N. Todd (1985) criticised the decision

Exceptions to Federated Homes:

  • CONTRARY PROVISION: Roake v Chadha (a provision that the benefit had to be expressly assigned which then prevented automatic annexation)..this shows an exception to automatic annexation!
  • COVENANTS PRIOR TO 1926: J. Sainsbury v Enfield: covenanted before 1926 and thus couldn't use automatic annexation
  • IDENTIFICATION: Crest Nicholson v McAllister (LJ Chadwick) stated 1. land must be clearly identified expressly or 2. regarded identifying the land to be benefit important from availbale information on register

AUTOMATIC ANNEXATION IS VERY IMPORTANT IF THE ABOVE EXCEPTIONS DO NOT APPLY

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Passing the benefit in equity: BUILDING SCHEME

BUILDING SCHEME: 

 Elliston v Reacher

4 strict requirements to be met:

A. The different plots are to be sold off by a common vendor 

B. The development should be laid out in defined plots each to be subject to covenants prior to sale

C. The common vendor must have intended to benefit all of the plots sold

D. The purchasers of the plots must have bought on the basis that the covenants were to benefit everyone in the scheme

If all of these 4 are met, a local law is created where everyone in the scheme can enforce the benefit of the covenant. These 4 requirements were very tight until 1970's.

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passing the benefit in equity: BUILDING SCHEME

BUILDING SCHEME CONT'D:

Shift in approach from Elliston v Reacher to Re Dolphins = MORE FLEXIBLE

Re Dolphins

Facts: Estate in Birmingham called Selley Hill. Solicitor called Robert Dolphin who had laid out plots on estate. Robert died and land passed to sisters and nephews. In 19th century, estate sold in plots and included was a covenant to build just 1 detached house per plot. In 1960's, dispute arose as new owner wanted to build a block of flats and breach covenant. Argued no building scheme as no common vendor as different plots sold by sisters and nephews (not 1 person!). 

Decision: Court held there was a common interest and intention that covenant should be enforced. New modern requirements established (but don't ignore Elliston requirements) :

1. An identifiable scheme

2. A mutually perceived common intention

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passing the benefit in equity: BUILDING SCHEME

Building Scheme cont'd...

NB: Building schemes are normally very large not just 3 houses for example!!!

Subsequent cases and shift in approach to building schemes:

1. Baxter v Four Oaks 

2. Lund v Taylor (Court of appeal acknowledged Re Dolphin but did not perceive a 'great change in the law per se')

3. Emile Elias v Pine Groves (noted the developments of this area of the law but not relev. here)

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Reform of Covenants..

REFORM:

What about discharging or modification of covenants? (i.e. get rid of a covenant!)

  • Section 84 (1) LPA 1925 = VERY criticised 
  • Law Commission Consultation Paper 'Easements, Covenants and Profits' Feb 2008: argued the law is unsatisfactory, cluttered with unnessary words and reform to section 84 is well overdue as very difficult to interpret for lawyers and public!
  • There is normally some bargain/negotation but if this fails or unsuitable then must rely on section 84. 
  • Can apply to Land Chambers who may alter or discharge under 4 categories: 

1. Covenant should be obselete

2. Covenant is obstrucitve of reasonable use

3. Both parties consent to change

4. No injury to those entitled to the benefit 


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Law Commission Reform..

Reform of passing the burden at common law....

The Law Commission: Law Com no 327 'Making land work: Easements, covenants and profits': 7th June 2011

The Right Honorouable Lord Justice Munby, Chairman Law Commission recommended:

  • 'Consideration of the issues relating to both restrictive and positive covenants together leads us to recommend that for the future they take effect as a new legal interest in land, known as a land obligation'
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Lands Tribunal/Chamber Applications

Lands Tribunal/Chamber Applications:

Re Lloyd and Lloyd's Application (1993)

Facts: applied to Lands Tribunal/Chambers asking for modification of a covenant. Lloyd wanted to use house as residential care but there was a covenant not to conduct business.

Decision: He failed to show category 1 (obselete) but successfully argued that the covenant prevented use in public interest and covenant did not coney a benefit for neighbours and proposed modification that would not injur those entitled to the benefit!

Lands Tribunal/Chamber stats:

- Jan 2000 - Nov 2011 had only 93 hearings (56% modification, 13% discharge, 31% for either modification or discharge)

- Only 38% resulted in a change of some sort

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Lands Tribunal/Chamber Applications

Gray & Gray 'The future of real burdens in scots law' 1993:

Reviewed the lands tribunal cases from 1990's and argued section 84 is just another level of planning control!

Re George Wimpey Bristol & Gloucester Housing Association Ltd 2011:

Facts: Application requesting modification of covenant preventing building under section 84. Land that was burdened with covenent was part of a huge development site and there was major opposition by the public to development. 

Decision: Lands tribunal were not prepared to modify as covenant did supply a practical benefit to those objecting that being preventing flooding and density of development. The development has gone ahead despite the application being in the tribunal!!!!

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REFORM of Covenants..

Main problems with covenants:

See: Making Land Work: Easements, Covenants and Profits, Law Commission no 327, June 2011

1. There is no mechanism for passing freehold covenants that are positive! (Tulk v Moxhay demands it must be negative only!)

2. Positive covenants concerned with over-burdening the land but the law commission think the time has come to allow them!

3. Difficult to identify who has the benefit as can't register benefit of a restrictive covenant

4. Deeds do not require a lot of detail

5. Different rules for running of benefit and burden making it complex/complicated!

6. 'Covenant' is urged a word to be got rid of and create new 'land obligation'

7. Reform of the Lands Tribunal/Chamber and section 84 and modify legislation

8. Make benefit and burdens registerable and no continuing liability for previous owners

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REFORM of Covenants..

Debate on REFORM:

P. O'Connor 'Careful what you wish for: positive freehold covenants' 2011

- cautious against reform as shouldn't be able to create property rights for positive cov's!

Recommendations:

1. New legal proprietary interest called 'land obligation'

2. Leave exisiting freehold covenants to continue as do now but whole new regime for furture promises and stop restrictive covenants being made i.e. new start for new promises

3. Would be a vechicle for passing negative AND positive covenants as long as touch land

4. Benefit and burden both registerable

5. No continuing liability for previous owners i.e. move away from contractual liability

NOTHING DONE YET ABOUT THE REPORT 18 MONTHS LATER!!!!

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