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Covenants in Land Law

Land Law

Covenants in Land Law are a key area of the Land module for LLB and LLM degrees at university. Covenants are most likely to come up during exams and coursework as problem questions, not essays.

Introduction

A covenant in law refers to a promise or contract to do or not do something. Deeds contain these covenants and are used to transfer covenants.

A covenant originally exists between two parties. The first party is the covenantee, who receives the benefit of the covenant. The second party is the covenantor, who receives the covenant burden.

Land law covenants include freehold covenants, leasehold covenants, and restrictive covenants.

Covenants on land may be positive or negative.

Leasehold covenant example:

An example is when a person or party rents a flat or apartment from an estate agency. When leasing/renting this property there may be a restriction to only use the property as a residence and not a commercial or business property. A leasehold covenant will often regulate the use of the rented land or property.

Freehold positive covenant example:

Property bought by a party may come with certain requirements. An example is maintaining the hedgerow in their garden.

Freehold restrictive covenant example:

A party buying a property may have certain restrictions imposed. A property may come with the restriction that the buyer cannot erect certain buildings.

Freehold covenants are included in deeds. Transfer of freehold titles for land must be made by deed transfer (s.52(1), LPA 1925).

Restrictive covenant example:

Farming may not be undertaken by the new owner of a land by the previous landowner by way of a covenant. Restrictive covenants may be found as either leasehold or freehold.

Issues

What happens to covenants when land is sold?

The doctrine of privity of contract states that a contract/covenant is only enforceable between the original parties. Therefore, it is necessary to prove the original parties have been replaced successfully if land is sold.

Example 1:

Party A begins a covenant with Party B. Party A has the benefit, Party B has the burden.

Party A can enforce the covenant against Party B, this is because Party B has agreed to be legally bound by the covenant.

Party A sells their land to a new owner.

For the new Party A to be able to continue to enforce the covenant against Party B, Party A must prove that the benefit of the covenant ‘runs with the land‘.


Example 2:

Party A begins a covenant with Party B. Party A has the benefit, Party B has the burden.

Party A can enforce the covenant against Party B, this is because Party B has agreed to be legally bound by the covenant.

Party B sells his land to a new owner.

For Party A to enforce the covenant against the new Party B. Party A must prove the burdenruns with the land‘.


Example 3:

Party A begins a covenant with Party B. Party A has the benefit, Party B has the burden.

Party A can enforce the covenant against Party B, this is because Party B has agreed to be legally bound by the covenant.

Party A and Party B sell their land to new owners.

The new Party A must prove the benefit has run to them, and that the burden has run to the new Party B.


Solutions

The rules surrounding the running and passing of Covenants in Land Law are complex. These rules are what will most frequently appear on exam and essay questions.

The rules operate differently for different runnings, these are:

Running the benefit in law:

Running the benefit of the land in common law goes against the principle of privity of contract shown in the doctrine of privity. Common law is therefore reluctant to allow the running of the benefit. Circumstances allowing the running of the benefit in common law rely upon strict possibilities.

Example A:

The benefit of the covenant can be shown to run, however in certain circumstances, such as being enforceable by parties who were not privy to the original agreement. This is shown in the Law of Property Act 1925 s56(1).

Section 56(1) states that a party not expressly named in the conveyance of land can take the benefit of a covenant if they can prove it was implied that they should benefit from it. This for example could be shown by a category of person(s) e.g adjoining plots/neighbours. If person(s) is generic or categorized, they must be existing and identifiable, and the covenant must touch and concern the land. – Re Ecclesiastical Commissioners for England’s Conveyance [1936] Ch. 430

The use of Section 56(1) is strict, it must be proven that the claimant party was intended to benefit from the covenant, it is not enough to show that they could benefit. – White v. Bijou Mansions Ltd [1938] Ch 351

Covenants made after the 11th of May 2000 do not benefit from Section 56 of the LPA 1925. After this date the Contracts (Rights of Third Parties) Act 1999 implements the suggestions of the Law Commission Report number 242. This change allows parties to sue a contract providing it was to benefit them without any terms contrary to this contained within the agreement. This claim under CROPTA 1999 does not require the covenant to touch and concern the land. CROPTA 1999 also allows claims from covenantee successors even if they do not exist yet (unborn children, for example) unless apparent they were not intended to benefit.

Example B:

The covenant must touch and concern the land.

Swift Investments Ltd v. Combined English Stores Group Ltd [1989] AC 632 HL provides a working test from Lord Oliver regarding this requirement.

The test states;

A covenant benefits only the reversioner for the time being, and if separated from the reversion ceases to be of benefit to the covenantee (the person who currently owns or has links to the land).

The covenant affects the nature, quality, mode of user, or value of the land of the reversioner (demonstrating a link to the land).

That the covenant must not express to be personal (meaning it does not expressly apply to one party or person).

The fact that a covenant is to pay a sum of money will not prevent it from touching and concerning the land so long as the three foregoing conditions are satisfied and the covenant is connected with something to be done on, or in relation to the land (a party or person cannot pay to be excluded from the covenant).

This test shows the covenant must benefit the land and not the covenantee

c) Intention must be shown that the benefit should run with the land belonging to the covenantee when the covenant is created. This is implied by the LPA 1925 s78(1).

d) The covenantee must hold a legal estate in the land (but is not required to own any physical land).

e) The new covenantee must also hold a legal estate in the land. This does not have to be the whole legal estate identical to the original covenantee. This legal estate may be freehold or leasehold. –Smith and Snipes Hall Farm v. River Douglas Catchment Board [1949] 2 KB 500

Running the benefit in equity:

If the benefit cannot be ran in law, it may be possible to run the benefit in equity.

Equity does not rely upon strict requirements like common law does. Equity identifies certain circumstances that will allow for the benefit to run.

Example A:

The first of these identified circumstances is ‘assignment’. If the covenantee expressly transfers the benefit of a covenant to the new covenantee, then the covenant may run successively through the continuation of new covenantees providing the chain is not broken.

Lord Justice Romer (LJ Romer) created a five-stage test to check if the assignment through equity is possible in the case of Miles v. Easter [1933] Ch 611.

The five stages to check for assignment are as follows:

The covenant must have been made for the benefit of the covenantee.‚

The land must be indicated with reasonable certainty. ƒ

The land must be retained in whole or in part by the plaintiff.„

The land must be capable of benefiting from the covenant.

… The assignment of the covenant and the conveyance must be contemporaneous.

The covenant does not have to be expressly transferred within a will, but this is not an absolute rule.

Example B:

‘Annexation’ may also allow a benefit to run. Annexation includes three types: express, implied, and statutory.

Express annexation is fulfilled if there is a clearly expressed intention for the covenant to run. This will also make the benefit enforceable by successors in title to the original covenantee. This fulfilment relies upon very clear writing of the covenant. – Rogers v. Hosegood [1900] 2 Ch 388 shows the covenant being clear that is intended to bind all successors upon conveyance.

Express annexation also requires land to be clearly identifiable within conveyance. – Renals v Cowlishaw (1878) 9 Ch D 125

Annexation can also be implied if the covenant was intended to run with the land as shown in the case of Marten v Flight Refuelling Ltd [1962] Ch 115.

Statutory annexation has mostly replaced implied annexation. Section 78(1) of the Law of Property Act 1925 states that a covenant made by a covenantee will be judged to be intended to carry on with all successors and all with title under the covenantee as if the covenant held express intention to do so. Restrictive covenants include owners and occupiers as successors in title within statutory annexation. – Federated Homes Ltd v. Mill Lodge Properties Ltd [1980] 1 WLR 594.

If the evidence clearly states that the covenant was never intended to run and the land in question is clearly identifiable then section 78 can be excluded from being enacted. Evidence outside of original conveyance or question may be used to identify the benefitted land for the purpose of excluding section 78 of the LPA 1925. – Crest Nicholson Residential Ltd v McAllister [2004] EWCA Civ 410; Sugarman v Porter [2006] EWHC 331 (Ch).

Example C:

Covenants in land law may have their benefit run in equity via a building scheme, also known as a scheme of development.

A building scheme is a local law system in which occupants of the property within can enforce the covenants against each other for the benefit of the scheme.

An example of the use of a building scheme would be on a residential estate. The scheme may include every resident keeping their hedgerows at a certain height with any residence being able to enforce this covenant against another.

Elliston v. Reacher [1908] 2 Ch 374 details four essential requirements for the use of a scheme of development. These rules are:

Both plaintiff and defendant must derive title from one common vendor.

‚The common vendor must have laid down a definite scheme of development.ƒ

The common vendor’s restrictions intended to have been for the benefit of all the plots within the scheme.„

The plaintiff and defendant must have purchased their respective plots on the footing that the restrictions were mutually enforceable by the owners of all the plots within the scheme.

Reid v. Bickerstaff [1909] 2 Ch 305 shows a fifth requirement that “the area the scheme applies to must be clearly defined”.

Whitgift Homes v. Stocks [2001] EWCA Civ 1732 shows this criteria can fail. In this case not all properties benefitted from the covenants contained within the scheme, so the third criteria failed.

The requirements surrounding a building scheme are not strict in nature, if intention to create a definite scheme can be shown and intention for enforcement can be proven to exist. – Re Dolphin’s Conveyance [1970] Ch 654; Baxter v. Four Oaks Properties Ltd. [1965] Ch 816.

A letting scheme, such as a property containing multiple apartments will commonly operate in the same manner as above. The exception is that the landlord would be the one to enforce covenants in a leasehold rather than a tenant against another tenant. – Williams v. Kiley [2002] EWCA Civ 1645; [2003] 06 E.G. 147

Running the burden in law:

When answering an essay or exam question dealing with the running of the covenant it is best practice to solve the running of the burden after the running of the benefit.

The principle rule is that the burden of a covenant in land does not run within common law – Austerberry v Corporation of Oldham (1995) LR 29 Ch. D. This is because it goes against the doctrine of privity of contract to create liability for anyone who is not a party to a contract.

Section 79 of the Law of Property Act 1925 appears to extend liability to those who are not privy to the contract for covenants. The courts have accepted that this legislation extends liability for the original covenantor but not others. – Lord Justice Robert Walker Morrells of Oxford Ltd. v. Oxford United Football Club and others [2001] Ch 459.

Running the burden in equity:

Tulk v. Moxhay (1848) 2 Ph 774 allows for the running of the burden of covenants in equity in certain circumstances.

The burden of a covenant in land law can be enforced against the assignee of a covenantor (the new covenantor) if sufficient notice has been made. This is done using the ratio of Tulk v. Moxhay (1848) 2 Ph 774.

The scope of this rule originally opened the floodgates for positive covenants, negative covenants, and covenants outside of reality.

Four conditions now exist for the burden to successfully run in equity:

a) The covenant must be restrictive or negative. The case of Haywood v Brunswick Permanent Benefit Building Society (1881) demonstrates it is irrelevant how the covenant is worded if it involves financial expenditure. A covenant involving financial expenditure is positive and the burden cannot run.

b) The covenantee must own the land afterwards and during when the covenant is made. – London County Council v Allen [1914] 3 KB 642

c) The covenant must touch and concern the dominant land. – Rogers v. Hosegood [1900] 2 Ch 388.

d) It must be a common intention of the parties involved that the burden is to run with the land. S79 of the LPA 1925 presumes this requirement unless a contrary intention is apparent.

Rules of enforcing a covenant:

Enforcing a covenant requires it has correct protection.

Covenants for registered land must be entered on the charges register against the title of the burdened land.

A covenant made for an area of unregistered land should have the burden entered against the covenantor as a land charge in the land charges register.

If the covenant existed prior to 1926 then the doctrine of notice from Tulk v. Moxhay (1848) 2 Ph 774 is the requirement.

To Conclude:

Covenants in Land Law can appear complex, following the step-by-step system above can help with any question you may encounter.

This article does not cover Positive Covenants, these types of covenants are often a separate question and require different legal rule applications.

This article does not include remedies for breach of covenants, to view the LawLessons guide on remedies in relation to covenants click here.

Key reading

Law Commission Report 327 ‘Making Land Work: Easements, Covenants and Profits à Prendre’ 2011. (Para 5.69).

Note: The Commission suggests reform to separate existing positive and negative covenants into ‘land obligations’, these would operate alongside new restrictive covenants from new interests in the land with the existing covenants.

Landlord and Tenant (Covenants) Act 1995.

Note: The Law Commission has stated that a similar system of two groups of covenants already exists under this statute strictly for leasehold covenants.

Law of Property Act 1925.

Note: The Law of Property Act 1925 is the key statute surrounding Land Law.

Contracts (Rights of Third Parties) Act 1999.

Note: Section 1 allows a person who is not privy to a contract to receive a benefit of a contractual term if it appears to confer a benefit to them.

Covenants in Land Law can be difficult. Bookmark this article if you need help in future.

OSCOLA reference this article/case: LawLessons, ‘Covenants in Land Law’ (LawLessons, 15th August 2021) <https://lawlessons.co.uk/covenants-in-land-law> accessed 8th July 2022


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