Land Law: Covenants (Practise Question 2)

Question

Mary owned numbers 1 and 3 Crawley Street, both freehold properties with registered title. Numbers 1 and 3 were originally one large property which Mary converted into two properties. In 2000, she sold number 3 to Sybil, retaining number 1 for herself. The conveyance of number 3 to Sybil was subject to the following covenants “for the benefit of Mary and any land retained by her, her heirs, assigns and successors in title:”

(a) to use the property for residential purposes only;

(b) to contribute a half of the cost of the sewer shared by the two properties;

(c) not to allow the fence that runs between the gardens of numbers 1 and 3 to fall into disrepair;

In 2005 Mary sold number 1 to Edith

In 2011 Sybil sold her property to Isobel, who has opened a café at number 3. Isobel has failed to repair the fence shared by the properties and which blew down in the strong winds over the winter and failed to contribute to maintenance costs of the shared sewer.

Answer

The first issue is whether the covenants are enforceable. This is a straightforward question before the land is sold off. Mary will always be able to enforce the covenants against Sybil because they have Privity of contract as in Beswick v Beswick and Tweddle v Atkinson. However, in this scenario the issue is when the land has been sold off. The burden of a covenant will never pass at common law as the case of Austerberry v Oldham Corp, which was later confirmed by Rhone v Stephens. This means that in order for a covenant to be enforceable the equitable rules of passing the burden and benefit must be satisfied.

The first part to this question is to determine which covenant are positive and which are restrictive. The reason for this is that the burden of a positive covenant cannot pass in equity, which is because it wouldn’t be fair on the owner of land to be burdened with something they did not agree to deal with, but there are several opportunities to circumvent this rule. A restrictive covenant is something that restricts the way a land can be used. Positive covenants are those which usually require some kind of action or monetary contribution. The test for whether something is either a positive or negative/restrictive covenant is the ‘hand in pocket test’ from Haywood v Brunswick Permanent Benefit. In this case the judge held that a good starting point was whether the covenator has to put their hand inside their pocket.  

In this scenario it is clear that covenant A will be a restrictive covenant because it does not require the expenditure of money from the covenantee for the upkeep of the covenant, this covenant can essentially be honoured through inaction. Covenants B and C will both require money to be spent in order for the covenants not to be breached, which indicates that these are positive covenants. This means that the Burden of B and C will not pass under the equitable rules for passing the burden.

The next legal issue is whether the Burden has been passed in equity from Sybil to Isobel. The legal test for this issue comes from the case of Tulk v Moxhay in this case there was a four part test identified to determine whether the burden had been successfully passed.

  1. The covenant must be restrictive (Clearly a positive covenant is not, which is why it cannot pass in equity)
  2. The covenant must accommodate the dominant tenement
  3. Original Parties must have intended the Burden to run with the land
  4. The person against who the covenant is made must have notice of it (effectively registration in modern law)

The covenant must accommodate the dominant tenement has three parts to it; There must be proximity between the land as in Bailey v Stephens; The covenant must touch and concern the land, which essentially means that it benefits the land by adding value or quality. The final requirement is that the covenantee must retain an interest in the land at the time the covenant was made.

In this scenario the land is neighbouring, which means that they are proximate. The covenants will all also touch and concern the land by adding value and benefit to it, in this case restricting the property to being used as residential properties will add a benefit to the dominant tenement. Keeping the fence in good repair will and contributing half the cost to the sewers is also going to add value to the property. The land is now also owned by Isobel who is Mary’s successor in title.

The next stage of Tulk v Moxhay is whether the parties intended the burden to run with the land. This is relatively simple to prove as it can either be done expressly in the covenant or implied by the Law of Property Act 1925 S79 unless the contrary intention is shown. Rhone v Stephens confirmed this interpretation of S79 of the LPA 1925.

In this scenario the covenant expressly says that the covenants are  “for the benefit of Mary and any land retained by her, her heirs, assigns and successors in title:”. Thid seems like a personal right as it does not identify the land, just any land Mary has. However, S79 will annex the burden to the land when the benefit touches and concerns the land, which in this scenario it does. There is also no contrary intention shown, which means that the burden wil become annexed to the land and be passed with every transfer.

The next issue is whether the person against whom the covenant is made had notice of it. This means that it needs to be registered in modern law. In unregistered land the covenant must be registered as a Class D(ii) land charge in Plymouth. S198 LPA 1925 says that registration is notice to the world, and if it is registered will be effective. S4(6) Land Charges Act 1972 says that if the covenant is not registered then the purchaser will not be bound by the land. However if they are gifted the land they will still have to honour the covenant.

If the land is registered S32 LPA 1925 requires the covenant to be registered on the charges register , which gives notice to the world. If the covenant is registered it will be effective, even if the purchaser of the land didn’t know about it.  S29 LRA 2002 says that covenant is not binding against the purchaser if it has not been registered.

From Tulk v Moxhay Covenant A is the only one which passes all the requirements for the burden to run. B and C does not because they are positive covenants, which fails on the first limb of the Tulk v Moxhay test.

The next legal issue is whether the Benefit can run with the land. In order for the equitable rules to be used the benefit must touch and concern the land as in P & A Swift Investment v Combined English Stores Group PLC [1989] AC 632. If the land meets this, then the benefit of the covenant can only pass in one of three ways. This comes from the case of Renals v Cowlishaw:

  1. Annexation (Express, implied or Statutory)
  2. Assignment
  3. Building Scheme

Annexation and assignment could be relevant to passing the benefit in the scenario. The covenant expressly annexes the benefit to the land for all of the covenants in this scenario because the covenant expressly says “for the benefit of Mary and any land retained by her, her heirs, assigns and successors in title:”. This clearly identifies the land that the benefit is to be annexed to.

The benefit also has the potential to be annexed to the land by statute. S78 LPA 1925 outlines that if the benefit touches and concerns the land it may be annexed to the land automatically, as interpreted in Federation Homes v Mill Lodge Properties. The law has restricted this provision: If the contrary intention is shown then S78 will not operate as in Roake v Chadha. The land must also be identifiable as in Crest Nicholson v McAllister.

The covenants all touch and concern the land as discussed earlier, which means that they can also become attached to the land through statute as there is no contrary intention shown and the land is clearly identified. The covenants all pass in equity, but are enforceable against different people.

The next issue is the enforceability of the covenants. The burden of A has been passed, which means that Isobel can only use the land for residential purposes. The benefit of the covenant has been passed to Edith, which means that Edith can enforce the covenant against Isobel. The benefit of B and C have passed in equity, which means that Edith can enforce the covenants, but it is a question of whom she can enforce them against. The burden of both B and C has not passed in equity, which means that Edith cannot take any action against them. Edith can enforce the covenant against Sybil, but she no longer owns the land and may be difficult to track down, which limits the remedies available.

There will not be a remedy available towards Covenant C because it is a positive covenant, which means the burden hasn’t passed.

It may be possible for the burden of Covenant B to pass even though it is a positive covenant. The way that this would be done is through the doctrine of mutual benefit and burden. The rule comes from Halsall v Brizell and was developed in Thamesmead Town v Allotey, in this case two requirements were introduced:

  1. The benefit and Burden must be directly linked
  2. Must be capable for the covenator to reject the burden so long as they don’t take the benefit.

This was developed again in Davies v Jones where the requirements for this rule to work were changed:

  1. The benefit and Burden must be conferred in or by the same transaction
  2. The benefit and burden must be directly related
  3. The person whom the burden is alleged to have been imposed on must have the opportunity of rejecting or disclaiming the benefit.

In this scenario the covenant to half the cost of the sewers between both properties seems like it may fulfil the criteria. The benefit and burden were both conferred in the transfer deed, they are related as it concerns sharing a sewer and paying for half the costs. Isobel has had the opportunity to refuse the burden, but she has already accepted the benefit.

The remedies available to Edith will have to be equitable because the benefit and burden have been passed in equity. The courts have a test to determine whether to grant an injunction or award damages in lieu under the Chancery amendments act 1885 may be awarded if the legal damage is – Shelfer v. City of London Electric Lighting Co. Ltd (No. 1) [1895] 1 Ch 287.

  • is small,
  • is capable of being estimated in money,
  • can be adequately compensated by a small money payment
  • and the case is one in which it would be oppressive to the defendant to grant an injunction

In this situation Edith could seek an injunction to prohibit Isobel from using the land from anything other than a Café, so long as it hasn’t been a delayed reaction as in Gafford v Graham.

 

 

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