Freehold Covenants PDF

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Freehold Covenants Overview of freehold covenants o Introduction and terminology o The real issue – enforcement of covenants o The burdens of the covenant o The benefit of the covenant o Modification and discharge o Reform – Law Commission Report and draft bill This material often makes up the backd...

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Freehold Covenants Overview of freehold covenants o Introduction and terminology o o o o o

The real issue – enforcement of covenants The burdens of the covenant The benefit of the covenant Modification and discharge Reform – Law Commission Report and draft bill

This material often makes up the backdrop of neighbour disputes – very emotional and driven. Advice when you move in somewhere is take photographs of when you move in, where the boundaries are, the front, back, and communal areas and date them. On the ground things become very heated and we are really talking about the personal relationships through land law terms, they can move far away from the rules. Tutor when in practise had a client who was having an argument with their neighbour about a large hedge between the two properties. She was working it out using these rules, the client went away on holiday and came back to find the hedge had been cut down – so irrespective of the rules in law things are personal and move in their own way Examples of common Covenants Promise to ... o Control the use of land – make sure doesn’t have a business which conflicts o o o o o

Keep up appearances of property Mend the fence/roof Contribute towards upkeep of shared road/path Refrain from keeping animals Not cause a nuisance

2 tiers of control o Modern public planning law – post-dates freehold covenants o Private covenants Some clients believe because they have planning permission they can go ahead with what they want to do despite covenants this is not true

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C&G Homes Ltd v Secretary of State for Health [1991] o Concerned a new housing estate o On the new estate the secretary of state had purchased 2 properties and they wanted to use them for the care in the community program o The care in the community programme in the late 1990s was the programme by which large hospitals that treated people with mental health difficulties were closed and properties were open up where people could be cared for in a home environment o These properties were subject to covenants: o Not to cause a nuisance

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o Not to carry on a business o To use the property as a private dwelling house A reasonable use of freehold covenants? Unfortunately some of the neighbours in the area decided that they did not want a care in the community programme locally to them and so they tried to use those covenants to stop the program going ahead The Court of Appeal found that there was no business but they found that the third covenant was breached because the houses were being used for public and not private purposes The neighbours were victorious in that case

o When we look at modification discharge we will look at the grounds in which even though covenants are technically enforceable sometimes the courts will intervene to vary them or modify them in the public interest o But in this case the neighbours were able to use private law to frustrate the public law purposes o Is this a reasonable use of freehold covenants? Terminology o Covenantor = person who grants the covenant o Covenantee = person who receives the promise (e’s in covenantee and in receive) o Burden = the covenantor is the person who has the land which is burdened o Benefit = covenantee is the person who has the benefit of the covenant o Dominant land = the land which is benefited by the covenant o Servient land = the land which is limited or subject to the covenant o Positive covenant = requires something to actually be done e.g. mend a fence, maintain a roof, contribute to a drive – the law is very resonant to allow positive covenants to pass to subsequent owners because they burden the land to much – test of substance and not form Haywood v Brunswick (1881)

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o Negative or restrictive covenant = stop the covenantor from doing something e.g. not building, not keeping animals, not running a business - test of substance and not form Haywood v Brunswick (1881) Haywood v Brunswick (1881) o Distinction between positive and negative covenant o Simply said does the covenantor have to put their hand in their pocket, if it is going to cost then it is going to be a positive covenant In practise positive covenants are very hard to work with, it's because of that that the Law Commission is suggesting that we have a new land obligation - suggesting that we keep the old rules for old premises but going forward we replace these old rules with the new land obligation. Covenants running with freehold land diagrams

These are the 4 different scenarios you could come across in a PQ 1 – you still have got the original parties that made the promise, there is a contract between the original covenantor and original covenantee - always going to be the easiest situation to manage 2 – Where the covenantor changes, the land that is burdened is sold on, trying to enforce against a subsequent owner

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3 - Covenantee changes so the land which has the benefit of the covenant changes hands 4- come across most often, both parties change hands and you are trying to show that both the benefit and the burden of the covenant has passed, sometimes land is sold on many times but the rules are still the same – can you show that the burden of the covenant has passed and can you show that the benefit of the covenant has passed? Would you expect law and equity to respond in different ways to different types of covenant? o In the 19th century – industrialisation and the new uses of land – equity chose as a matter of conscience to enforce certain types of covenants and they were the negative ones not the positive ones o This is the reason why we still have a different approach between common law and equity What are we dealing with? o Contractual rights - between the original parties you have privity of contract, in diagram 1, but once you start saying that the benefit can be passed this is then talking about a proprietary interest o Interests in land – Contractual rights o Privity of Contract o s56 LPA 1925- enabled a person who was not a party to the covenant to sue upon it. o Contracts (Rights of Third Party) Act 1999- Thompson say that s.56 now ceases to be relevant and not we use section 1(1) of the Contracts (Rights of Third Party) Act 1999. A third party may sue on a contract to which he was not a part if, either, the contract expressly provides that he may or, a term in the contract purports to confer a benefit on him. o What both of these pieces of legislation do is try to enlarge the pool of land owners who can benefit from the original contract Crucial issue: When and how can freehold covenants be enforced? In a most cases you will be looking where both parties change In a problem question ASK: a) Identify the covenant(s) in question. What sort of covenant(s) are they? – positive or negative

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b) Has the burden of the covenant(s) passed? i.e. Does the person who the covenant(s) is to be enforced against have the burden of the covenant(s)? c) Has the benefit of the covenant passed(s)? i.e. Does the person who wants to enforce the covenant(s) have the benefit of the covenant(s)? Both b) and c) must be established in order for the covenant(s) to be enforceable Sometimes the way in which you deal with the burden dictates what you do with the benefit so seems logical to deal with the burden first and then go to the benefit. In deciding whether the BURDEN and BENEFIT are enforceable we have separate rules from common law and equity Passing the BURDEN of a covenant

Common law The burden may NOT run at law – not possible to pass the burden of any covenant. Austerberry v Oldham (1885) o Most frequently used but not the most modern consideration of the principle o Concerned a covenant to keep the road in good repair o The covenantor had entered into the covenant i.e. they promised that they would keep the road in good repair but then they sold on the land o The court refused to enforce that covenant against the o That rule is really awkward for us and it has caused many practical difficulties, it was really a policy decision on the part of the court so that land didn't become too fettered with obligations, equity has intervened to help in some situation but equity only helps where covenants are negative or restrictive o That means that if you're dealing with a positive covenant they are practically unenforceable once you move past the original parties At this time when land development is becoming much more intensive and we have got more people living closer together many more flats that are using much smaller amounts of land that raises many practical difficulties for us. In a number of jurisdictions such as Australia, Ireland and Canada those places have decided to change this rule – there have bee calls to change the law here, when Rhone v Stephens came along and reached the HL we hoped that this would be the time that the rule would be abolished

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*** Rhone v Stephens [1994] o Most important case on this topic o The original sale dates back to 1960 and in 1960 the owner of Walford house sold part of the property off and the part of the property that they sold off became known as Wolford cottage o The properties are actually joined together, so they are selling part of the building literally o The owners of the house that was selling off covenanted, they promised, that they will keep the part of the roof over the cottage in wind and watertight condition o Positive covenant because it's going to cost money to actually do that o At the same time the owners of the house also reserved for themselves a right of support which is the type of easement o Both the cottage and the house changed hands (diagram 4) o The roof started leaking and the owners of the cottage wanted to enforce that covenant o The Court of Appeal said it wasn't possible to enforce the covenant because the burden could not pass at common law o Because it's a positive covenant we already know equity isn't going to help with this o But the Court of Appeal hinted that the House of Lords might decide differently they said “it's not I think impossible that House of Lords would now feel able to abolish or modify the rules” which is a very strong hint o The case went on to the House of Lords o But the House of Lords much to the disappointment of land lawyers at the time failed to rise to the challenge, they said that if they overruled Austerberry it would create difficulties for people that had relied upon that rule for over a hundred years o The House of Lords said that if we are going to have a change, the change had to be for Parliament to make o So situation remains that you cannot ever pass the burden of a covenant at common law Consider reform – link to land obligation proposal The burden of a covenant may not run at law BUT there are some (imperfect) ways of circumventing the rule: 1. Chains indemnity clauses – rely upon the original contract, each time the land is sold on they ask the new owner to promise that they will indemnify the previous owner for any breach, try to build up a chain of promises – the weakness is that if you try to

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sue down a chain if you find someone has gone bankrupt or has no money down the chain then you are stuck 2. Rights of re-entry – the law commission says it is not used that much in practise as it is ‘clumsy’, sometimes people try to attach a right of re-entry to a covenant situation but not that useful because the court will allow relief to forfeiter in that situation 3. Doctrine of Mutual benefit and burden – most interesting, the idea is that if somebody makes a promise in a situation and is going to get certain benefits because of the promise they shouldn’t then be allowed to go back on the promise later on, i.e. if they don’t want to bear the burden then they shouldn’t get the benefit 3 is the most important 1 is the one used most in practise Doctrine of mutual benefit and burden cases Halsell v Brizell (1957) o In this case you had a developer who developed an area of land for houses but kept back the ownership of the roads o The developer promised to let the people who brought the houses to use the roads in return for them promising to the upkeep of that road o Later on one of the plot owners decided that they didn’t want to contribute but the court said that if they wanted to use the road for access then they were bound to contribute for the maintenance o The doctrine of mutual benefit and burden Rhone v Stephens [1994] o Above was re-examined o Puts some limitations upon this doctrine of mutual benefit and burden o The burden has to be relevant to the enjoyment of the benefit – has to be a clear link between the benefit and the burden o The successor in title (buyer) has to have had some choice about the transaction, have to be able to renounce the benefit and the burden if they wanted to o This case when the owners of the cottage failed to get what they wanted by changing the common law rule they tried to use this doctrine o They failed again on this doctrine o HL said the doctrine couldn’t apply here either o Firstly, because the clause about repairing the roof was independent of the clause about the support o Secondly, it would have been impractical for the right of support to be denied because you couldn't really knock down the wall between the two of them without destroying both properties so there wasn't an element of choice 7

Wilkinson v Kerdene [2013] o The Court was asked whether the covenant to pay an appropriate proportion of the costs of keeping in good repair the roadways, sea wall, drains and sewers in respect of a common development was enforceable. Held: The defendants could not be o A successor in title to the original covenantor did not incur a liability to perform a positive covenant unless it had some real relation to a right granted in his favour under the conveyance which he did wish to exercise. Elwood v Goodman [2014] You cannot pass the burden in common law – there are some circumventions

Equity Tulk v Moxhay requirements – equity will sometimes allow the burden of a covenant to pass, equity will allow this where the Tulk v Moxhay conditions are met. Tulk v Moxhay o Concerns Leicester Square o In the middle of the square there is a park – it is open you can walk through o If it wasn’t for this case Leicester Square would be built all over and there would be no square o This case turns on keeping the park an open area o About the square itself o The square was sold to somebody that we’re going to call E by a person that owned all the houses around the square at that point in time o E covenanted, promised, that they and anybody who came after would keep the square open and unbuilt on o This was no problem whilst E continued to own the property because he was bound by contract (diagram one situation) o However E then sold that land on to Moxhay o Moxhay wanted to build on the central garden although he was aware of the covenant when he bought the land o The court said that if somebody buys a piece of land and they pay a relatively low price for it because of the covenants it would be completely unfair if the next day they could sell it on at a higher price without the burden of the covenant o The covenantee was given an injunction to stop Moxhay building o Equity took that approach because it regarded the conduct is unconscionable

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o If you were to look at the detail of the legal history of this it would show that in Victorian times what really happened was that landowners kept putting these covenants into their transaction even though there was no authority for them being enforced until it reached the point where actually the courts had no choice but to start enforcing the covenant in some situation and Tulk v Moxhay was the first of those o Need all of them: 1. The covenant must be negative / restrictive in nature 2. It should be the common intention of both parties that the burden of the covenant should run with the land of the covenantor 3. The covenant must benefit the dominant tenant 4. Notice/registration requirements must be met 1. The covenant must be negative / restrictive in nature For policy reasons equity will only enforce covenants which stop land owners from acting in a particular way. E.g. not building, not keeping animals etc. Equity will never assist in passing a positive covenant 2. It should be the common intention of both parties that the burden of the covenant should run with the land of the covenantor Equity requires that the original parties meat that the burden would run. – intend it will effect subsequent people Statute does step in to help us here because for a covenant created post 1925 then you can make an assumption under section 79 of the Law of Property Act 1925 - section 79 says that you can presume that this common intention exists unless there is a contrary intention, you are allowed to make the presumption under section 79 that the parties did mean for this to happen unless you can show a contrary intention Ronan v Stevens confirmed that section 79 the LPA 1925 acts in that way Morrells v Oxford United Football Club o When thinking about something to the contrary we can look to this case

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o Concerns the building of Oxford United new stadium (built 2001) Kassam Stadium o The whole project was put in jeopardy by one small freehold covenant o The situation was that Oxford City Council owned and they still own land to the south-east of the city o In the 1960s they developed a housing estate on part of that land o During the development they sold land to Morrells predecessors which was going to be used as a pub o The council covenanted as part of that deal, the council promised, that they would not allow any of their land within 1/2 mile radius to be used as a brewery or a club or licence premises o In the 1990s host the Taylor enquiry into safety at football grounds Oxford United obtained planning permission for this new stadium on the outskirts of Oxford on land owned by the council but within half a mile radius of that pub o The council were going to transfer the land to the football club but they were also going keep back a financial interest in this whole project as well o So Morrells applied for an injunction to try to enforce the covenants that there o o o o o o

should be no licensed premises there He decided that he would try to enforce the covenant that there shouldn't be licensed premises The problem was who wanted to build a football stadium where they could not put a bar in it Morrells lost and it was held that in this instance section 79 of the LPA 1925 could not be used to infer that common intention It was said that the way in which the covenant was drafted indicated that the parties did not have a common intention that it was going to bind subsequent owners It was a personal covenant that was going to bind the council alone The Kassam Stadium has open for many years, it has a conference centre, leisure facilities and if you go to the next home game then you are able to buy a drink in spite of what Morrells tried to do

3. The covenant must benefit the dominant tenant (piece of land) In other words you are not allowed to have covenants just floating around they have to be attached to a certain piece of land. When the original covenant is made both parties must hold estates of land which are capable of being the dominant and servient land. If there was one piece of land in Brighton and one in London and we tried to say that the covenant in London would benefit the Brighton land that would also be nonsense because

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they are not close enough for it to have any impact – must have land which is capable of being the dominant and servient land. If the covenantee sells all the dominant land then they cannot enforce their covenant except against the original covenantor under the original contract and then they would just get nominal damages. Also under this third hurdle – very important for PQ’s – the covenant must touch and concern the land, it has got to actually be something to do the land itself, the land must benefit whether it is value or use of i...