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Freehold covenants ESSAYS

CONSIDER THE EXTENT TO WHICH THE COA DECISION IN FEDERATED HOMES HAS SIMPLIFIED THE LAW RELATING TO PASSING OF BENEFITS OF RESTRICTIVE COVENANTS WITH FREEHOLD LAND: Freehold covenants are a promise made in a deed and is enforceable as a contract between covenantor and covenantee regardless whether there was consideration. Each covenant has a burden and a benefit. The covenantor carries the burden as he is making the promise and covenantee the benefit. It is a proprietary interest in land, section 1 of the LPA 1925. The Law Commission has proposed that certain types of covenant should become enforceable as legal proprietary interests affecting the land and this would require Section 1 LPA 1925 to be amended. Under Common Law, the only remedy available are damages. However, under Equity there are variety of remedies available such as specific performance and injunction. The original covenantee has the benefit of the covenant and may enforce it as a matter of contract. He has the right to sue for performance of the covenant and may be awarded damages, injunction or a decree of specific performance. Equity is not strict as common law and therefore in some circumstance’s burdens do run with the land in equity. Nature of the covenant comes in in two ways. There is a covenant that is positive in nature that requires an act by the covenantor or negative in nature, that it restricts the owner of the land from doing something on his land. Whether it is restrictive or positive it depends on the substance and not how it is worded Holland Park v Hicks. Under both common law and equity there are rules of running of burdens and benefits. In Law, generally burdens do not run. However, there is an exception to this rule Rhone v Stephens, Austerberry v Oldham. The exception to the rule is that only positive covenants can run, restrictive covenants will not run. We have two rules here, the rule in Halsall v Brisell and unbroken chain of indemnity. Hallsall v Brisell applies when a person is benefiting from the right that is being claimed, so therefore, he should also take on its burden. According to Martin Dixon, the burden must be the flipside of the benefit. The benefit and burden must be linked. However, this will only work if the covenantor has a choice of taking the benefit or not, Thamesmead v Allotey. The next rule however applies when you accept to take on the burden. If you chose to take the burden that you will take the burden. Benefits on the other hand has 4 requirements to satisfy. The first requirement is that the covenant must touch and concern the land, LJ Oliver in Swift investment came out with 3 questions to ask when looking at whether the covenant touch and concern land. The first question is whether the covenant can burden any owner of the land as opposed to the original covenantor. The second question whether the covenant affects the nature, quality, value or mode of user of the land and the final question is whether the covenant has been expressed to be personal? These needs to be fulfilled in order for the land to touch and concern land. The second requirement for the benefit to pass is whether there was an intention that the benefit pass to the subsequent occupier. Section 79 Law property Act 1925 presumes such an intention unless there is contrary intention. The benefit of the covenant may be annexed by virtue of section 78 lpa 1925 as discussed by federated homes v mill lodge properties, Whitgift v stocks, and Crest Nicholson. According to the court of appeal in federated homes, section 78 has the effect of statutorily annexing the benefit of every covenant both positive and negative to each and ever part of the benefited land. the only conditions are that the land is capable of benefiting from the covenant and that the land can be easily identified from the deed of covenant itself. Mcallister was seeking to enforce

Property exam notes

Freehold covenants ESSAYS

covenants that had not been expressly annexed and Chadwick LJ was faced with the puzzle posed by Federated homes. His lordship applied the test put forward by Marquess and decided that in order for statutory annexation to apply the deed must describe the land in such a way that it is easily ascertainable from the covenant. In practice the outcome of Federated homes is that unless a contrary intention is shown the benefit of most covenants will now be annexed to the covenantee’s land and be available to a purchaser of it provided that the covenant itself identifies the land in a way that the benefited land is easily ascertainable, Holland v Park. As an alternative to annexation, it is possible for the benefit of a covenant at law to be assigned expressly to another person. This is the assignment of a chose in action within section 136 LPA 1925 and must be in writing, with written notice being given to the covenantor. It is of course unnecessary if there has been express annexation. The third requirement is whether the original covenantee have held a legal estate at the time the covenant was made, and the final requirement is where the subsequent covenantee must have derived title from the original covenantee. Overall these are all the requirements for Benefits to run in Law. On the other hand, under Equity Tulk v Moxey, restrictive covenants bind anyone that comes onto the land. it includes people who are on the land illegally. But there are four conditions for the burden to run. The first requirement is that the covenant must be a restrictive covenant in nature. It cannot be positive. This is what distinguishes equity from Law, because in Law, burdens of restrictive nature cannot run. The second requirements are that again the covenant must touch and concern land, Swift Investment. The third requirement is where the covenant must have been imposed to benefit the land of the original covenantee and not the original covenantee himself. This means that the covenant must benefit the land, and not the covenantee only. The final requirement is where the burden of restrictive covenant must be intended to run with the land, Section 79 LPA 1925, assumes this intention unless proven contrary. It can be seen from the above that for burdens intention, section 79 LPA 1925 will apply however for Benefits section 78 LPA will apply for the question as to whether has been intended to run with the land. On the other hand, for a restrictive covenant to be registered a notice must be entered onto a register. If it is not registered, it will lose its priority and cannot be enforced against a purchaser, Section 29 LRA 2002. On the other hand, passing of benefits in equity are slightly easier to satisfy than those needed to pass the benefit at law. The benefit of both positive and restrictive covenants may pass at law and in equity although the fact that only the burdens of restrictive covenants may pass means that if the original covenantor has parted with the land, only restrictive covenants are likely to be in issue. Other than that given again that only the burden of restrictive covenants may pass and then only in equity, in practice the claimant usually pleads that the benefit has also passed in equity, gafford v graham. This means that the passing of benefit of covenants at law and passing of benefit of positive covenants are relevant in practice only when the claimant is suing the original covenantor as this is the only person liable in such circumstances. The conditions for the benefit to pass in equity are as follows. Again, the covenant must touch and concern land. other than that, there are 3 ways in which

Property exam notes

Freehold covenants ESSAYS

transmission of benefit to the claimant must have been made. Its either through assignment, annexation or building scheme. As a general rule a benefit of any contract may be assigned expressly to another person. This need not necessarily attach itself to the land meaning the benefit can be given to someone who is not currently the owner of the land. Building scheme on the other hand is where every participant in the building scheme will get the benefit even though they did not sign an agreement. The requirements are found in Elliston v Reacher. Finally, with regards to Annexation, this is where in the sales and purchaser agreement all the benefits will run to the purchaser. However today as a result of Federated homes v Mill Lodge Properties, the effect of section 78 LPA 1925 is to automatically annex all benefits of the covenant to the covenantee’s land. It is to be noted that section 78 did not expressly say this but this case has interpreted this as when a person sells his land there is no need to care about whether it is express or implied annexation because we have statutory annexation, and this is today’s accepted law. However, if there was an express contrary intention, then this will not apply, ROAKE V CHADHA. Brightman LJ in Federated Homes makes it clear that the effect of section 78 is to annex automatically the benefit of the covenant to the covenantee’s land. again, of course the land must be readily identifiable from the deed itself as explained in Crest Nicholson and capable of benefiting from the covenant but if these conditions are satisfied the benefit of the covenant is annexed to each and every part of the land. it will therefore be available to a purchaser of the whole or any part of it. This statutory annexation can be avoided by an express contrary intention. The effect of Federated Homes is to ensure that the benefit of a covenant passes where the parties have failed to draft the covenant clearly to ensure express annexation unless this failure is thought to be a deliberate measure to prevent annexation.

STRUCTURE FOR A QUESTION 1. Explain the legal issue – “the land has changed hands putting Lana in breach” 2. Define terms – who is the covenantor / covenantee / SiT 3. Explain which covenants have been breached and how 4. Cover the rules for the formalities, covenants properly acquired? S53 (1) (a) deed 5. Can enforce direct IF benefit and burden have passed 6. Rules in equity and equitable remedies – burden doesn’t pass under common law 7. Benefit in equity (only for negative covenant) 8. Remedies (what are available) and conclude 9. Burden under common law (positive) – fail in Tulks v Moxhay – if fails then original covenantor remains responsible 10. Benefit under common law – explain how 11. Remedies (only damages under common law) the conclude

What are the circumstances in which the benefit of a freehold covenant will run with the land? Did the decision in the case of Federated Homes Ltd v Mill Lodge Properties Ltd (1980) fundamentally alter the law in this area?

Property exam notes

Freehold covenants ESSAYS

As an introduction, you may wish to briefly explain what a freehold covenant is and the fact that it has a duel aspect of a burden and a benefit. Identify that the transmission of each is governed by separate rules. Identify the circumstances where it will be necessary to see if the benefit of a freehold covenant has passed. Key focus will then be upon the circumstances in which the benefit of a covenant will run with the land. Remember to make the distinction between the rules in equity and the rules at common law. Perhaps it would be advisable to reflect upon the difference between passing the benefit of a covenant on to a successor of the dominant land personally (through assignment for example (s 136 LPA 1925 at common law; Miles v Easter (1933) in equity)) and attaching the benefit of a covenant to the dominant land itself so that any subsequent successor of that land may benefit from it (annexation in equity; P&A Swift Investments Ltd v Combined English Stores Group plc (1989) at common law. The wording of the question appears to focus upon the latter method of transmission? Explain the requirements for passing the benefit of a covenant at common law. Consider the methods of annexing a benefit of a covenant to the land in equity. Particular focus should rest upon statutory annexation following the Federated Homes Ltd v Mill Lodge Properties Ltd (1980) interpretation of s 78 LPA 1925. You should critically analyse the difference, if any, this decision made to the passing of the benefit of a covenant. Has it, for example, made other methods of passing the benefit redundant? Is it as far reaching in its application as was once first thought? Key authorities here include Brightman LJ in Federated Homes Ltd; Roake v Chadha (1984); Crest Nicholson Residential (South) Ltd v McAllister (2004); 89 Holland Park (Management Ltd v Hicks (2013). Draw final conclusions....