Land Law - Covenants Indemnity Notes PDF

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Land Law - Covenants Indemnity Notes suitable for workshops, assignments, lectures and open book exam. Personally used for open book exam. ...

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INDEMNITY The burden of a covenant will not run at common law meaning that future owners of the burdened land will not be bound however the original covenantor will remain liable even after he has parted with his land. This rule was established in the case of Austerberry v Oldham Corporation [1885]. There are several exceptions: 1) A chain of indemnity covenants can be created. Where a piece of land burdened by covenants is sold it is usual for the seller to require that a clause be included in the transfer to the buyer whereby the buyer agrees to indemnify (insure, assure, repay, protect…) the seller against any claims for breach of any of the covenants. The owner of the land which has the benefit of the covenant can still sue the original covenantor for breach of contract however the original covenantor can then sue his buyer on the indemnity. If that buyer has since sold the property and obtained an indemnity from his purchaser then he can sue him and so on down the chain of ownership. In theory a chain of indemnity covenants can continue indefinitely however in practice it will come to an end either on the disappearance of the original covenantor or where the chain is broken (by a transfer taking place that does not incorporate an indemnity covenant). 2) The rule in Halsall v Brizell [1957], also known as the doctrine of mutual benefit and burden, states that a person cannot continue take the benefit of a deed without subscribing to the obligations under it. What this means is that if a deed grants the owner of a property the right to, for example, use a private road but the same deed also contains a covenant to contribute toward the cost of the upkeep of the road then the owner cannot exercise the right to use the road without contributing to its upkeep. 3) The burden of covenants contained in a lease will generally run therefore granting a lease out of the freehold title instead of simply conveying the freehold title is a useful way to ensure the covenants remain enforceable. 4) An estate rentcharge can be imposed, whereby the owner of the property is obliged to contribute an annual sum toward the repair and maintenance of shared facilities. If this is coupled with a right of re-entry for non-payment this ensures the covenant to contribute should not be breached.

Indemnity Insurance for Breach of Covenant Where a covenant has been breached, it appears still to be binding, it is not possible or practical for it to be removed or modified and nor does the rule in Hepworth v Pickles [1900] apply then it may be possible to obtain indemnity insurance. Indemnity insurance provides cover against loss sustained by the insured as a result of a legal risk. In the case of a breach of covenant, this means the insured would be compensated against loss, such as loss of value to his property, the costs of remedial works or the cost of legal action, should the beneficiary attempt to enforce the covenant. Unlike a standard insurance policy, the premium is payable just once and that generally provides cover, for the homeowner, his mortgage lender, successors in title of the homeowner and successive mortgage lenders for the life of the property. Premiums are charged on a sliding scale depending on the value of the property. At the time of writing for properties under, say, £500,000 the premium would be somewhere between £100 – £250.

Indemnity insurance is frequently used in conveyancing as the practical requirements of the seller and buyer often don’t allow time for an application to the Lands Tribunal, which may take several months to be determined and even then may not be successful. Indemnity insurance can only be arranged by solicitors or licensed conveyancers, insurers are not permitted to deal directly with the public. In order to agree to offer cover, the insurer will need the conveyancer to confirm that certain conditions are met. Usually they are that the breach has continued for at least 12 months, the property has been used for residential purposes for the last 12 months and will continue to be so used and there is no evidence of enforcement action being taken. If these points are satisfied an “off the shelf” policy can be obtained online without the need for assessment by an underwriter. If they are not, and even where insurance is required in respect of a contemplated future breach, then it may still be possible to obtain a bespoke policy, though the premium will generally be higher.

Miles v Easter Facts: Company S bought some land and mortgaged it to a bank. They later sold a part of this land to B. As part of the sale of land, there was a deed which contained restrictive covenants to not do anything on the land that might be a nuisance to the vendors, nor to construct a pub or hotel on the property. This was applicable to B and to subsequent owners of the land. The plaintiff later received the title of the land via the executors of B’s will, after B had died. Later, the defendant bought land from Company S and subsequently conveyed this to fifteen people. The defendant later sought to enforce the restrictive covenants and appealed the decision of the trial judge who prevented this at the first instance. Issue: The court was required to establish whether the covenant from the earlier conveyancing was annexed to the plot of retained land, a portion of the land or not to any of the lands in question. This would allow the court to establish whether the restrictive covenant could be considered as enforceable by the defendants against the plaintiff. In doing this, it was important for the court to establish whether the benefit of the covenant had been expressly assigned to the plaintiff. Held: The Court of Appeal affirmed the original decision of the trial judge and dismissed the appeal. The court held that the defendants could not enforce the restrictive covenants against the plaintiffs as there was no evidence that the benefit of the restrictive covenant had been annexed to the plaintiff’s land....