4. Freehold Covenants

Question 1

What is a freehold covenant?

Answer 1

a promise to do or not to do something with respect to land

Question 2

What is the general purpose of a freehold covenant?

Answer 2

To maintain or enhance the value and/or amenity of the land retained by the seller.

Question 3

Is a freehold covenant capable of being legal?

Answer 3

No - equitable by nature.

Question 4

What is the difference between a positive and a restrictive freehold covenant?

Answer 4

Positive: requires some effort/expenditure to perform the obligation
Restriction: no effort/expense

Question 5

What defines whether a freehold covenant is positive or restrictive?

Answer 5

substance of the covenant NOT the wording

Question 6

What are the formalities of creating a freehold covenant?

Answer 6

Can be created by contract but usually created by deed as included in the transfer.

Question 7

Who is the covenantor?

Answer 7

one make the promise + owner of servient land

Question 8

Who is the covenantee?

Answer 8

one who receives the promise + owner of dominant land

Question 9

How can original parties to a freehold covenant be liable forever?

Answer 9

• original covenantor and covenantee are parties to a contract
• original covenantor is bound by privity of contract.
• liability can last forever even if land is sold.

Question 10

In common law, can the burden of a freehold covenant run with the land?

Answer 10

• No
• principle based on contract, which allows the assignment of contract benefits but not the burdens.

Enforcing a covenant against a successor in title would essentially mean trying to enforce a personal obligation against someone who did not originally covenant

Question 11

In equity, can the burden of a freehold covenant be transferred to another party?

Answer 11

Yes - a restrictive covenant only may pass in equity

Question 12

What are the requirements of the running of the burden of a freehold covenant in equity?

Answer 12

The covenant:
1. must be restrictive;
2. must be made to benefit the covenantee’s dominant land;
3. must touch/concern the dominant land;
4. must be made with intent to burden the servient land; AND
5. The servient land owner must have notice of the covenant for it to be binding.

Question 13

What are the ways to enforce a positive covenant against a successor in title to the covenantor - making it binding?

Answer 13

1. create a lease
2. indemnity covenant
3. doctrine of mutual benefit and burden

Question 14

How will the creation of a lease enforce a positive covenant?

Answer 14

Selling land as a leasehold allows positive covenants to be binding on a successor in title to a tenant

Question 15

How will an indemnity covenant enforce a positive covenant against successors in title of the servient land?

Answer 15

• Buyer enters into an indemnity covenant promising to observe positive covenants: AND
• Indemnifying the seller for any loss incurred as a consequence of breach.

Question 16

How is a chain of indemnity covenants created?

Answer 16

Seeking an indemnity covenant of each subsequent buyer of the servient land.

Question 17

What is the effect of having a chain of indemnity in a case of breach of positive covenant?

Answer 17

If an original covenantor is sued for breach, this enables them to sue their successor in the indemnity and so on down the line.

Question 18

How is indemnity covenant an indirect method of enforcement?

Answer 18

• It does not allow the original covenantor to sue the current owner who is in breach
• there is no privity of contract between them

Question 19

How is a chain of indemnities valued and how does this affect the transfer of burden?

Answer 19

• As strong as the weakest link
• If one person in the chain cannot be found/is insolvent, the burden falls on the last person in the chain.

Question 20

What does the doctrine of mutual benefit and burden dictate?

Answer 20

that a person who wishes to take advantage of a service/facility which benefits their land must also comply with any corresponding obligation.

Question 21

What are the two conditions of the doctrine of mutual benefit and burden?

Answer 21

1. burden must be ‘relevant to the exercise of the rights which enable the benefit to be obtained’ - must be a clear correlation between the benefit and the linked
   burden; AND
2. The covenantor’s successors in title must have the opportunity to elect whether to take the benefit (and accept the related burden) or to renounce it (and escape the related burden).

Question 22

What is the effect of ‘the doctrine of mutual benefit and burden’ on enforcing a positive covenant?

Answer 22

• Enables the owner of the benefited land to prevent the exercise of the rights if the costs of maintenance has not been paid
• Not a direct method of enforcement

Question 23

What are the two rules regarding the running of the benefit at common law?

Answer 23

1. Annexation
2. Assignment

Question 24

How does annexation allow for the benefit of a covenant to run with the land at common law?

Answer 24

The original covenantee can enforce a covenant in contract.

The covenantee’s successor can enforce the covenant if:
- covenant touches/concerns land
- an intention for the benefit to run with the covenantee’s estate, expressed or implied.
- covenantee holds a legal estate in the benefited land, not an equitable interest.
- buyer of the benefited land obtains a legal title, even if not identical

Question 25

How does express assignment allow for the benefit of a covenant to run with the land at common law and equity?

Answer 25

• At the same time as transfer;
• in writing signed by the assignor (OG covenantee); AND
• written notice given to person with the burden of the covenant.

Question 26

What are the three rules regarding the running of the benefit in equity?

Answer 26

1. Annexation
2. Assignment
3. Building schemes

Question 27

What is annexation and what are the three methods?

Running of the benefit in equity

Answer 27

Annexation is the permanent attachment of the covenant to the dominant land - enabling any owner of the dominant land to enforce the covenant.

Methods:
1. Express annexation
2. Implied annexation
3. Statutory annexation

Question 28

What are the elements of express annexation?

Running of the benefit in equity

Answer 28

• Covenant expresses intention to benefit a define piece of land
• land to benefit must be identified
• annexation is to the whole of the dominant land, no matter how extensive.

Question 29

What are the elements that must be met for the court to grant implied annexation?

Running of the benefit in equity

Answer 29

Court willing to imply annexation where such annexation:
- was obviously intended; and
- it would be an injustice to ignore that intetion

Intention must be manifested in the transfer as construed in the light of all the surrounding circumstances.

Question 30

What is the effect of statutory annexation and when is it applied?

Answer 30

Effect: s78 LPA 1925 automatically annexes a freehold covenant to each and every party of the land reta8ined by the covenantee.
Application: following criteria must be met -
- covenant must have been created after LPA 1925
- covenant must touch and concern the land.

Question 31

If express annexation is not present, will statutory or implied annexation be considered first?

Answer 31

Statutory annexation should be considered in priority to implied annexation.

Question 32

What is the effect of building schemes?

Answer 32

to impose reciprocal obligations between the buyers of the different plots of the scheme, including positive covenants.

Question 33

What are the characteristics of a building scheme?

Answer 33

• Common ownership is required.
• All lots within the area must have restrictions.
• The common owner must intend for these restrictions to be universal.
• Original buyers must be aware of these restrictions benefiting all lots in the scheme

Question 34

What is matching the benefit and burden?

Answer 34

The passing of the benefit and burden need to match for the dominant land owner to take action.

Question 35

What is the approach of matching the benefit and burden of a restrictive covenant?

Answer 35

The burden of the covenant cannot pass at common law. It may pass in equity if the criteria is met.

When the original covenantee sells the dominant land the successor in title needs to
demonstrate that they have the benefit of the covenant in equity.

This will enable them to pursue a claim (in equity) against the successor in title to the original covenantor

Question 36

What is the approach of matching the benefit and burden of a positive covenant?

Answer 36

• When the original party placing a positive covenant on land (covenantor) sells the land it applies to (servient land), the burden of the positive covenant doesn’t transfer to the successor in title, whether in common law or equity. The original covenantor remains bound by the contract.
• A successor in title to the land that benefits from the positive covenant (dominant land) can hold the original covenantor accountable for breaching the positive covenant if they can demonstrate that the benefit has passed to them under common law.
• The original covenantor may, in turn, seek indemnity from their own successor in title.

Question 37

What are the remedies for breach of positive covenant?

Answer 37

• Damages: can be sought against the original covenantor by the original covenantee or their successor in title if they have the benefit of the covenant at common law.
• Specific performance: compelling the original covenantor to fulfill the obligation, but not available for breach by successors in title to the original covenantor

Question 38

What are the remedied for a breach of restrictive covenant?

Answer 38

1. An injunction - equitable remedy
* to retsrain the breach
* can be applied for in anticipation of breach or in response to an existing breach.

2. Damages only awarded where:
* injury to claiamant’s rights are small;
* capable of being estimated in money;
* can be adequately compensated by money; AND
* it would be oppressive to the respondent to grant an injunction.

Question 39

What are the methods of removing or limiting the effect of a covenant AND which type of convenant do they apply to?

Answer 39

• express release (P&R)
• common ownership (P&R)
• s 84 LPA 1925 (restrictive only)
• insurance (restrictive only)

Question 40

What is the method of express release?

methods of removing or limiting the effect of a covenant

Answer 40

• agreement to release/modify
• deed is required
• payment

Question 41

What is the effect of common ownership?

methods of removing or limiting the effect of a covenant

Answer 41

• servient and dominant land come into common ownership
• covenant will be extingiuished
• AKA unity of seisin

Question 42

What is effect of Section 84 LPA 1925?

methods of removing or limiting the effect of a covenant

Answer 42

application can be made to the Lands Chamber to discharge/modify the part/whole of a covenant.

Question 43

What are the grounds of Section 84 LPA 1925 that must be satisfied AND who is the burden on?

methods of removing or limiting the effect of a covenant

Answer 43

• Burden: applicant
• Grounds: RC is obsolete OR impedes use of land + no practical benefit/public + money is adequate OR express/implied agreement to discharge OR discharge will not injure perons entitled to benefit.

Question 44

What is the effect of insurance?

methods of removing or limiting the effect of a covenant

Answer 44

• insurance policy purhcased for a one-off premium
• if dominant owner(s) seek to enforce the breach of a restrictive covenant, the insurer accepts the financial risks of such action.