Covenants

Question 1

Determining the nature of a covenant

Answer 1

The test for identifying whether a covenant is positive or restrictive is set out in Haywood v
Brunswick Permanent Benefit Building Society (1881) 8 QBD 403.
This is known as the ‘hand in pocket’ test.
If covenantors have to put their hands in their pockets to find money to spend to comply with the
covenant, it is positive.
Time is money’ so any covenant which requires expenditure of money, effort or time falls within
the definition of positive covenants.
Deciding whether a covenant is positive or restrictive is a matter of looking at the substance not
form: look beyond the words used and ask: ‘what is the essence of the obligation?’

Question 2

Mixed covenants

Answer 2

• A mixed covenant has positive and restrictive elements.
• It may be possible to split a mixed covenant into two separate covenants.
• If it is not possible to split the covenant, it will be viewed as either overall positive with a
  restrictive condition attached, or as overall negative with a positive condition attached.

Question 3

The general rule

Answer 3

As a general rule, the burden of a covenant does not pass to a successor at common law:
Austerberry v Oldham Corporation [1885] AC 29 ChD 750. This decision was followed for over
100 years and was confirmed by the House of Lords in Rhone v Stephens in 1994.
This means that at common law the covenant is unenforceable against a successor in title to the
covenantor and the covenantee or the successor covenantee is unable to enforce the covenant
against the person who has breached it.

Equity has developed rules which allow the burden of certain covenants to pass to successors,
which allows the covenant to be enforced direct against the person in breach.
The equitable rules began with the case of Tulk v Moxhay (1848) 2 Ph 774, and have developed
into what is known today as the rule in Tulk v Moxhay.

Question 4

The covenant must accommodate the dominant tenement

Answer 4

There are three aspects to this second rule:
(a) The covenantee and successor covenantee must hold an interest in land at the time of
creation and enforcement.
(b) The covenant must touch and concern the land.
(c) The dominant land and the servient land must be in proximity.

Question 5

There must be intention for the burden of the covenant to run

Answer 5

This intention can be shown in two ways:
* Expressly: the covenant is worded in such a way as to make it clear that successors are to be
bound:
‘X hereby covenants with B for themself and their successors in title to land known as […]’ or ‘X
hereby covenants with the intention of binding land known as […]’
* Impliedly: LPA 1925, s 79 states that a covenant relating to land shall be deemed to be made
by the covenantor on behalf of its successors in title, unless a contrary intention is expressed.
The impact of LPA 1925, s 79 is that there will always be implied intention unless the covenant is
drafted in such a way to exclude it eg ‘X hereby covenants on behalf of itself only…

Question 6

There must be notice of the covenant

Answer 6

Whether the successor covenantor is deemed to have notice of the covenant depends on whether
it has been properly protected by registration.
3.5.1 Registered land
The covenant must be protected by the entry of a notice in the charges register of the servient
title (LRA 2002, s 32).
3.5.2 Unregistered land
The covenant must be protected by a Class D(II) Land Charge.
In either case, if not done, a purchaser for value of the burdened land will not be bound, but a
volunteer (or donee) (ie someone who inherits of is gifted the estate) would be.

Question 7

Equitable rules: Benefit

Answer 7

If a successor covenantee wishes to enforce a breach against a successor covenantor direct, two
things must be shown:
* That the burden of the covenant has passed to the successor covenantor in equity; and
* That the benefit has passed to it in equity.
It is not enough to show that the burden has passed in equity and the benefit passes at common
law. If an equitable remedy is required, both the benefit and burden must pass in equity: the rules
go hand in hand.

Question 8

Passing the benefit in equity

Answer 8

There are two elements which must be fulfilled for the benefit to pass in equity:
(a) The covenant must ‘touch and concern’ the dominant land; and
(b) The benefit must pass by one of the methods recognised in Renals v Cowlishaw (1878):
(i) Annexation;
(ii) Assignment; or
(iii) A building scheme.
Note. See above for a reminder of what it means for a covenant to ‘touch and concern’ the land.
You may have already established the covenant does touch and concern the land when passing
the burden using Tulk v Moxhay.

Question 9

Equitable rules: Benefit

Answer 9

If a successor covenantee wishes to enforce a breach against a successor covenantor direct, two
things must be shown:
* That the burden of the covenant has passed to the successor covenantor in equity; and
* That the benefit has passed to it in equity.
It is not enough to show that the burden has passed in equity and the benefit passes at common
law. If an equitable remedy is required, both the benefit and burden must pass in equity: the rules
go hand in hand.

Question 10

Passing the benefit in equity

Answer 10

There are two elements which must be fulfilled for the benefit to pass in equity:
(a) The covenant must ‘touch and concern’ the dominant land; and
(b) The benefit must pass by one of the methods recognised in Renals v Cowlishaw (1878):
(i) Annexation;
(ii) Assignment; or
(iii) A building scheme.
Note. See above for a reminder of what it means for a covenant to ‘touch and concern’ the land.
You may have already established the covenant does touch and concern the land when passing
the burden using Tulk v Moxhay.

Question 11

Annexation

Answer 11

This occurs when the covenant is made in such a way that the benefit becomes a permanent part
of the dominant land itself.
It therefore passes automatically when the dominant land is sold, without being specifically
mentioned in the transfer deed.
Annexation occurs in one of two main ways:
* Express annexation; and
* Statutory annexation (LPA 1925, s 78).

Assessment focus point
Think of annexation like ‘legal glue’. It occurs at the point of creation of the covenant and if
done, means the benefit will automatically pass each time the dominant land is sold. Always
look for evidence of express annexation first!

Express annexation
This occurs where the express words of the covenant make it clear that the original parties intend
the benefit to become part of the dominant land, rather than simply a personal advantage to the
covenantee.
Example: Express annexation
In Rogers v Hosegood [1900] 2 Ch 388 a covenant made ‘for the benefit of the owners and
successors in title’ to named land was enough to demonstrate express annexation. However, in
Renals v Cowlishaw, a covenant stated to be made with the covenantees, their heirs, executors
and assignees was not enough to show express annexation because the benefit was stated to be
for people, not for land.

Statutory annexation
If there is no evidence of express annexation in the wording of the covenant, consider if statutory
annexation will apply.
LPA 1925, s 78(1) as interpreted in the case of Federated Homes v Mill Lodge Properties Ltd [1980]
1 WLR 594 provides that a covenant relating to any land of the covenantee shall be deemed to be
made with the covenantee and its successors in title of the land intended to be benefitted.
The effect of this interpretation of LPA 1925, s78(1) is to make annexation automatic unless it is
excluded. Annexation can be excluded expressly, in the wording of the covenant, or impliedly if an
alternative method for passing the benefit is stipulated in the transfer deed.

Question 12

Assignment

Answer 12

This occurs where the benefit of the covenant has not been annexed at the outset. The benefit can
nevertheless be assigned when the dominant land is transferred. As the benefit exists separately
from the land itself, it is treated as a separate interest in the land and must be transferred every
time the land is transferred.
The separate assignment of the benefit must comply with the formalities in LPA 1925, s 53(1)(c): in
writing and signed by the person transferring the benefit.

Question 13

Building scheme

Answer 13

When a new housing estate is built, all houses are sold subject to the same covenants. New
owners who wish to enforce a covenant against a neighbour may struggle to show that the
benefit of a particular covenant has passed to them.
Building schemes resolve this problem relating to restrictive covenants only.
If the conditions of a building scheme are met, the covenants are treated as a set of by-laws
enforceable by and against all owners. It is not necessary to show specifically that the benefit of a
particular covenant has passed to a claimant.
The conditions of a building scheme are set out in Ellison v Reacher [1908] 2 Ch 374:
(a) All buyers buy from the same seller;
(b) The seller divided the estate into plots;
(c) The covenants were intended to benefit all plots; and
(d) Each buyer buys on the understanding that the covenants are intended to benefit all plots.
Later cases have interpreted these rules as guidelines rather than strict requirements.
A court will need to be satisfied that it was the intention of the parties to create a scheme of
mutually enforceable obligations.

Question 14

The position of the original covenantee

Answer 14

When dominant land is sold, the original covenantee technically still has the benefit of the
covenant and can sue on it. This is based on contractual principles.
However, it is highly unlikely that an original covenantee would wish to enforce a covenant in these
circumstances.
Even if action was taken, it is hard to envisage any loss which could be suffered by an original
covenantee who no longer owns the dominant land.
For example, a covenant not to build on servient land is of no value to a covenantee once the
dominant land is sold. A breach of the covenant causes the original covenantee no loss.

Question 15

Remedies

Answer 15

Where the successor covenantee can show that the benefit of the covenant has passed to it, and
that the burden has passed to the successor covenantor, it can enforce the covenant direct
against the successor covenantor who is in breach.
As a restrictive covenant is an equitable interest in land, equitable remedies are available to
enforce the breach against the current owner. However, equitable remedies are discretionary,
there is no automatic right to them.
90 Land Law
4.6.1 Injunction
The most common remedy for breach of covenant is an injunction.
Typically, if the breach is threatened or ongoing, the claimant can apply for a prohibitory
injunction, ordering the breach to cease.
If the breach has already occurred, the claimant can apply for a mandatory injunction, ordering
the person in breach to do something.
Example
If a servient owner is using the burdened land for an unauthorised use, or is building in breach of
covenant, a prohibitory injunction would be appropriate.
If a building has been built in breach of covenant, a mandatory injunction, ordering the
demolition of the building, may be appropriate.
An injunction, like all equitable remedies is awarded subject to general equitable principles and
maxims. For example, the maxim ‘delay defeats equity’ means a claimant must not wait too long
before applying for an injunction.
A claimant who wishes to apply for an injunction in respect of building work being carried out in
breach of covenant must act immediately. If the claimant waits until the building is complete and
then applies for a mandatory injunction to knock the building down, the application is likely to be
refused.
Equitable damages are not awarded as of right. They may be awarded in lieu of an injunction, as
an injunction may be refused where it would be oppressive to grant it.
Key case: Wrotham Park Estate Co Ltd v Parkside Homes [1974] 1 WLR 798
Facts: There was a breach of covenant not to develop land without approval.
Held: The court refused to grant a mandatory injunction to demolish the houses built in breach of
covenant. It said that it would be ‘an unpardonable waste of much needed houses’ to do so.
Instead, it awarded equitable damages. The court did not award damages to reflect to the loss in
value to the dominant land (which was nominal). Instead, it awarded damages calculated as a
percentage of the profit made by the developer. This reflected the amount which would
theoretically have been paid to the owner of the dominant land to secure a release from the
covenant.

Question 16

Common law rules: burden and indirect enforcement

Answer 16

Remember, at common law the covenant is unenforceable against a successor in title to the
covenantor because of the general rule that the burden will not pass.
For this reason, it is always worth considering if you can pass the burden of the covenant using
the equitable rules first.
Assessment focus point
As the burden of restrictive covenants can pass using the equitable rules, the common law
rules are primarily applied to covenants that are positive in nature.

Question 17

Continuing liability of the original covenantor

Answer 17

The effect of the general rule is that at common law, a successor covenantor cannot be sued.
However, the burden of a covenant does not disappear. It remains with the original covenantor
permanently. This is known as ‘the continuing liability of the original covenantor’. This means
that it is the original covenantor who has the burden of the covenant and can be sued for both its
own breaches and the breaches of its successors.
This continuity is often found expressly stated in the wording of the covenant. This can be stated
in a variety of ways, but common examples are:
* ‘the covenantor covenants for itself, its successors in title and all those deriving title under it to
maintain the boundary fence […]’;
* ‘the covenantor covenants that it and its successors in title will maintain the boundary fence […
]’; or
* ‘the covenantor covenants with the intention of binding land known as 9 Main Street to
maintain the boundary fence […]’.
If there is no express wording in the covenant itself, LPA 1925, s 79(1) has been held to imply such
wording.

Question 18

Remedies

Answer 18

The only remedy available against the original covenantor is damages. This is because the original covenantor is no longer in possession or control of the land.

Question 19

Indemnity covenant

Answer 19

The original covenantor may be able to recover any outlay it has to pay out for a breach by a
successor if it has an indemnity covenant.
Indemnity: An indemnity is a primary obligation and is an agreement by one party to bear the
cost of certain losses or liabilities suffered by another party in certain circumstances.
Figure 4.10: Indemnity covenant
As part of the sale process, the original covenantor (the seller) should require its successor (the
buyer) enter an indemnity covenant promising to comply with the covenant and to indemnify
(reimburse) it for any loss incurred as a result of a breach. An indemnity covenant should then be
sought each time the burdened land is sold. This creates a chain of indemnities to the current
owner.
An indemnity covenant enables the original covenantor to sue their direct successor only, but if
there is a complete chain of indemnity to the current owner in breach, it works as a method of
indirect enforcement.
There must be a complete chain of indemnity for indirect enforcement to work.
There may be a complete chain, yet indirect enforcement fails if a party dies or is made bankrupt.
A chain of indemnities is therefore only as strong as its weakest link.
Assessment focus point
An indemnity covenant does not pass the burden of the covenant and it does not enable the
current owner to be sued by anyone except their predecessor in title.

Question 20

Common law rules: the doctrine of mutual benefit and burden

Answer 20

As you know, the general rule is that the burden of a covenant does not pass to a successor at
common law.
This means that at common law the covenant is unenforceable against a successor in title to the
covenantor.
The burden remains with the original covenantor who can be sued for damages.
There is, however, a limited exception to the general rule enabling the burden of a covenant to
pass to a successor covenantor at common law. It is known as the ‘doctrine of mutual benefit and
burden’.
Assessment focus point
The doctrine of mutual benefit and burden is also known and referred to as ‘the rule in Halsall
v Brizell’.
Key case: Halsall v Brizell [1957] Ch 169
Halsall v Brizell enables the burden of a covenant to pass to a successor covenantor at common
law where the covenantee grants to the covenantor a benefit in the nature of an easement, and
imposes a connected burden.
Facts: A transfer deed relating to a plot of land granted rights of way and drainage over private
roads and drains. In the deed, the original purchasers covenanted to contribute to the cost of
maintaining the roads and drains. A successor covenantor relied on the common law rule that a
burden does not pass, and refused to pay, whilst still enjoying the benefit of the easements.
Held: The court held that the successor covenantors could not take the benefit (ie the rights of
way and drainage) without submitting to the burden (ie the obligation to contribute to the costs of
maintenance). Only if the successor covenantor is happy to relinquish the benefit, the burden
cannot be enforced. The liability is conditional.

Question 21

The three conditions that must exist

Answer 21

Rhone v Stephens [1994] 2
AC 310
There must be a clear link between the burden and the benefit.
There is no general principle that someone who takes a benefit
under a deed must submit to any burden which it imposes.
Thamesmead Town Ltd v
Allotey (1998) 3 EGLR 97
There must be a genuine choice as to whether or not to take the
benefit. This choice can be theoretical.
If there is no real choice but to take the benefit, then the normal
common law rule applies and the successor covenantor does not
take the burden.
Davies v Jones [2009]
EWCA Civ 1164
The benefit and burden must have been conferred in the same
transaction

Question 22

Other ways of enforcing covenants: grant of long lease

Answer 22

One way of side-stepping the rule that the burden of a freehold covenant will not pass to a
successor covenantor is to dispose of the land by way of long lease.
All covenants in leases except personal ones are enforceable by and against successors in title via
the doctrine of privity of estate

Question 23

Common law rules: benefit

Answer 23

The original covenantee can enforce a covenant as a matter of contract law.
If the dominant land is sold, the successor covenantee must show that the benefit has passed to it
at common law.
This enables the successor covenantee to enforce the covenant either against the original
covenantor, or (in limited circumstances if the doctrine of mutual benefit and burden applies)
against the successor covenantor.
There are two ways the benefit can pass at common law:
(a) Express assignment; or
(b) Implied assignment

Express assignment
Under normal contractual principles, the benefit of a covenant can be expressly assigned to a
successor.
LPA 1925, s 136 requires the assignment must be in writing and express notice of the assignment
must be given to the covenantor. This is to ensure that the covenantor realises that a new person is
in a position to enforce the covenant.

Question 24

Implied assignment

Answer 24

Where there is no express assignment, the benefit of a covenant may pass to a successor
covenantee if certain conditions are met. This involves the benefit automatically passing every
time the land is transferred, as long as the conditions are met. The conditions of implied
assignment are set out in the case of P&A Swift Investments v Combined English Stores Group
plc [1989] AC 632.
Figure 4.15: The conditions of implied assignment
7.2.1 The covenant must touch and concern the land
The covenant must benefit the dominant land itself, it must affect the nature, quality, use or value
of the land. It must not be expressed to be personal and should only benefit the dominant owner
for the time being, so that, if separated from the land, it ceases to be of any advantage to them.

There must have been an intention that the benefit should run with the dominant land
Intention of the parties can be shown expressly or impliedly through statute.
If there is no express intention, LPA 1925, s 78 implies an intention for the benefit to pass unless it
is expressly excluded.

The original covenantee must have owned a legal estate when the covenant was
made, and that the successor must own a legal estate at the time of enforcement
The legal estate does not need to be of the same nature: Smith and Snipes Hall Farm Ltd v River
Douglas Catchment Board [1949] 2 KB 500.
In that case the original covenantee held a freehold and the successor held a leasehold. The
successor was held to be entitled to the benefit of the covenant and could therefore enforce it

Question 25

The problem with old covenants

Answer 25

Restrictive covenants, once validly granted, last forever. Over time, these can become obsolete
and can unduly restrict the use of the servient land.
For example, a covenant not to build on land might have benefitted the dominant tenement whilst
that land was used for residential purposes, but no longer does if the dominant land is now a
factory.
There are various ways in which a covenant can be discharged or modified.
Discharge: Discharge of a covenant means that it is no longer valid.
Modification: Modification of a covenant means that the scope of the covenant is altered, but
it is not completely invalidated.

Question 26

Methods of discharging/modifying covenants

Answer 26

A covenant will automatically be discharged if the same person becomes the owner of both the
dominant and servient land (Re Tiltwood, Sussex [1978] Ch 269).
This is known as merger.
A dominant owner may expressly agree to discharge the covenant and will enter into a formal
release of covenant, usually in return for a payment. The release must be made by deed.
Alternatively, the dominant owner may impliedly agree to discharge the covenant by doing
nothing when the covenant is being breached openly.

Question 27

Statutory discharge or modification of covenants

Answer 27

The dominant owner could hold the servient owner to ransom by asking for a large sum of money
to discharge an obsolete covenant.
To avoid this, the servient owner can apply to the Upper Tribunal (Lands Chamber) for the
discharge or modification of any covenant.
LPA 1925, s 84(1) gives the Lands Chamber the power ‘wholly or partially to discharge or modify
any […] restriction’.
Note. This provision only applies to restrictive covenants!
Section 84(1) sets out the grounds on which the Lands Chamber can discharge or modify a
covenant.
If the Lands Chamber discharges or modifies a covenant it may require compensation to be paid
to the owners of the dominant land.

Section 84(1)(a): Obsolete due to changes in the character of the property or
neighbourhood
A servient owner may apply to the tribunal for a declaration to discharge or modify a covenant on
the basis that the covenant has become obsolete due to changes in the character of the property
or neighbourhood.
For example, a covenant to use property only as a residence may be obsolete if the surrounding
area is now business, retail of mixed use.
8.3.2 Section 84(1)(aa): Its continued existence impedes the reasonable use of the land for
public or private purposes
An application can be made on the basis that the covenant impedes reasonable use of the
servient land. The applicant must show either that the covenant confers no practical value, or that
it is contrary to public interest.
4: Freehold covenants 99
The tribunal must be satisfied that financial compensation would be adequate for the dominant
owner.
For example, a covenant restricting the density of houses on a plot may confer no practical value
on the dominant land if that land is itself densely developed.
8.3.3 Section 84(1)(b): The dominant owners expressly or impliedly agree
This section applies where the dominant owners have agreed, expressly or impliedly, to discharge.
For example, an application here may be appropriate where the parties have expressly agreed a
release in principle, or where the dominant owner has tolerated a long-term breach. In this
instance, the tribunal will decide the level of compensation to be paid, thereby preventing the
dominant owner holding the servient owner to ransom.
8.3.4 Section 84(1)(c): The dominant owners will not suffer injury
This section enables an application to be made where discharge of a covenant will not ‘injure’ the
dominant owners.
This provision means that the tribunal can override spurious or frivolous objections.
However, the tribunal has a balancing act to do; it will be wary of discharging covenants on this
basis simply because discharge will not injure the current dominant owner and it will have regard
to social and economic concerns: the wider public interest rather than the interest of one
dominant owner.