Freehold Covenants

The freehold covenant entails both a burden and a benefit in respect of two estates in land held by
different people. It is a proprietary obligation, which was developed by the court of Equity - as the
court of equity could not, in conscience, allow a landowner who bought a land with knowledge it
was affected by a covenant to escape the obligation that was affecting the land, even though it was
created by another person (Tulk v Moxhay)

Definition:
Promises made by deed (‘covenant’) between freeholders’ (or other persons who do not stand in
privity of estate), whereby one party promises to do or not to do certain things on their own land for
the benefit of the neighbouring land.

Example: “A” who is the owner of House #1 promises owner of House #2 not to carry on trade or
business on his land; or not to build above a certain height without first obtaining the agreement of
the owner of House #2.
“A” is the covenantor (where the burden lies - maker of promise), and other person is
covenantee (benefit lies - the person to whom the promise is made).

The covenant may be ‘positive’ in nature too: to build and maintain a fence (Norwich City College
v McQuillin). BUT, such positive covenants are difficult to enforce against people who are not the
original parties to it (original covenantor and covenantee - although the Law Commission has made
a recommendation that such covenants should be made more easier to enforce against later parties
too).

The Nature of Freehold Covenants:

• Covenants are not included in LPA 1925, s. 1 (1) or s. 1 (2), therefore, they can only be equitable,
even though created by “deed”.
• Since a covenant is a promise made in a deed - therefore it must comply with the formality re-
quirements of a deed laid down in s.1 of the Law of Property (Misc Provisions) Act 1989 - and as
such is enforceable as a contract between the covenantor (promisor) and covenantee (promisee)
irrespective of whether contractual consideration is given.

As Gray says:
“the law relating to covenants provides a highly convenient means of adjusting neighbourhood relationships
in such a way as to enhance the optimal utilisation of land”

Passing the Benefit:

There remains no problem of enforcement of any covenant whilst the original parties retain their
land, because they have privity of contract, and therefore, may sue for damages, specific perfor-
mance or injunction.
Once the original covenantee assigns his interest, he can still sue the original covenantor
on his promises, but since he will not suffer any ‘real loss’, any damages will be nominal, if any.
AT LAW:
At common law, the successor of the covenantee cannot sue because he was not a party to the
original agreement. However, we must discuss the implications of s.56 (1) of the LPA 1925.

S.56 of LPA 1925:

‘a person may take…the benefit of any…covenant over or respecting land…although he may not
be named as a party to the conveyance or other instrument’.

It is argued that all this provision does is remove the need for the party to be named expressly.
However, s.56 only benefits a person who is both: in existence and identifiable at the date of
covenant. A person, who acquires the benefit under s.56 may pass it to his successors in title by
annexation or assignment (it technically makes him a covenantee).

Re Shaw’s Application:
Original owner, O, converted large house into 2 flats. Both flats were subject to covenant for the
benefit of owner of each other and their successors. Flat 3 was sold later on, with the covenant that
no alteration can be made unless you get it approved from ‘the vendor or its successors in title, the
owner and occupies of adjoining properties’. Flat 3 proposed some plans - Flat 1 and 2 owners re-
jected. Flat 3 owner said they cannot rely on benefit, because the benefit was not annexed to the
land, nor was there any assignment of it.
HELD: The objectors (Flat 1 and 2 owners) could rely upon covenant, because they were referred
to generically in the conveyance. Flat 1 and 2 were the only adjoining properties to Flat 3, and
therefore, must be the properties referred to for the purposes of s.56 (1).

Re Ecclesiastical Commissioners for England’s Conveyance:

What is necessary to consider is ‘the true construction of the conveyance…in order to ascertain
whether the persons, not parties thereto, are described therein as covenantee(s), and whether any
such covenants are expressed to affect any property’

White v Bijou Mansions Ltd:

‘Under s.56…only that persons can call it in who, although not named as party in original agree-
ment, is yet a person to whom that conveyance or instrument purports to grant something or with
whom some agreement or covenant is purported to be made…’

Drive Yourself Hire Co v Strutt:

Lord Denning (obiter): Too narrow an interpretation should not be placed on S.56 as proposed in
White v Bijou Mansions. Instead, the covenant is sufficiently made “with” a person, if it is, on the
face of it, made directly for his benefit in such circumstances that it was intended to be enforceable
by him’.
Armstrop Training v Harris:
A sub-tenant, H, covenanted with the tenant that ‘it shall be lawful for the superior landlords and
the landlords…to enter and repair at the cost of the sub-tenant’. However, when A (the super land-
lord) made some repairs, H, refused to pay. A relied on s.56 saying that the covenant intended to
benefit A
HELD: Not enough that must was made for A’s benefit, must purport to be made with A. On this
construction, A’s claim failed.
Contract (Right of Third Party) Act 1999:

SUCCESSORS:
In order for the successors to claim benefit, they need to show that the covenant ‘runs with the
land’. In order to run with the land, both the burden and benefit needs to pass. As equity follows the
law, we’ll start with common-law rules:

IN LAW:
The benefit of covenants, whether positive or negative, runs with the land of the original covenan-
tee. The liability of original covenantor remains to original covenantee and his successors, even
when he no longer owns the land (but of course, since the ‘loss’ will be less, damages may be min-
imal).
The rule is that the covenantee must have a land that is to be benefited (Smith & Snipe Halls Farm
v River Douglas Catchment Board), but the convector need not have any land, as in The Prior’s
Case, where the covenant to sing in covenantee chapel was upheld.

1. Convenant must touch and concern the land:

1. ‘It must either effect the land as regards the mode of occupation, or it must be such as per se,
and not merely from collateral circumstances, affects the value of land’ - Snipes Hall Farm
(touch & concern is the equivalent of ‘accommodate the land’ in easement)

2. There must have been, at the date of covenant, an intention that the benefit of it should
run with the land of the covenantee:
1. Words to this effect will prove necessary intention
2. Snipes Hall Farm: This condition was satisfied by the inclusion in deed of conveyance the ex-
planation of the purpose of the covenant, which was ‘to improve the drainage of land liable to
flooding and prevent future flooding’.
3. S.78 (1) LPA 1925: provides that ‘A covenant relating to the any of the covenantee shall be
deemed to be made with the covenantee and his successors in title and the person deriving ti-
tle under him or them (e.g. purchasers), and shall have effect as if such successors and other
persons were expressed’ —- this was upheld in Snipes Hall Farm too.

3. The covenantee must have had, at the date of covenant, a legal estate in land to be ben-
efitted:
1. Must have a legal estate, not equitable estate.

4. Assignee of the covenantee must have a legal estate in land:

1. While the old rule was that both covenantor and covenantee must have a fee simple estate in
land. This requirement was modified
2. Snipe Halls Farm: A lessee was held to be entitled to the benefit of a covenant notwithstanding
the fact that he had a lesser estate than the original covenantor, who was a fee simple owner.
The court held that S.78 had the effect that a covenant is enforceable on behalf of not only the
original covenantee, but all successors in title and all persons deriving title from such succes-
sors - which would include people who derive a lease.

Furthermore, S.136 LPA 1925 provides that covenant may be transferred by assignment, provided
that the assignment is in writing, and an express notice in writing is given to covenantor.

IN EQUITY:
In equity, the benefit of a covenant can run in one of the there ways mentioned in Renals v Colin-
shaw: (it must also touch and concern the land)

1. by annexation;
2. by assignment;
3. by building scheme;

Annexation:
It has been described by Gray as ‘the metaphorically ‘nailing’ of the benefit of covenant to clearly
defined area of land belonging to covenantee…such that the benefit passes to all successive own-
ers, tenants, and occupiers of the land’.

There are three types of annexation:

5. statutory (S. 78 of LPA 1925 as interpreted by Snipe Halls Farm v River Douglas and Feder-
ated Homes v Mill Lodge Properties)
6. express
7. implied

Federated Homes v Mill Lodge Properties:

If as the language of S.78 implies, a covenant relating to land which is restrictive of the user
thereof is enforceable at the suit of:
(1) a successor in title of the covenantee
(2) a person deriving title under the covenantee or his succession;
(3) Owner or occupier of land intended to be benefited by the covenant;
It must in my view, follow that the covenant runs with the land because ex hypothesis every suc-
cessor in title to the land, every derivative proprietor of the land, and every other occupier of the
land has a right by statute to the covenant.

This decision, is however, not wholly welcomed.

Roakes v Chadha:
The judge held that in spite of s.78 (1), which is not made subject to any contrary intention, the
covenant had to be construed as a whole to see whether the benefit is annexed. The express pro-
vision, in this case, that the covenant was not to ensure for the benefit of any owner or subsequent
purchaser ‘unless the benefit of it shall be expressly assigned’ could be not ignored, and therefore
the court held that there was no annexation.

Crest Nicholson v McAllister:

The COA confirmed the approach in Roakes v Chadha. If the terms of the covenant show that the
land of the covenantee intended to be benefitted does not include land which may subsequently be
sold off by the original covenantee in circumstances where there is no express assignment of the
benefit of the covenant, then the owner and occupiers of the land are not ‘owners and occupiers’ of
the land or ‘successors in title’ and therefore, there is no express annexation.
Sainsbury v Enfield LBC:
Conveyance had to be construed in light of all circumstances including any necessary implication
raised thereby.

It must be noted that Federated Homes is still good law and creates an automatic annexation in al-
most all cases.
I. University of East London v Barking and Sugar v Porter (2006) followed Crest Nicholson
II. Muhammadzadeh v Joseph (2006) followed Federated Homes

Express Annexation:
The covenant must be taken for the benefit of a certain land. Thus, in Newton Abbot v
Williamson, there was no annexation where there was nothing in the conveyance which identified
the land for the benefit of which the covenant was alleged to be taken.

An intention to annex must also be shown in the original deed containing the covenant, and this
can be inferred from the language. In Drake v Gray: the covenanted made ‘with so and so, owners
or owners for this time being of whatever the land may be’.
Another example is ‘for the benefit’ of whatever the land may be.

Re Ballards Conveyance:
There would be no annexation of a covenant which purportedly benefitted the whole of the estate.

This strict approach was relaxed in Federated Homes: if the benefit of the covenant is, on a
proper construction of a document, annexed to the land, prima facie it is annexed to every part
thereof, unless contrary clearly appears’.

Implied Annexation:
Martin v Flight Refuelling Ltd:
Annexation can be implied from circumstances. In this case, although annexation was not ex-
pressed in deed containing the original conveyance, annexation was so obviously intended by the
covenanting parties that to ignore it would be ‘not only an injustice but departure from common
sense’.

As with express annexation, the benefit of the covenant must be clearly referable to a defined
piece of land, and the parties must have intended that the benefit attach to the land, not merely be
a personal covenant.

Assignment:
Annexation is to the land. Assignment is to the person.
Annexation is effected at date of making of restrictive covenant. Assignment is effected, perhaps
many years later, on subsequent transfers. S. 78, as interpreted in Federated Homes has, how-
ever, reduced the scope of assignment.

Miles v Easter: (laid down 5 requirements for express assignment)

4) Covenant must have been taken for benefit of land of the covenantee (must touch and con-
cern);
5) Land must be indicated with reasonably certainty
6) Must also be retained in whole or part by plaintiff
7) Capable of benefitting from covenant
8) Assignment of covenant and conveyance of land to which it relates must be existing or occur-
ring at same time

With regards to (4): the view is that there must be an unbroken chain of assignments, created by
each conveyance of benefitted land, as it passes the benefit of covenant to each new owner down
the chain - Re Pinewood Estate, Farnborough

Renals v Colinshaw:
An attempted assignment by declaring the benefit of covenant for the ‘heirs and assigns’ of the
covenantee, without any express mention of any land to be benefitted, will not suffice for express
assignment.
Passing the Burden:
AT LAW:
The general rule is that the burden of any covenant affecting freehold land does not run with land
at common law. The rule is one of the many wider principles of privity of contract.

Austerberry v Corporation of Oldham:

The burden of a positive covenant cannot run with the fee simple, that is, it cannot travel beyond
the original covenantor.

Rhone v Stephens:
‘Equity will enforce negative covenants against freehold land, but has no power to enforce positive
covenants against successors in title of the land. To enforce positive covenants would be to en-
force a personal obligation against a person who has not covenanted.’

E & G C Ltd v Bate:

It was held that a covenant to construct a road upon the land of the covenantee when required to
do so to do could not run so as to bind a successors in title of the covenantor.

It is the effect that makes a covenant either positive or negative, not its wording.

Rhone v Stephens:
The covenant required the covenantor to ‘maintain to a reasonable satisfaction of the purchaser
and their successors in title such part of roof…’. While the benefit was expressly assigned and pur-
chaser (of servant tenement) had notice of it. The burden did not pass, because it was a positive
burden.

CIRCUMVENTING THIS RULE

1. Chains of Covenants:
Each purchaser from covenantor undertakes to indemnify his immediate predecessor in title. The
original covenantee may also be able to sue current owner under Contract (Rights of Third Parties)
Act 1999, provided he can show that there was an intention by original covenantee for the term to
be enforceable - s. 1 (2).

2. Rule in Halsall v Brizell:

Known as the doctrine f mutual benefit and burden. The rule states:
“a positive covenant can be enforced in practice…obliges a person who wishes to take advantage
of a service or facility (e.g. road or drain) to comply with any corresponding obligation to contribute
to cost of providing and maintaining it. This rule, does not apply, where the burdened owner does
not enjoy any service or facility..’

There are some requirements for this rule to work:

9) Benefit relied upon must be satisfied before the burden can be enforced; or be granted or re-
served in exchange for, or in consideration of, the assumption of burden
10) The benefit must be real and substantial and not technical and minimal (Tito v Waddell [No.2])
11) The benefit must be specially granted or reserved

Tameside Town v Allotey:

The COA reiterated the view that a successor in title must have a choice of whether he wants to
exercise the right, or having taken the right, whether to renounce the benefit.
3. The Rule in S.79 LPA 1925:
In Topham v Earl of Sefton, any broad interpretation of s.79 was struck down. The court said the
statute did no more than render it unnecessary to add after convector’s name “his executors, ad-
ministrations and assigns”.

4. Long Leasehold:
S.153 LPA 1925 enables long leasehold to be enlarged into freehold, whereupon the freehold is
‘subject to all same covenants…as the tenant would have been subject to if it had not been en-
larged’.
The leasehold allows the privity of estate to be established.

IN EQUITY:
The burden may run in equity if the requirements of Tulk v Moxhay are satisfied:

Tulk v Moxhay:
The four requirements are:
12) Covenant must be negative in nature:
13) Covenant must accommodate the dominant tenement: There must be dominant and servient
tenement - and both parties must own an estate in their tenement
14) Covenantee, must, at date of covenant, have owned land that is to be benefitted:
15) Covenant must have been intended to run with the servant tenement: This is usually presumed
until something to contrary appears. In Re Royal Victoria Pavillion, Ramsgate: the words
‘vendors covenant with purchasers that the vendors will…’ was enough to show contrary inten-
tion. You cannot imply into the agreement that it was intended to pass as well (as we have
seen that S.79 has been done away with so it cannot be implied)

Only when these 4 requirements are met, and purchaser has notice of it, will the burden of the
covenant run with the land.

Rogers v Hosegood:
This case states that it does not matter that the benefit passed at common law, and the burden in
equity so long as both pass…there can be no difference between law and equity…

Rhone v Stephen: Equity supplements but does not contradict common law.

R E Megarry and H W R Wade said: It makes no practical difference whether the benefit passes
under the rules of law or equity, since the same court enforces both and equity merely follows the
law