COVENANTS

Freehold Covenants

• These are commonly included in leases and made for freehold property, especially when land is divided.
• The seller ensures the new neighbor doesn't behave disruptively.
• Developers may impose covenants on purchasers in new estates to maintain order.
• Covenants bind original parties contractually; the issue arises whether they bind subsequent purchasers.
• Special rules have evolved to determine which covenants run with freehold land.
• While there are some connections to covenants in leases, but the two regulations are distinct.
• A similar covenant in a lease would bind the tenant's assignee, but a covenant by a freehold owner often doesn't bind the purchaser.

Trant Way Example

17 and 18 Trant Way

• In 1988, Olive Orange owned both No. 17 and No. 18 Trant Way in fee simple.
• Miss Orange lived in No. 17; No. 18 was leased.
• Miss Orange sold No. 18 to Robert Raspberry with several covenants to ensure he didn't inconvenience her or change the neighborhood.
• These included not using No. 18 for business, maintaining its exterior, sharing driveway costs with No. 17 and not selling to families, as Miss Orange was sensitive to noise.
• Miss Orange made Mr. Raspberry covenant for the benefit of land owners abutting 18 Trant Way to protect her neighbor at No. 19 Daniel Date.

20 Trant Way

• 20 Trant Way was the Old Rectory which included a large garden and an orchard.
• In 1999, Big Builders plc bought the Old Rectory, demolished it and built six bungalows, and named it Rectory Crescent
• Each purchaser covenanted with Big Builders plc not to fence the garden of the plot being purchased.
• It is necessary to consider the enforceability of covenants between original parties and successors.

Enforceability of Covenants: Original Parties

Covenantor and Covenantee: Burden and Benefit

• The covenants when Olive Orange sold No. 18 to Robert Raspberry in 1988 constituted a contract.
• Robert Raspberry is the covenantor bearing the burden; Miss Orange is the covenantee taking the benefit.
• If Mr. Raspberry breached a covenant, Miss Orange could sue for damages or seek an injunction.
• There needs to be clear and exact language to show the covenant being made.
• The court decision Dano Ltd v Earl Cadogan accepted that the meaning of a covenant, like restricting premises to ‘the housing of the working classes’, might change over time.

LPA 1925, s. 56

• One can benefit from a covenant even without being party to the deed.
• In the case of 19 Trant Way, Daniel Date which was not a party in the deed, Miss Orange included any owner of land abutting No. 18 should also benefit from the covenant.
• LPA 1925, s. 56(1) says a person may take the benefit of any condition..covenant or agreement over or respecting land, although he may not be named as a party to the conveyance or other instrument.
• Re Ecclesiastical Commissioners for England's Conveyance held that s. 56 makes a person for whose benefit the covenant was made an original covenantee this allows benefits to other persons.
• Amsprop Trading Ltd v Harris Distribution Ltd held that s. 56 is only effective if the covenant was made with the person seeking to enforce it, not just for their benefit which may be unsurprising.

The 'Mischief' Addressed by Statute

• One reason for the decision may have been that, were this interpretation not to be adopted, it would be easy to circumvent the standard leasehold regulations
• This may circumvent enforcement of covenants by individuals lacking estate or contract privity.
• The rule that a person couldn't sue on a deed unless named was the issue of concern.
• Describing a party as 'the owner for the time being' of a property was insufficient.
• This rule was modified by s. 5 of the Real Property Act 1845, then by s. 56.
• Courts view s. 56 as removing the common law rule limitations, so someone described in a document as a party can benefit.
• The main limitation is that those described must be existing and identifiable when the covenant was made.
• The provision doesn't eliminate privity of contract principles.

An Alternative

• The Contracts (Rights of Third Parties) Act 1999 assists with privity of contract issues
• Benefits and obligations conferred by the Act exist in addition to those provided by s. 56, but the use is similar.

Enforceability of Covenants: Successors of the Original Parties

• If a covenantor or covenantee sells the property, the legal system defines what the burden and benefits that pass to the other parties.

Position After Sale by the Covenantee: Does the Benefit Pass to the New Owner?

• In 1995 Olive Orange the original covenantee died and Paul Peach bought the property on Trant Way, at this time Robert Raspberry, the original covenantor, still owned the property Common law allows a covenant's benefit to pass to a title successor if four conditions are met.
• The covenant must 'touch and concern' the land of the covenantee.
• When made, the parties must intend the covenant's benefit to run with the land to the covenantee's successors.
• When made, the covenantee must hold the legal estate in the benefited land
• The claimant must derive his title from or under the original covenantee common law rule amended by LPA 1925, s. 78.

'Touching and Concerning' the Land of the Covenantee

• Common law rules that don't allow original covenantee to have benefit of a covenant Emphasizes that the the originial benefited from a covenant
• That no such connection is made by the contracting parties are concerned if the covenants are a claim.
• Lord Oliver of Aylmerton provides a useful working test designed to ascertain whether a covenant 'touches and concerns’ in leasehold covenants:
  • The covenant must benefit the estate owner and would cease it to benefit the covenantee.
  • The covenant must affect the mode, or value of benefited land
  • A covenant will not be regarded as 'touching and concerning' benefited land if the benefit is expressed to be personal to the covenantee or to an earlier lessee.
  • Covenant to not sell to anyone with children is purely for Miss Orange to show a person intention and not to any of the properties.

The Parties Must Have Intended the Benefit to Run

• Conditions require proof that the Covenant is made runs to benefit successor of a covanant.
• Provide by The covenantee his successors in title and deriving title under him.
• 78(1) the words are now deemed to be in by LPA.
• Relating to any covenantee covenanteee it should have deemed to be made it affect as if each person.

At the time when the covenant was made, the covenantee must have held the legal estate in the land

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