Freehold Covenants PDF - Textbook on Land Law

25. Freehold covenants Textbook on Land Law (19th edn) Aruna Nair p. 576 25. Freehold covenants Aruna Nair, Associate Professor of Law, University of Oxford https://doi.org/10.1093/he/9780192858832.003.0025 Published in print: 04 September 2023 Published online: August 2023 Abstract Course-focused and comprehensive, the Textbook on Land Law provides an accessible overview of one key area on the law curriculum. This chapter discusses covenants affecting freehold land. It covers the enforceability of covenants, including enforcement against later acquirers of land; the problem of positive covenants; remedies; the discharge of covenants; and proposals for reform of the law. It illustrates the law by reference to 17 and 18 Trant Way, two freehold properties previously owned by Olive Orange and sold by her subject to a number of covenants, and by reference to 20 Trant Way, a property development comprising several freehold bungalows which were individually sold subject to certain covenants. Keywords: covenants, restrictive covenants, positive covenants, freehold, land law, burden, benefit 25.1 Introduction We saw in Chapter 10 that it is usual for covenants to be included in leases. Similarly, covenants are quite commonly made in respect of freehold property, particularly if land is divided and the person selling part of the land wishes to ensure that his or her new neighbour does not behave in an inconvenient or disturbing manner. In the case of a new estate, the developer may well wish to impose covenants upon all the purchasers, in order to ensure that the estate is maintained in good order. Thus, covenants are frequently imposed upon freehold estates. However, while the covenants made will be binding between the original parties as a matter of the law of contract, once the land burdened with the covenant is sold, the question will arise whether the covenant is binding upon the purchaser of the property. Over the years, special rules have developed in order to settle the question of which covenants can run with freehold land. These rules have some links with the rules governing covenants in leases, but the two systems are not the same and should not be confused with one another. In many cases a covenant by a freehold owner will not bind a purchaser, although a similar covenant, if contained in a lease, would bind the tenant’s assignee. Page 1 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants 25.2 Trant Way 25.2.1 17 and 18 Trant Way In 1988, Nos. 17 and 18 Trant Way were both owned in fee simple by Olive Orange. Miss Orange occupied 17 Trant Way, while No. 18 was let to a tenant. When the tenant left the property at the end of the lease, Miss Orange decided to sell 18 Trant Way. She sold the fee simple estate in the property to Robert Raspberry and, because she was concerned that her new neighbour should not inconvenience her, or alter the character p. 577 ↵ of the neighbourhood, she insisted that Mr Raspberry should enter into a number of covenants in the conveyance. The covenants were: (a) not to use No. 18 ‘for business purposes’; (b) to keep the exterior of No. 18 in good repair; (c) to contribute one-half of the cost of maintaining the driveway shared with No. 17; and (d) not to sell No. 18 to a family with children (Miss Orange was elderly and found the noise of children at play disturbing). When she made these arrangements Miss Orange wanted to ensure that her neighbour at 19 Trant Way (Daniel Date) was also protected, in so far as was possible. Accordingly, she made Mr Raspberry covenant ‘for the benefit of the owners for the time being of land abutting 18 Trant Way’ and told Daniel Date about the arrangements she had made. Figure 25.1 shows 17–19 Trant Way at that point. Figure 25.1 17–19 Trant Way In 1995, Miss Orange died, and her executors sold 17 Trant Way to Paul Peach. In 1998, Mr Raspberry sold 18 Trant Way to Silvia Strawberry. In the last year Mrs Strawberry has proved to be rather a difficult neighbour to Mr Peach and causes him considerable trouble. She has started to give piano lessons at home and the noise of children playing their scales throughout the day and early evening Page 2 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants disturbs Mr Peach greatly. Furthermore, Mrs Strawberry has failed to repair the outside of No. 18, which has become something of an eyesore, and when Mr Peach had repairs made to the joint driveway she refused to contribute to the cost. 25.2.2 20 Trant Way 20 Trant Way was the old rectory, which had a very large garden and an orchard. In 1999, a development company, Big Builders plc, bought the old rectory, demolished it, and built a new crescent of six bungalows. The gardens of the properties were landscaped and are ‘open plan’ in style. The six bungalows have now been sold, and the new owners of the fee simple estates have been registered as proprietors at HM Land Registry. The crescent is called Rectory Crescent, and the bungalows have been numbered 1 to 6, and were sold in that order. 1 Rectory Crescent was bought by Alfred Alpha, and 6 Rectory Crescent was bought by Oscar Omega. On each sale, the purchaser covenanted with Big Builders plc not to fence the garden of the plot being purchased. See Figure 25.5 at 25.4.3.5 for a plan of Rectory Crescent. p. 578 ↵ We now need to consider the extent to which the covenants just described are enforceable, not only between the original parties but also between their successors in title. 25.3 Enforceability of covenants: original parties 25.3.1 Covenantor and covenantee: burden and benefit When Olive Orange sold 18 Trant Way to Robert Raspberry in 1988, the covenants contained in the conveyance to Mr Raspberry constituted a contract between the parties. You have already seen that a covenant is a promise by deed (2.5.5). Here, Mr Raspberry is the ‘covenantor’, and assumes the ‘burden’ under the covenant, and Miss Orange is the ‘covenantee’, and takes the ‘benefit’. If Mr Raspberry had broken a covenant, Miss Orange could have sued for damages for breach of contract or sought an injunction restraining the breach. In this situation, the basic rules of the law of contract apply. As with any contract, it is important when drafting a covenant to make its exact limits entirely clear. However, Dano Ltd v Earl Cadogan 2 P&CR 10, provides an interesting example of a case in which the court seemed to accept that the exact meaning of a covenant might change over time. The covenant in question restricted use of premises to ‘the housing of the working classes’, and it was accepted that the interpretation of this covenant might change to mean (in modern times) those whose income was sufficiently low that they required inexpensive accommodation. However, an alternative approach to construction mentioned in the case was that, if one could find some persons who still clearly fell within the restriction, it was not necessary to be able to identify every person who did so. (However, in a later Court of Appeal decision on another issue in the same case (see The Times, 2 June 2003) it was held that since the document creating the covenant, when read as a whole, envisaged that the covenant lasted only as long as the benefited land remained settled and that had ceased to be the case, the covenant was not in fact enforceable.) Page 3 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants 25.3.2 LPA 1925, s. 56 It is easy enough to see that Miss Orange and Mr Raspberry had a contractual relationship with one another, for both executed a deed which contained their agreement. However, it is possible for someone to take the benefit of such a covenant, even though he or she was not a party to the deed or perhaps did not even know that the contract had been concluded. In the case of 19 Trant Way, Daniel Date was not an express party to the deed which included the covenants made by Mr Raspberry. However, you will recall that Miss Orange included in that deed words which indicated that any owner of land abutting No. 18 (which is the case with No. 19) should also benefit from the covenant. This wording may have an important legal effect and may indeed allow Mr Date to sue on the covenant as if he had been a party to the deed. However, as we will see, this result depends upon the case law interpreting the effect of LPA 1925, s. 56(1), which provides that: 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. p. 579 ↵ In Re Ecclesiastical Commissioners for England’s Conveyance Ch 430, it was held that the effect of s. 56 was that a person, expressed in the conveyance to be one for whose benefit the covenant was made, was to be regarded as an original covenantee, even though he was not a party to the deed. As a result, the covenant may confer enforceable benefits on other persons, even though they may have been unaware that such a covenant had been made! Accordingly, Re Ecclesiastical Commissioners for England’s Conveyance seems to suggest that if Mr Raspberry broke the covenants Mr Date could sue him for breach of contract, provided that Mr Date could satisfy the court that the covenant did purport to be with him as covenantee, although he was not a party to the agreement (Re Foster 3 All ER 357 at p. 365). However, in Amsprop Trading Ltd v Harris Distribution Ltd 1 WLR 1025, Neuberger J said that s. 56 was only effective in a case in which the covenant purported to be made with the person seeking to enforce and not where the covenant merely purported to be made for the benefit of that person. This appears to produce results that vary depending upon the exact wording used in the covenant in the case, but this may be unsurprising in a situation in which a statutory provision appears to be being stretched beyond what would appear to be its intended ambit. It may also be of importance that the case involved an attempt to circumvent the standard rules relating to covenants in leases. It concerned a covenant in a sublease which the head landlord, rather than the tenant/landlord of the sublease itself, was seeking to enforce. The head landlord could not use the leasehold rules (see Chapter 11) to enforce the covenant because there is no privity of estate or contract between the head landlord and the subtenant. However, the covenant in the sublease was expressed to give the head landlord power to enforce the covenant and thus he claimed to be able to enforce the covenant under the general covenant rules because the covenant was clearly intended to benefit the head landlord. Neuberger J held that, on the construction of the sublease in question, the covenant was not expressed to be made with the head landlord, although it was clearly intended to benefit him. In such a case, it was held that s. 56 did not operate to permit the head landlord to enforce the covenant. Page 4 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants 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 rules and to allow enforcement of covenants by persons who have no privity of estate or of contract with the tenant in question. Unfortunately, however, the effect may be merely to make the result in such cases depend entirely upon the particular words used. If Amsprop is p. 580 confined to its facts and Mr Date can rely on s. 56, the position would now be as shown in Figure 25.2. ↵ Figure 25.2 Operation of s. 56 25.3.3 The ‘mischief’ addressed by statute In trying to decide what s. 56 will or will not do, it may be helpful to consider the mischief that the statutory provisions appear to have been addressing, even if to do so does require a short historical digression. The ‘mischief’ was the effect of the common law rule that a person could not sue on a deed unless he or she were actually named in that deed: a description which identified the person in question but without naming them would not do. Accordingly, if in an old deed one described one of the parties as ‘the owner for the time being of 21 Trant Way’, that would not have sufficed to enable the owner of that property at the time the deed was made to enforce the covenants in that deed. This was true even though the actual person involved was readily identifiable and there was no doubt as to who was intended by the description given. This rule was first modified by s. 5 of the Real Property Act 1845 and then by s. 56. Accordingly, courts might have been expected to view s. 56 as only removing the problem created by the common law rule, so that a person who was described in a document as a party but not named and who clearly was a contracting party could benefit. However, the courts have in fact gone further than this in their use of s. 56. The main limitation on s. 56 seems to be simply that the persons covered by the description in question can only benefit if they are existing and identifiable at the date that the covenant was made. The statutory provision does not (as some originally suggested) have the effect of setting aside altogether the principles of privity of contract (see the discussion in Smith and Snipes Hall Farm Ltd v River Douglas Catchment Board 2 KB 500 at p. 514 and Beswick v Beswick Ch 538 at p. 556). Page 5 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants 25.3.4 An alternative In addition to s. 56, it may be possible to rely on the general contractual provisions in the Contracts (Rights of Third Parties) Act 1999, which were designed to relieve some of the problems connected with the rules on privity of contract. The benefits and obligations conferred by that Act are in addition to those provided by s. 56 (see s. 7(1) of the 1999 Act), but are similar in many ways and normally use of s. 56 will suffice for land cases. However, you should remember this as a possible alternative approach. 25.4 Enforceability of covenants: successors of the original parties In time, the benefited and burdened pieces of land will change hands, and pass to new owners. We must now consider whether the new owner of the benefited land obtains the right to enforce the covenants, and whether the duties under these covenants bind the new owner of the burdened land. In other words, do the benefits and burdens of the covenants run with the respective pieces of land? 25.4.1 Position after sale by the covenantee: does the benefit pass to the new owner? In 1995 Olive Orange, the original covenantee in relation to the covenants burdening 18 Trant Way, died and her executors sold her fee simple estate in No. 17 to Paul Peach. At this time, the original covenantor, p. 581 Robert Raspberry, was still the owner of 18 Trant ↵ Way. If Mr Raspberry had broken one of the covenants contained in the 1988 conveyance to himself, could Mr Peach have enforced the covenant against him? At that point the arrangements at 17–19 Trant Way were as shown in Figure 25.3. Figure 25.3 Position after sale of 17 Trant Way Obviously, there is no privity of contract between Mr Peach and Mr Raspberry, but common law does allow the benefit of such a covenant to pass to a successor in title of the original covenantee, if four conditions are met: Page 6 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants (1) the covenant must ‘touch and concern’ the land of the covenantee; (2) at the time when the covenant was made, it must have been the intention of the parties that the benefit of the covenant should run with the land to the covenantee’s successors in title; (3) at the time when the covenant was made, the covenantee must have held the legal estate in the land to be benefited; and (4) the claimant must derive his title from or under the original covenantee (this is the common law rule as amended by LPA 1925, s. 78). Each of these requirements is now considered in greater detail. 25.4.1.1 ‘Touching and concerning’ the land of the covenantee Common law rules do not allow the successor of the original covenantee to claim the benefit of a covenant unless, at the date when the covenant was made, the covenantee had land which was benefited by the covenant. This emphasises that only the benefit of covenants which are appurtenant to land can be claimed under these rules, although no such connection is required where the original contracting parties are concerned. In addition, the covenant must ‘touch and concern’ the covenantee’s land. The purpose of the rule is to distinguish between covenants which confer a benefit upon land and those which confer a purely personal benefit upon the covenantee. In P. & A. Swift Investments v Combined English Stores Group AC 632 at p. 642, Lord Oliver of Aylmerton provides a useful working test designed to ascertain whether a covenant ‘touches and concerns’ land. This is mentioned earlier in connection with leasehold covenants (see 11.2.2.1) but it is useful to note it here as well. The first element of the test is that the covenant must benefit the estate owner for the time being and that it would cease to be of benefit to the covenantee were it to be separated from the ownership of the benefited estate. Secondly, the covenant must affect the nature, p. 582 quality, ↵ mode, of use or value of the benefited land. Thirdly, even if it satisfies the first two elements of the test, a covenant will not be regarded as ‘touching and concerning’ benefited land if the benefit is in some way expressed to be personal to the covenantee (this last element accordingly raises the issue of the intention of the parties). In the case of 17 Trant Way you may well feel that the covenant not to sell No. 18 to anyone with children was purely for the personal benefit of Miss Orange. Such a covenant does not seem to confer any benefit upon 17 Trant Way itself: the test here is the same as that used in relation to leases made before 1 January 1996 (the test in Spencer’s Case (1583) 5 Co Rep 16a). The other covenants made by Mr Raspberry do, however, appear to confer a benefit upon No. 17. 25.4.1.2 The parties must have intended the benefit to run This condition requires proof that, when the covenant was made, the parties intended that it should run to benefit successors of the covenantee. Evidence of such an intention can be provided by the covenantor expressly covenanting with ‘the covenantee, his successors in title, and those deriving title under him’. These words are, however, now deemed to be contained in the covenant, by virtue of LPA 1925, s. 78(1): Page 7 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants A covenant relating to any land of the covenantee shall be deemed to be made with the covenantee and his successors in title and the persons deriving title under him or them, and shall have effect as if such successors and other persons were expressed. 25.4.1.3 At the time when the covenant was made, the covenantee must have held the le gal estate in the land At common law, covenants attach to the legal estate and pass with it, and so it is essential that, at the time the covenant was made, the covenantee was the owner of the legal estate in the land on which the benefit is to be conferred (Webb v Russell (1789) 3 TR 393). 25.4.1.4 The successor claiming to enforce the covenant must derive title from or under the original covenantee At one time, a successor claiming the benefit of a covenant at common law had to show that he or she had acquired the same estate as had been held by the original covenantee, for common law regarded the covenants as attaching to the estate, so that only a person who took the estate could obtain the benefit of the covenants. Thus, a purchaser of the fee simple from the covenantee could enforce a covenant, while a tenant acquiring a term of years (even if it were for 999 years) could not do so. Today, however, a tenant may claim the benefit of a covenant which is attached to the freehold estate in the land of which he or she is a tenant, because in Smith and Snipes Hall Farm Ltd v River Douglas Catchment Board 2 KB 500 it was held that LPA 1925, s. 78, has the effect of extending the right to enforce a covenant to such a person. In this case the original owner of the benefited land had sold it to a purchaser and that purchaser had granted a lease of the premises to a tenant. The Court of Appeal took the view that the effect of s. 78(1) was that the benefit of the covenant was enforceable not only by the successor in title to the freehold estate but also by the tenant, who derived title under that freeholder. Section 78 appears to have been intended to be merely a word-saving provision, but here and elsewhere has been held to create important substantive changes in the law. In this instance it was said that, because the section refers to persons ‘deriving title p. 583 under’ the covenantee, it extends the benefit of such covenants to tenants, who derive their ↵ title under the covenantee (or his successors). Were the intention that such persons remain incapable of obtaining a benefit under the legal rules, the inclusion of the reference to them in s. 78 would be meaningless. Therefore, the section has been interpreted as creating an amendment to the law. The benefit of a covenant amounts to a chose in action and thus it is possible for the holder of the benefit to assign it to any third party in accordance with the ordinary rules of law. Under LPA 1925, s. 136, any such express assignment should be made in writing and notice of it should be given to the covenantor. Page 8 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants 25.4.1.5 Application of the rules One can see from these rules that, when Miss Orange’s executors sold 17 Trant Way to Paul Peach, he would have obtained the benefit of all Mr Raspberry’s covenants; except probably that of the covenant not to sell No. 18 to a family with children, which appears to be purely personal in nature. Apart from this, the benefit of all the covenants, both positive and negative, would pass with the estate to the new owner, for at common law the benefit of both types of covenant can run to a successor of the covenantee. 25.4.2 Position after sale by covenantor: does the burden pass to the new owner? In 1998, Mr Raspberry sold the fee simple in 18 Trant Way (the burdened land) to Silvia Strawberry, and it appears that Mrs Strawberry is in breach of a number of the covenants originally made between Mr Raspberry and Miss Orange. The current owner of the benefited land, Mr Peach, needs to know whether Mrs Strawberry is in fact bound by these covenants. Mr Peach wishes to establish, if possible, that the position at 17–19 Trant Way is now as is shown in Figure 25.4. Can he do this? Figure 25.4 Position after sale of 17 and 18 Trant Way 25.4.2.1 Burdens do not run at common law Unfortunately for Mr Peach, the basic rule is that the burden of covenants does not run at common law. Common law dislikes restraints being placed on your use of your own estate, and accordingly applies the strict rule of privity of contract in such cases. The leading decision on this issue is Austerberry v Corporation of Oldham (1885) 29 ChD 750, in which it was held that, at common law, the obligation to make up a road and keep it in good repair could not pass to the successor in title of the original covenantor. This p. 584 ↵ position was reaffirmed by the House of Lords in Rhone v Stephens 2 AC 310, in the case of a covenant to maintain a roof. Thus, Mrs Strawberry will not be liable at law for breach of any of the covenants made in respect of 18 Trant Way. This is in line with the general principles of the law of contract, which allow the benefit of a contract to be transferred to a third party but not the burden. The rule arose Page 9 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants principally because of the concerns at law to keep land freely alienable and to prevent it becoming burdened with incumbrances which might hinder sale. However, in the increasingly complex modern world, such a rule can be inconvenient since in many cases it may be quite reasonable to wish to impose restrictions when one sells, for example, part of one’s property and to wish to ensure that those restrictions apply to anyone subsequently acquiring the part sold. 25.4.2.2 The burden of certain covenants can run in equity: Tulk v Moxhay The common law rule caused considerable inconvenience, because the owner of benefited land could find that covenants became unenforceable merely because the burdened land changed hands. Equity took note of this difficulty and, through applying general equitable principles, arrived at the conclusion that where a purchaser acquired the burdened land with knowledge of the covenants it was quite fair that he or she should be bound to observe them. The enforceability of the burden of certain covenants against a successor in title to the covenantor was settled finally in the famous case of Tulk v Moxhay (1848) 2 Ph 774. In this case, the burdened land formed the centre of Leicester Square in London, and the original covenantor had covenanted with the owner of adjacent property that he would maintain the square as an ornamental open space. Later the square was sold, and the purchaser, relying on the common law rule that burdens do not pass on sale, intended to build on the property. It was held that the owners of the neighbouring benefited land had a right in equity to enforce the covenant against the purchaser of the burdened land, because he had known of the restriction when he acquired his estate. In taking this view, the court attached great importance to the inequity of a purchaser who acquired with notice simply disregarding the restriction in question. Lord Cottenham in Tulk v Moxhay seems to be taking a fairly liberal view (for the period) of the power of the court to intervene in an inequitable case. However, the reasoning adopted may not be that strong because, if before Tulk v Moxhay the burden of covenants had not run (see Keppell v Bailey (1834) 2 My & K 517), a purchaser would surely be entitled to assume that although he or she knew of the covenant it would have no impact upon a purchaser. The decision to alter the law may have been a surprising result. Lord Cottenham seems also to have thought that if one bought at a reduced price due to the covenant, one should in conscience be bound by it. However, surely if the law (or rather equity) were clear that burdens did not run, then normally the vendor could sell at a higher price because he or she would know that the purchaser would not be bound by the covenant. If the vendor failed to claim a higher price in this way, the loss is the vendor’s and that of the owners of the benefited land: the vendor loses solely due to ignorance of the law. It is difficult to see in such a case how the purchaser’s conscience is affected. Accordingly, while the decision in Tulk v Moxhay proved to be an essential step towards the introduction of a more modern approach to the planning of land use, one wonders to what extent the reasoning in the case stands up to close scrutiny. In essence, the decision is an early example of an attempt to introduce land-use planning by non-statutory means. (The Leicester Square covenants were again the subject of litigation in R v Westminster City Council, ex parte Leicester Square Coventry Street Association (1989) 87 LGR 675.) Page 10 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants p. 585 ↵ Since 1848 the courts have, in later cases, identified the rules which must be satisfied before equity will regard the burden of a covenant as passing under the Tulk v Moxhay doctrine. These rules are derived from Tulk v Moxhay but are not (apart from the last of them) expressly mentioned in the case. To a certain extent the rules step back from the very liberal and reforming approach taken in Tulk v Moxhay. In their modern form, they may be stated as follows: (1) the covenant must be negative; (2) at the date of the covenant, the covenantee must have owned land which was benefited by the covenant; (3) the original parties must have intended that the burden should run to bind successors; and (4) as the rule is equitable, general equitable principles (and the need for notice or its modern equivalent) apply. 1. The covenant must be negative This rule may seem odd when one remembers that the covenant in Tulk v Moxhay was to maintain Leicester Square as an ornamental open space, which sounds like a positive obligation. However, it is the substance of the covenant which matters, and not the form in which it is expressed. Thus, the effect of the covenant in Tulk v Moxhay was that the owner should keep the square in an open state and not erect buildings. In the case of the covenants relating to 18 Trant Way, the covenants to keep the exterior in good repair and to contribute to the cost of maintaining the driveway are both positive, and thus cannot run to bind Mrs Strawberry under the rule in Tulk v Moxhay. This can produce rather inconvenient results, and reform of the law has been recommended (see 25.8.3). Indeed, some writers have argued that Tulk v Moxhay makes no mention of such a requirement, and that in the past positive covenants had been enforced against the covenantor’s successors (see Bell Conv 55). However, this limitation on the rule has been accepted since the case of Haywood v Brunswick Permanent Benefit Building Society (1881) 8 QBD 403, in which Lindley LJ said that ‘only such a covenant as can be complied with without expenditure of money will be enforced’ against a successor in title. Thus, a covenant ‘not to allow the premises to fall into disrepair’ would be regarded as a positive covenant, even though it is worded in a negative form, because compliance with the covenant will require action, and expenditure, on the part of the owner of the burdened land. The difference between positive and negative covenants was summarised by Cotton LJ in Austerberry v Corporation of Oldham (1885) 29 ChD 750 at pp. 773–4 in a passage in which it was explained that a covenant requiring someone to ‘lay out money’: Page 11 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants … is not a covenant which a court of equity will enforce: it will not enforce a covenant not running at law when it is sought to enforce that covenant in such a way as to require the successors in title of the covenantor to spend money, and in that way to undertake a burden upon themselves. The covenantor must not use the property for a purpose inconsistent with the use for which it was originally granted: but in my opinion a court of equity does not and ought not to enforce a covenant binding only in equity in such a way as to require the successors of the covenantor himself, they having entered into no covenant, to expend sums of money in accordance with what the original covenantor bound himself to do. p. 586 ↵ This principle was reaffirmed by the House of Lords in 1994 in Rhone v Stephens 2 AC 310. In that case a large single property had been divided into two parts (‘the house’ and ‘the cottage’) and the cottage had been sold. The vendor retained the house. Due to the design of the properties the roof remained part of the house but protected both the house and the cottage. Accordingly, on sale, the vendor covenanted that he would maintain the roof for the benefit of the cottage. Over the years both the house and the cottage had been sold on and the current owner of the cottage sought to enforce the covenant to repair the roof, which had fallen into disrepair. The House of Lords was urged to overturn the rule which prevented such positive covenants binding successors and the many criticisms of the rule were argued against it. However, the traditional rule was reaffirmed, and it appears now that it can only be overturned by legislation. Lord Templeman said (at p. 321): For over 100 years it has been clear and accepted law that 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 a positive covenant would be to enforce a personal obligation against a person who has not covenanted. To enforce negative covenants is only to treat the land as subject to a restriction. Thus, in a situation like that in Tulk v Moxhay, in equity a successor to the covenantor can be prevented from putting the open space to an alternative use but cannot be forced to maintain it in good order, since the latter requires expenditure whereas the former merely prevents the successor taking certain types of action. (This was one of the reasons for the introduction of commonhold, discussed at 8.6.) 2. At the date of the covenant the covenantee must have owned benefited land Equity will not enforce a covenant unless it confers a benefit upon land. This involves two requirements: (a) that the covenant touches and concerns land; and (b) that, at the date of the covenant, the covenantee must have retained land which was benefited by the covenant. In London County Council v Allen 3 KB 642 a builder covenanted that he would not build on a particular piece of land. The covenantee was the council, which did not own land in the neighbourhood. Mrs Allen bought the plot with knowledge of the covenant, but was held not to be bound by it, because it Page 12 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants was not made for the benefit of land owned by the council. This decision emphasises the fact that equity will protect only covenants which are appurtenant to land: see also Morrells of Oxford Ltd v Oxford United Football Club Ltd Ch 459, in which a covenant was construed as being personal only. There are, however, some exceptions to the rule that the covenantee must retain land which is benefited by the covenant, which are as follows. (a) If you think of the situation in Rectory Crescent, you will realise that Big Builders plc, after selling plot 6 to Mr Omega, did not retain any land in the Crescent, and so, on the basic rule, the burden of the covenant would not run with that plot to any new owner. However, if it can be established that the development of Rectory Crescent constituted what is known as a ‘building scheme’, the burden will run with the last plot, despite the fact that the developer did not retain any land in the area. Building schemes are explained later in this chapter (at 25.4.3.7). (b) There are also statutory exceptions to the rule, for example in favour of local authorities or the p. 587 National Trust. These exceptions allow such bodies to enforce covenants on behalf of the whole community (for example, to ensure that an area of natural beauty is not disturbed: National Trust Act 1937, s. 8). (c) The rules relating to restrictive covenants in leases require a special mention in this context. Such covenants are capable of amounting to restrictive covenants binding under the rules of Tulk v Moxhay. This is of little importance where assignees of the tenant are concerned, for most of the covenants in the lease may be enforced against them under the rule in Spencer’s Case (see 11.2.2.2) or pass under the Landlord and Tenant (Covenants) Act 1995. However, covenants which fall within the Tulk v Moxhay principle are binding on anyone who derives title from or under the covenantor, or one of his or her successors, and thus such covenants can be enforced against a subtenant, with whom the enforcing landlord has no privity of estate. You may remember this from the chapter on leases, which also says that in general the head landlord cannot enforce covenants in the lease against the subtenant. Where the restrictive covenant is contained in a lease, it is not necessary to show that the landlord has retained other neighbouring land which is benefited. It is enough to show that a benefit is conferred on the landlord’s reversion (which is normally the case) (Hall v Ewin (1887) 37 ChD 74; Regent Oil Co. Ltd v J. A. Gregory (Hatch End) Ltd Ch 402). 3. The parties must have intended the burden to run It is essential that the parties should have intended the burden to pass to later owners of the affected property. Normally this intention will be expressly evidenced by the covenantor covenanting on behalf of the covenantor and his or her successors in title, and those deriving title under the covenantor and successors. In the absence of an express provision, the covenantor is deemed to have covenanted in these terms by virtue of LPA 1925, s. 79. However, this provision may be excluded from the agreement by an express term to the contrary: for a case in which the court construed the document as a whole when deciding whether such an exclusion existed, see Morrells of Oxford Ltd v Oxford United Football Club Ltd Ch 459. If the document creating the covenant is silent on the matter, the parties will be presumed to intend that it will bind later owners. Section 79 only deals with the need for intention. Suggestions that its positive wording (‘shall have effect’) rendered the other traditional rules on running of burdens Page 13 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants redundant have been disapproved by the House of Lords in Sefton v Tophams Ltd 1 AC 50 at pp. 73 and 81 and in Rhone v Stephens 2 AC 310 at p. 322. Thus, s. 79 on its own will not make the burden run to bind a successor. 4. The application of equitable principles, and the need for notice or its modern equivalent If Mr Peach is to enforce the covenants relating to 18 Trant Way against Mrs Strawberry, he will be obliged to rely on the assistance of the equitable jurisdiction of the court. As we have seen, in Tulk v Moxhay Lord Cottenham regarded the decision of the court as being primarily based upon conscience operating as an equitable principle. As a result, the general equitable principles and maxims will apply to any action which he brings. The most important of these is that ‘He who comes to equity must come with clean hands’. This may be of particular importance where there are reciprocal covenants between neighbouring owners (as we shall see, this is the case in Rectory Crescent), if the owner seeking to enforce is also breaking any of the covenants. In such a case, the court would almost certainly decline to assist the person who is also in breach of the agreement. More importantly, the fact that the burden of the covenants runs only in equity means that one must bear p. 588 in mind the need to protect the right to the covenant by ↵ entry on the register in the case of registered land or registration of a land charge in unregistered land. As we have seen, Tulk v Moxhay was decided primarily on the basis that the purchaser of Leicester Square bought with notice of the covenant restricting the use of the land. 25.4.2.3 Unregistered land Where one is dealing with unregistered land and with restrictive covenants created before 1 January 1926 the old equitable doctrine of notice will still apply. You should not assume that such old covenants can be ignored, for they are still frequently encountered and can still be enforced where the rules in Tulk v Moxhay are satisfied. Where the title to the land is unregistered, and the covenant was created on or after 1 January 1926, it requires registration as a class D(ii) land charge (LCA 1972, s. 2(5)). If such a covenant is not registered, it will be void against a purchaser of a legal estate for money or money’s worth, regardless of notice (LCA 1972, s. 4(6)). The date by which the covenant must have been registered is the date on which the burdened land was conveyed to the purchaser. In the case of 18 Trant Way, Mrs Strawberry will not be bound by such restrictive covenants relating to the property unless they were registered as land charges before she bought the fee simple in 1998 (the land has not been sold since Mousehole became an area of compulsory registration in 1990). 25.4.2.4 Registered land When she acquired the property, Mrs Strawberry was obliged to register her title to the land with HM Land Registry (see Chapter 6), because Mousehole became a compulsory registration area on 1 December 1990 (see 3.2.3.1). On any such registration, the purchaser must tell the registrar of any pre-1926 covenants of Page 14 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants which he or she has notice and present to the registrar a land charges search, which will reveal any registered covenants made after 1925. When the estate is registered, the registrar will also enter on the register notice of any such encumbrances. At the time Mrs Strawberry purchased, this requirement arose from the Land Registration Rules 1925, r. 40; LRA 1925, s. 50(1). Today the requirement on the registrar arises from the Land Registration Rules 2003, r. 35. These burdens on the land will affect a purchaser only if entered on the register relating to the burdened land. Usually the registrar will insert a full copy of the terms of the covenant in the charges section of the register. Any covenants created after the title becomes registered must also be entered against the burdened estate. Most new covenants are created on transfer of the estate, and in the transfer deed. These covenants will be entered automatically on the register by way of notice. In the case of a covenant created at another time, the person with the benefit of the covenant should apply to have his or her interest noted on the register of the burdened land (under LRA 2002, s. 32) by way of notice. 25.4.3 Where the burden runs in equity, the benefit must be made to run in eq uity Having established that Mrs Strawberry may be bound by certain covenants burdening 18 Trant Way, it must still be established that Mr Peach has a right to enforce the covenants. When alleging that Mrs Strawberry is bound in equity by the covenants, he must also establish that he has obtained the benefit of the covenants according to equitable rules: it is not enough to show that the benefit passes at common law. However, in general the equitable rules are more generous to the person claiming the benefit and thus one would not wish to use the legal rules. p. 589 ↵ In equity, there are three ways in which a purchaser of the benefited land can acquire the right to enforce the covenant: (1) by annexation (which may be express, implied, or statutory); (2) by express assignment of the benefit of the covenant; and (3) under the special rules relating to building schemes. 25.4.3.1 Express annexation Where ‘words of annexation’ are used, the benefit of the covenant is annexed or attached to the land, so that forever afterwards it passes automatically with the land to the new owner. In order to achieve express annexation, it is necessary that the words of the covenant should show that the original parties intended the benefit to run, and one way of doing this is to state expressly that the covenant is made ‘for the benefit of’ named land (Rogers v Hosegood 2 Ch 388). Another method which will have the same effect is for the covenant to be made with the covenantee as ‘estate owner’, that is, describing him as the owner of the land to be benefited. For example, Mr Raspberry covenanted with Miss Orange as ‘for the benefit of the owners for the time being of land abutting’ No. 18 and that included Miss Orange. These words would have the effect of attaching the benefit of the covenants to No. 17. It is not enough, however, for the covenant to Page 15 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants be made with the covenantee and his ‘heirs, executors administrators and assigns’ (or any similar set of words), for such a phrase does not link these people with the benefited land (Renals v Cowlishaw (1878) 9 ChD 125). Where a claimant seeks to establish express annexation, a problem will arise if the wording of the deed creating the covenant purports to annex it to an area of land which is so large that it cannot reasonably be said that the covenant confers actual benefit on the whole property. In Re Ballard’s Conveyance Ch 473, a covenant was said to be for the benefit of the whole of a large estate (approximately 690 hectares). In fact, the covenant could confer a benefit on only a small portion of that estate. Here the court said that, since the covenant did not confer a benefit on the whole estate, it could not run on a sale of the estate. Nor would it run when a part of the estate which was benefited was sold, because the court would not sever the covenant and attach it to parts of the land where the express wording of the deed did not allow for this (but see also Earl of Leicester v Wells-next-the-Sea Urban District Council Ch 110 and Small v Oliver & Saunders (Developments) Ltd 3 EGLR 141). As a result, when one drafts a covenant and wishes to attach it to a large area of land, it is wise (in order to avoid any disputes) to say that the covenant is for the benefit of ‘the whole or any part of’ the named land. This will allow the covenant to run with any part of the large estate which is actually benefited, and will also allow the benefit to be divided between several plots if the estate is ever sold off in that way (Marquess of Zetland v Driver Ch 1; and see Morrells of Oxford Ltd v Oxford United Football Club Ltd Ch 459 and at 25.4.3.3). 25.4.3.2 Implied annexation Where words of express annexation are lacking, some cases suggest that it may still be possible for the court to identify the benefited land by looking at the circumstances. Where the facts are held to indicate with reasonable certainty the land which is to be benefited, the benefit will thereafter run with that land. This way of proceeding has been called ‘implied annexation’. The notion of implied annexation is usually said to be derived from two decisions: Newton Abbot Cooperative Society Ltd v Williamson & Treadgold Ltd Ch 286 (the ‘Devonia’ case) and Marten v Flight p. 590 Refuelling Ltd Ch 115. The first of these cases ↵ was in fact concerned with assignment of the benefit, rather than with annexation, but it was welcomed as ‘a useful guide’ in Marten v Flight Refuelling Ltd (at p. 133). Here there had been no assignment of the benefit, and the court looked at the burdened land and the surrounding area, and came to the conclusion that the covenant had been taken for the benefit of land retained by the vendor. Wilberforce J mentioned with approval (at p. 132) that there seemed to be support for the view ‘that an intention to benefit may be found from surrounding or attending circumstances’. It has to be said that this decision stands very much on its own, and, further, that it has been suggested that the issue of annexation was not relevant (Ryder (1972) 36 Conv NS 26). The covenant was made with the executors of the previous owner, who were holding in trust for an infant beneficiary, and it was these executors and the former beneficiary, now absolutely entitled to the property, who sought to enforce the covenant. Thus, there was no transfer and the benefit did not need to run. The decision was also criticised as tending to increase the general uncertainty about the enforceability of covenants, for while questions of Page 16 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants express annexation can in general be decided from a study of the documents, a claim of implied annexation cannot be decided without an application to the court (Report of the Committee on Positive Covenants Affecting Land (Chairman: Lord Wilberforce) (Cmnd 2719, 1968), para. 15). However, in Shropshire County Council v Edwards (1982) 46 P&CR 270, at first instance, it was said explicitly that express words of annexation are not necessary if, on the construction of the relevant document, both the land to be benefited and an intention to benefit that land, ‘can be clearly established’ (see pp. 277–8). This may have resolved the matter but, in the majority of cases, no sufficiently clear intention can be discerned: see, for example, the Privy Council decision in Jamaica Life Assurance Society v Hillsborough Ltd 1 WLR 1101. 25.4.3.3 Statutory annexation These rather complicated rules about express annexation, and the uncertainty about implied annexation, may be of less importance since the decision of the Court of Appeal in Federated Homes Ltd v Mill Lodge Properties Ltd 1 WLR 594, which introduced the idea that in certain cases statutory annexation may be effective. The case before the court concerned a covenant by the defendant not to build more than a certain number of dwellings on the burdened land. It was clear from the wording of the document that the land to be benefited was neighbouring land retained by the covenantee, but there were no express words annexing the benefit of the covenant to that land. Later the covenantee sold this land and eventually it became the property of Mill Lodge Properties Ltd. In the case of part of the benefited land no problem about annexation arose, because the benefit of the covenant had been expressly assigned. In respect of the other portion of the land, however, there had been no assignment, but the court held that this did not matter because it was clear which land was intended to benefit, and accordingly the covenant was annexed to that land by LPA 1925, s. 78. In the words of Brightman LJ (at p. 605): If, as the language of section 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 to the covenantee, (2) a person deriving title under the covenantee or under his successors in title, and (3) the owner or occupier of the land intended to be benefited by the covenant, it must, in my view, follow that the covenant runs with the land, because ex hypothesi … every other owner and occupier has a right by statute to the p. 591 covenant. In other words, if the ↵ condition precedent of section 78 is satisfied—that is to say, there exists a covenant which touches and concerns the land of the covenantee—that covenant runs with the land for the benefit of his successors in title, persons deriving title under him or them and other owners and occupiers. One strange feature of this case, is that the defendant was the original covenantor. There was no need, therefore, to show that the burden had run with the land in equity, and accordingly one would have thought that the court would have been concerned only with whether the benefit ran at common law. Consideration of the equitable requirement of annexation was, strictly, unnecessary for the decision of the Page 17 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants case, and it would therefore be open to a later court to treat the statements about statutory annexation as obiter dicta (but see the discussion in Roake v Chadha 1 WLR 40). However, since that time it seems to have been accepted that s. 78 does have this effect in any case in which it is clear which land was intended to benefit. Also, it appears that the statutory annexation is to every part of the benefited land since the court assumed that every successor or derivative proprietor could claim under s. 78. If this is the effect of s. 78, it renders obsolete many of the traditional difficulties associated with express annexation, including the need to annex to the ‘whole or any part’ of the benefited land (if such a need exists—see 25.4.3.3). You should note, however, not everyone accepted that the decision in Federated Homes was correct. See particularly two articles by G. H. Newsom on this subject in (1981) 97 LQR and (1982) 98 LQR 202, in which it is argued that the decision is wrong. What is clear is that there are arguments that suggest that the decision is problematic. These include the following points. (1) The fact that a consequence is that covenants created before 1926 have to be treated in a different way. However, that is normally true with reforming legislation because it does not normally have retrospective effect. (2) This interpretation took until 1980 (54 years) to be applied and it is easily possible to interpret the provision in a more limited way, to cover the points mentioned earlier in this chapter. A similar provision actually originated in 1881 and this extends the period of judicial blindness to almost 100 years. It is also notable that s. 79 has not been applied in the same way, despite the similarity of wording. It should, however, be noted that the provision in the Conveyancing Act 1881 has been said by some to give clearer evidence of an intention to annex. (3) One might have expected the legislature to use clearer language to make such a marked change. The wording of ss. 76(6) and 77(5) show that where the legislature intended annexation to arise or be recognised, it uses clear language to produce that effect. Similarly, in s. 80(3) clear language is used to dispense with an old requirement for technical language in documents. (4) In Federated Homes two members of the Court of Appeal said that they agreed entirely with the comments made on annexation by Hall V-C in Renals v Cowlishaw (1878) 9 ChD 125 at p. 130. Yet that reasoning does not seem to tally with a subsequent owner of the benefited land being able to take the benefit of the covenant even though he or she may not have known of it and perhaps could not even be sure that it benefited the land, because this would not be clear from the documents creating the covenant. In Crest Nicholson Residential (South) Ltd v McAllister 1 WLR 2409, the Court of Appeal returned to the p. 592 issue of statutory annexation and affirmed it as a possibility but ↵ also considered some further issues about when s. 78 can be relied upon. The case also provides an interesting discussion of the differences between ss. 78 and 79 of the LPA 1925 and whether s. 78 produces ‘statutory annexation’ where the benefited land is not identified in the documents creating the covenant. Page 18 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants The case involved an estate which had been sold off in plots in the early 1930s by two brothers and their company (the company had a beneficial interest in the property arising from a contract with the brothers). The conveyance of each plot said that the covenants in the conveyance were given by the purchaser ‘to the intent that [the covenants would] be binding in so far as maybe on the owner for the time being’ of the plot sold. The covenants were substantially in the same terms in the case of each plot and were as follows: The premises shall not be used for any purpose other than those of or in connection with a private dwellinghouse or for professional purpose. No dwellinghouse or other building shall be erected on the land hereby conveyed unless the plans drawings and elevation thereof shall have been previously submitted to and approved of in writing by [the brothers’ company] but such approval shall not be unreasonably or vexatiously withheld. Some time after the plots had all been sold, the brothers’ company had been dissolved and therefore no longer existed as a legal person. The claimant and the defendant were successors in title to the original purchasers of two of the plots of land. The owner of one (a property called ‘Redruth’) was Crest Nicholson, which wished to demolish the house on Redruth to build a new house and an access road to new houses on other plots also now owned by the same party. Mrs McAllister was the owner of another plot (‘Newlyn’), at least part of which had been one of the original plots and which was sold after Redruth, and she contended that the development proposed by Crest Nicholson was in breach of the covenants and that she had the benefit of those covenants. Crest Nicholson brought the initial action in order to determine the effects of the covenants. On appeal the issue of whether the covenants had been annexed to the benefited land was raised. There had been no express annexation in the documents relating to some of the potentially benefited plots, including Newlyn. At first instance there was no issue taken as to annexation but in the Court of Appeal the issue was raised. The Court of Appeal followed the ‘statutory annexation’ approach it had adopted in Federated Homes v Mill Lodge Properties. However, it concluded (see Chadwick LJ at para. 33) that the land intended to be benefited still had to be so mentioned or defined in the documents creating the covenant that it was easily ascertainable (the requirement in Marquess of Zetland v Driver Ch 1). It was insufficient, in the view of the Court of Appeal, for the benefited land to be identifiable from the surrounding circumstances. As the documents relating to the property that had come into Mrs McAllister’s hands contained no references that could be relied upon to identify benefited land, the covenants were not annexed to Newlyn by operation of statute and could not be enforced by Mrs McAllister. Indeed, such references as existed in any of the documents relating to the string of transactions (when one included documents relating to all the plots sold) only suggested annexation to such land as the company retained from time to time (suggesting that on a sale by the company it was intended that the annexation ended). The Court of Appeal was content that s. 78 gave way to anything in the documents that indicated that enduring annexation was not intended. p. 593 ↵ Thus, Crest Nicholson is authority for at least two propositions: Page 19 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants (1) the land benefited must be identifiable from the documents creating the covenant and not just from extraneous facts; and (2) the effect of s. 78 gives way to anything in the documents that suggests that it was not intended that the benefit should be annexed so as to run with the land after sale. In the recent case of Bath Rugby Ltd v Greenwood EWCA Civ 1927, the Court of Appeal revisited the general principles governing the statutory annexation of the benefit of restrictive covenants in equity. In that case, a 1922 conveyance had included a covenant not to build on the land or start a business there that could amount to ‘a nuisance, annoyance or disturbance or otherwise prejudicially affect the adjoining premises or the neighbourhood’. Although the covenant was entered into before 1926, and the rules of statutory annexation did not apply, the general approach to identification of benefited land in Crest Nicholson was applied. The Court of Appeal held that a covenant for the benefit of ‘the neighbourhood’ did not sufficiently identify the benefited land and so annexation was not possible on the facts. Nugee LJ said: …it is not enough to see that the vendor owns adjoining property and that the covenant is plainly inserted with a view to benefiting the vendor accordingly; what is needed is an intention that the covenant is taken for the protection of defined lands of the vendor so that it goes with the land to successive owners, rather than being kept in the hands of the vendor for him to exploit. Finally, there is authority that—even for covenants created before 1926—the benefit of a covenant may be annexed to each and every part of the benefited land. In Small v Oliver & Saunders (Developments) Ltd 3 EGLR 141, the covenant in question was a covenant made in March 1925 and thus before the 1925 legislation came into force at the start of 1926. The claimant owned only a portion of the land that had been retained by the covenantee at the point that the covenant was made. The covenant was expressed to be for the benefit of the retained land and was worded to be made ‘to the intent that such covenant shall enure for the benefit of and be annexed to the remainder of the Beech Hill Park Estate’. However, the ‘magic’ wording ‘for the whole or any part of’ was missing. One issue was therefore whether these words or, perhaps more accurately, this intention, could be implied prior to s. 78 coming into force. Mark Herbert QC, sitting as a Deputy Chancery Division Judge, relied on statements of Brightman LJ and Megaw LJ in Federated Homes v Mill Lodge Properties 1 WLR 594, at p. 606 and p. 608 respectively to the effect that a covenant annexed to the whole of land must necessarily be annexed also to every part of that land. He concluded that those statements were: … statements of principle that, in the absence of any contrary intention, annexation to identified land of the vendor, whether statutory or express, enures for the benefit of every part of the land (para. 31). If this is correct, then the impact of s. 78 was less extensive than once had been suggested. It seems annexation to parts as well as the whole may apply even in relation to pre-1926 covenants, provided that there is nothing in the documents to suggest that the annexation was only intended to be to the whole of the retained property. Page 20 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants p. 594 25.4.3.4 Assignment Even where the benefit of a covenant has not been expressly annexed to land, it has always been the case that the covenantee could transfer that benefit by express assignment. The benefit of a covenant, like the benefit of any other contract, is a chose in action and can be assigned at will. If one relies on this method it is, however, necessary to show that there is an unbroken chain of assignments, so that on each sale of the benefited land the benefit has been passed to the new owner and has finally come to the person who now seeks to enforce the covenant (Re Pinewood Estate Ch 280). It is also essential that the right should be assigned to the purchaser of the estate at the time of the conveyance to him: an assignment made after the estate has been transferred is not acceptable (Re Union of London & Smith’s Bank Ltd’s Conveyance Ch 611 at p. 632). 25.4.3.5 Building schemes Some of the rules discussed would cause difficulty when applied to the development of a new estate, such as Rectory Crescent. As we have seen, each purchaser entered into covenants with the developer, but now the estate is completed Big Builders plc has sold all of its plots in the area and will move on to work elsewhere and will not be concerned with enforcing these covenants. What the purchasers want is to be able to rely on a sort of ‘local law’ for the area (Re Dolphin’s Conveyance Ch 654 at p. 662), which each householder can enforce directly against all the others. To a large extent, this could be achieved by the ordinary rules for freehold covenants, but this would be complicated and would depend on knowing the exact order in which the plots had been sold. Once the new properties built on the old Rectory land had been built and sold the position in Rectory Crescent was as shown in Figure 25.5. Page 21 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants Figure 25.5 Position after construction and sale of 1–6 Rectory Crescent 1. Rectory Crescent: the position without a building scheme In this example, plots 1 to 6 Rectory Crescent were sold in that order. If some time in the future, the successor of the original purchaser of No. 3 should fence the garden in breach of the covenant, those p. 595 holding plots sold after No. 3 (i.e., 4 to 6) could claim that they ↵ held land retained by the developer at the time of the sale of No. 3. The benefit of that purchaser’s covenant would be annexed to the retained land, assuming of course that the covenant had been drafted correctly. Therefore, it would have passed to them, or their predecessors in title, when the later plots were sold. Those who bought before the sale of No. 3 (i.e., 1 and 2) might be able to rely on LPA 1925, s. 56, if the covenant purported to be with the owners of those plots and provided that, if they are not the original purchasers, they can show that the benefit has passed to them under the usual rules. Proceeding in this way may not seem too difficult, but that is because we have simplified matters by saying that plots 1 to 6 were sold in that order. In real life, the houses on a new estate may be sold in no particular order, as purchasers make their choices. Fifty years or so later it could be quite difficult to know, in respect of a particular breach, who could proceed under s. 56 and who could rely on annexation. There is, further, the problem mentioned earlier that, because Big Builders plc retained no land when the last plot was sold, an essential rule for the running of the burden is not satisfied on the sale of that plot. Therefore, the successor to the original purchaser of No. 6 would take free of the covenant. However, all these difficulties are avoided if it can be established that the development satisfies the legal requirements of a ‘building scheme’. Page 22 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants 2. Requirements for a building scheme The traditional requirements for a building scheme were established in the Edwardian case of Elliston v Reacher 2 Ch 374, in which a building society had laid out an area for development in separate plots and had sold these using identical conveyances and imposing identical covenants upon each purchaser. The court held that the covenants were enforceable against all the successors to the original covenantor and set out four rules to be satisfied in order to establish a building scheme (sometimes called a ‘scheme of development’): (a) the purchasers must derive their titles from a common vendor; (b) before selling, the vendor must have laid out the land in lots (or plots); (c) on sale, the same restrictions must be imposed on all the plots, and it must be clear that those restrictions are intended to be for the benefit of all the plots sold; and (d) each purchaser must have acquired a plot on the understanding that the covenants were intended to benefit all the other plots in the scheme. 3. Developments after Elliston v Reacher In later cases, however, it has been established that these four rules provide only guidance, and that what is crucial is the intention of the parties to create a building scheme. Accordingly, a scheme was found in Baxter v Four Oaks Properties Ltd Ch 816, even though the whole area had not been divided into lots in advance of the first sale. In this case the developer had wished to allow purchasers to choose lots of varying sizes. Again, in Re Dolphin’s Conveyance Ch 654, a single scheme was established, even though the purchasers had not acquired from a common vendor. The first sales were made by two co-owners, but later the land came into the hands of their nephew, who continued the sale of plots and imposed covenants identical to those imposed by his aunts. The court considered that this satisfied the essential requirement, since it was quite clear that the various vendors did intend to create a local law for the area. If, however, a common intention cannot be established—for example, because the covenants vary between the plots of land—a building scheme will not exist (see Emile Elias & Co. Ltd v Pine Groves Ltd 1 WLR 305 and Small v Oliver & Saunders (Developments) Ltd 3 EGLR 141). p. 596 4. Advantages of establishing a building scheme Rectory Crescent would appear to be a clear example of such a scheme. Once a scheme has been established, it is necessary to consider what benefits will accrue. Although it is still necessary to establish that the rules in Tulk v Moxhay have been satisfied, the first benefit of a building scheme is that these rules are modified slightly in one respect, so that the burden will run with the last plot sold (here, No. 6). This happens despite the fact that the developer does not retain any land capable of being benefited. With this exception, all the other basic rules have to be observed: so there is no question of the burden of positive covenants being enabled to run under a building scheme, and the usual registration or protection by entry on the register is needed if successors of the covenantors are to be bound. Page 23 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants The second benefit of a building scheme is that all purchasers of plots in the scheme are enabled to enforce the covenants between themselves, irrespective of the date on which they, or their predecessors in title, bought their plots. There is thus no need to distinguish between the earlier purchasers, proceeding under s. 56, and the later purchasers, who rely on express annexation. Earlier purchasers will be able to obtain the benefit of later covenants, and that benefit will run with their plots automatically, provided that they can establish that a building scheme has been created. The third advantage of a building scheme is that, in equity, it will ensure that the benefit of the covenants imposed on other plots will automatically run to all successors of the original purchasers, without the need for express annexation or for assignment (although this may be less important since Federated Homes Ltd v Mill Lodge Properties Ltd 1 WLR 594). Besides the three advantages of the building scheme, such a scheme appears not to be subject to some of the other general principles relating to covenants. In Brunner v Greenslade Ch 993, it was established that both the benefit and the burden of covenants in a building scheme will run to affect someone who acquires only part of the original plot. Thus, where a plot is subdivided, the purchaser of one part may enforce the covenants against the purchaser of the other part and against all the other owners of plots forming part of the scheme. This rule was accepted because the aim of the scheme is to create a type of local legal system, and this aim would not be fulfilled if ‘islands of immunity’ developed in which covenants could not be enforced (as would happen if the owners of subplots could not enforce the covenants between themselves). Similarly, it appears that, should two plots come into common ownership and then later be divided again, the original covenants will revive automatically between the subsequent owners (Texaco Antilles Ltd v Kernochan AC 609). In general law this would not occur, for the common ownership would extinguish the covenants as between the two plots and the rights and duties created by the covenants would not revive when the plots were once more separated. The only way in which the covenants could be revived would be for the common vendor to require fresh covenants from each purchaser. However, when a building scheme can be established, the rights and duties under the original covenants will spring up again automatically when the plots are separated. Thus, the building scheme provides a useful exception to the ordinary rules on this point. Another interesting issue is what happens if the covenants cannot be shown to benefit the whole of the area described as falling within the scheme. In Whitgift Homes v Stocks 48 EG 130 (CS) the claimants were owners of 55 properties on an estate built in the 1920s. The defendants were owners of two properties, which they proposed to develop in a manner that was in breach of some of the covenants imposed by the original developer. The Court of Appeal accepted that LPA 1925, s. 78 would be effective p. 597 ↵ to annex the benefit of the covenants to all the plots on the estate. However, it was also held that in this case the building scheme tests could not be passed for the estate as a whole. At first instance it was held that this did not prevent it being possible to establish a scheme in relation to part of the whole estate. However, the Court of Appeal pointed out that it was necessary for the scheme to apply to a defined area (Reid v Bickerstaff 2 Ch 305), and said that here this was not possible because one could not clearly identify which of the properties on the estate formed part of the scheme. Page 24 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants 25.4.3.6 Letting schemes At this point it is worth noting that the building scheme rules are also capable of application to leasehold properties that are let as a scheme and, in such cases, allow the tenants to enforce some of the covenants in their leases against one another. An example is Williams v Kiley (trading as CK Supermarkets Ltd) 1 EGLR 47, in which five shops in a shopping parade had been leased and one tenant claimed that it was able to enforce a covenant against another tenant on the basis of a letting scheme. Here each lease dovetailed with the others to ensure each business did not compete with the others and this was held to demonstrate a sufficient reciprocity of obligation for a scheme to exist and thus for one tenant to enforce against the others. In Hannon v 169 Queen’s Gate Ltd (The Times, 23 November 1999), it was held that where a block of flats that was covered by a letting scheme was extended upwards, the scheme could stretch to cover that development. The court said that there was only a limitation in the horizontal plane. Thus, it should be borne in mind that the letting scheme can change in area over time but only upwards or, presumably, downwards. 25.5 The problem of positive covenants The fact that the burden of a covenant will not normally run at law, and that equity declines to enforce a positive obligation against the successor of the original covenantor, can prove decidedly inconvenient. You will recall that when 18 Trant Way was sold originally to Mr Raspberry he undertook to contribute towards the cost of the maintenance of the driveway which is shared with No. 17. Undoubtedly, the same conveyance gave him an easement of way over the same drive. When Mrs Strawberry bought No. 18, she will have acquired the benefit of the legal easement, but may claim that she is not obliged to contribute to the maintenance of the drive, as the burden of positive covenants does not run to the covenantor’s successors. This would produce an unfair result, and over the years conveyancers have developed a number of ways in which positive obligations can be made to bind successors. In addition, the common law has recognised one exception to the basic rule that it will not enforce burdens on later owners of the covenantor’s land. These methods of avoiding the disadvantages of the basic rules can accordingly be of considerable importance, and they are now considered individually. 25.5.1 The exception to the rule: Halsall v Brizell In the case of Halsall v Brizell Ch 169, the purchaser of a plot of land on an estate had been given various easements including an easement of way over the estate roads, and in return had covenanted to contribute to the cost of maintaining the roads, walls, and other facilities from which he derived a benefit. p. 598 A successor of the original ↵ purchaser claimed the benefit of the easements affecting the property but denied that he was obliged to make any payment, on the basis that the burden of a positive covenant would not run at law or equity. The court refused to accept this argument, holding that the successor in title could not take the benefit of an agreement unless he was also prepared to accept the related burdens (see also E. R. Ives Investment Ltd v High 2 QB 379, and Tito v Waddell (No. 2) Ch 106 at p. 290). For the rule to apply, the burden and benefit do have to be related to one another in some way. Comments by Megarry Page 25 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants V-C in Tito v Waddell (No. 2), which suggested that the benefits and burdens did not have to be interrelated provided that they were part of the same transaction, were expressly disapproved by the House of Lords in Rhone v Stephens 2 AC 310, in which Lord Templeman said (at p. 322): It does not follow that any condition can be rendered enforceable by attaching it to a right nor does it follow that every burden imposed by a conveyance may be enforced by depriving the covenantor’s successor in title of every benefit which he enjoyed thereunder. The condition must be relevant to the exercise of the right. In Halsall v Brizell there were reciprocal benefits and burdens enjoyed by the users of the roads and sewers. Accordingly, under this rule only related burdens can be enforced and, where there is no necessary relationship between the benefit exercised and the burden for which enforcement is sought, the courts will not act. The problems that this approach can produce when dealing with modern estate housing are illustrated very clearly by Thamesmead Town Ltd v Allotey (1998) 37 EG 161. Here the original covenantor had covenanted to pay a service charge to maintain roads, sewers, and landscaped and communal areas on an estate. Mr Allotey acquired a property from the original covenantor and was held not to be liable to make payments in relation to the landscaped and communal areas because he had obtained no entitlement to benefit from these areas. He did, however, have to pay the service charge in relation to the roads and sewers, which he had a right to use and did use. The possible arguments that may arise where someone argues that they never use a facility and thus are not going to pay for it can be imagined. However, if they have a right but simply do not choose to use it, this argument should fail. A recent example of the difficulties that can arise in relation to positive covenants can be found in Elwood v Goodman Ch 442, which, inter alia, concerned the effect of the burden in equity of a positive covenant to contribute to the cost of maintaining a road in the case of registered land. You will recall that the aim of the land registration legislation is to produce a register that can be relied upon as accurate to the interests applicable on purchase of a property, subject to those interests that are made to override. However, the burden in equity of a positive covenant is not capable of creating an estate or interest in registered land and therefore it is not registrable under what was s. 20(1) of the LRA 1925. Accordingly, it does not have to be registered to be binding on a successor of the original covenantor. As the obligation could prove to be an expensive one, this constitutes an unhelpful gap: the register is a mirror of title but does not necessarily reveal all the positive obligations that may arise in connection with ownership of the property. You will see in this case that the court was of the view that the covenant to pay for an estate road was accordingly binding on a purchaser of the burdened estate in land. The principle in Halsall v Brizell may assist the current owner of 17 Trant Way, in compelling Mrs Strawberry to contribute to the cost of the repairs recently made to the shared driveway. The rule is also p. 599 frequently of considerable importance when one ↵ is dealing with a building scheme in which positive covenants for the maintenance of shared facilities may be necessary. Page 26 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants 25.5.2 Evasion of the rules by techniques of drafting There are numerous ways in which the burden of a positive covenant can be imposed on a later acquirer of burdened land. 25.5.2.1 Granting leases Where a lease is granted, covenants in the lease which fall within the rule in Spencer’s Case or pass under the Landlord and Tenant (Covenants) Act 1995 will bind the tenant’s assignees (see Chapter 11). In such cases, the law makes no distinction between positive and negative obligations, and covenants to contribute to the cost of maintenance or to an insurance premium are common. As a result, a vendor may well choose to grant a long lease of property, rather than selling the fee simple estate. In the case of blocks of flats, where the enforcement of positive obligations may be crucial, it is exceptionally rare for the flat owners to hold estates in fee simple, and leases are the norm. In such cases, the purchaser may well pay as much as would have been paid to acquire a freehold estate, but will obtain only a wasting asset. In addition, the tenant’s ownership will be subject to the landlord’s rights of re-entry and to a continuing obligation to pay ground rent. The tenant may also encounter the difficulty that mortgagees may be less willing to lend money on the security of a leasehold property. All this is quite a high price to pay to enable the vendor to ensure that the burden of positive covenants passes to the successors in title of the covenantee. The new commonhold system was designed to meet these problems but it has not proved popular in practice (see 8.6). In practice, the issue is sometimes addressed by the leaseholders acquiring the freehold and vesting it in a management company in which they each hold a share. 25.5.2.2 Indemnity covenants Another method of circumvention is to impose upon the covenantor an obligation to require an indemnity covenant from his successor. Should the covenant be broken, the covenantee can then sue the original covenantor, who remains liable on the covenant; he or she will sue their successor, and so on down the line. This method is not, however, very effective, because it is dependent on the maintenance of an unbroken chain of indemnity covenants. In the case of Thamesmead Town Ltd v Allotey (25.5.1) this approach broke down on the first transfer. In addition, after some years it may prove impossible to find the original covenantor in order to enforce against him or her. 25.5.2.3 Creating estate rentcharges Another possible method is for a vendor to require the purchaser to grant the vendor an estate rentcharge over the land. You will remember that a rentcharge imposes a duty on the current estate owner to make regular payments of money to the person entitled to the charge (see 2.5.1), and so a rentcharge can be useful where it is wished to impose an obligation to contribute to the cost of maintenance; it might, for example, have been used in relation to the shared driveway at 17 and 18 Trant Way. However, in addition to this, the rentcharge can be used to enforce other positive obligations beyond the mere payment of money, for the owner of the charge has a legitimate interest in maintaining the value of the land, and so can Page 27 of 43 Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice). Subscriber: Royal Holloway, University of London; date: 12 February 2025 25. Freehold covenants require the estate owner, when the rentcharge is granted, to enter into covenants for repair and maintenance. The rentcharge, and its associated obligations, run with the land to bind successive owners. p. 600 The right of re-entry ↵ which supports the rentcharge enables the owner of the charge to enter on the land and do the work, if the estate owner fails to repair. The estate rentcharge was exempted from the general bar on the creation of rentcharges imposed by the Rentcharges Act 1977 (see s. 2), and so may still be created. It takes effect as a legal interest in land. In the case of registered land, the rentcharge must be substantively registered in order to be legal. Where a rentcharge is granted in relation to a registered estate, its creation does not operate at law until the registration requirements are met (LRA 2002, s. 27). If the rentcharge is granted for a term of years of up to and including seven years’ duration, the requirement is to enter a notice on the register of the burdened land (LRA 2002, s. 27(4) and Sch. 2 para. 7). In the case of any other rentcharge the person granted the charge must be registered as proprietor of the rentcharge and a notice must be entered against the register relating to the estate that has been charged (LRA 2002, s. 27(4) and Sch. 2 para. 6). In the case of unregistered land, it is good against the world (LPA 1925, s. 1(2)). The decision in Orchard Trading Estate Management Ltd v Johnson Security Ltd 18 EG 155 illustrates the use that may be made of the estate rentcharge. The court considered the application of the tests in the Rentcharges Act 1977 for a valid estate rentcharge and the decision indicates how they will be applied in practice. It concerned a rentcharge en

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