Экзамен зачет учебный год 2023 / Dixon, Modern Land Law

Modern Land Law

A common reason why there may have been no land owned by the covenantee which was intended to benefit from the covenant at the time it was given, is the simple one that the original covenantee may not have retained any such land at that time. For example, if Smith sells Blackacre to Jones, and in the sale Jones (as original covenantor) covenants with Smith (as original covenantee) not to build on Blackacre, the burden may run to Jones’ successors in title only if Smith retained some land at the time the covenant was executed.34 If Smith sold everything at that time (i.e. he kept no portion of Blackacre), he remains the original covenantee, but has no benefited land, and so the burden cannot pass to successors of the original covenantor. Likewise, the covenant must have been undertaken in order to benefit the land and be capable of so benefiting. Thus the substance of the covenant must be such that it confers a proprietary advantage on the covenantee’s land35 and the relationship between the plots of land must be such that a benefit does indeed accrue. So, like easements, it would be unusual for a covenant to be transmissible if it imposed a burden on one plot of land for the alleged benefit of land that was not reasonably geographically close.

8.5.4The burden of the restrictive covenant must be intended to run with the land

A further condition is that the burden of the restrictive covenant must have been intended to run with the land of the original covenantor. That is, there must be evidence to establish that the ‘burden’ was intended to be enforceable whosoever came into possession of the burdened land. However, this is not difficult to establish because, in the absence of a contrary intention, the burden of a restrictive covenant is deemed to be attached to the land by virtue of section 79 of the LPA 1925. According to section 79(1):

A covenant relating to any land of the covenantor … shall, unless a contrary intention is expressed, be deemed to be made by the covenantor on behalf of himself, his successors in title and the persons deriving title under him.

By virtue of this section, the burden of a covenant is deemed to be made by the original covenantor on behalf of himself and all future owners of the land, thereby annexing the burden of the covenant to that land because of a statutory presumption of an intention that it shall run.36 The burden may

34Formby v. Barker (1903).

35This appears to be equivalent to the touching and concerning requirement. ‘Land’ here means the estate of the covenantee, so a covenant specifically imposed to benefit a tenant’s leasehold interest only, may be enforced only by the holder of the lease (Golden Lion Hotel v. Carter). Absent a specific limitation to a particular estate, the benefit may then be enforced by the holder of any estate in the land and in the case of restrictive covenants by an adverse possessor (section 78 of the LPA 1925).

36Tophams Ltd v. Earl of Sefton (1967).

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then become enforceable against such successors. A ‘successor’ is someone with a legal or equitable estate in the land37 and, for restrictive covenants only, includes any person in occupation of the land without an estate, such as an adverse possessor (section 79(2) of the LPA 19250. Of course, this statutorily assisted annexation of the burden occurs ‘unless a contrary intention appears’, and it is clear that the covenant does not have to recite specifically that section 79 is inapplicable to exclude its effect.38 A ‘contrary intention’ will ‘appear’ from the instrument creating the covenant if there is anything in it indicating that successors in title or assigns of the original covenantor would not be bound, as in Morrells v. Oxford United FC (2000) where section 79 was found to be excluded by the whole tenor of the arrangement between the parties. Clearly, whether section 79 of the LPA 1925 is so excluded is a matter of construction, and so the safest course for someone wishing to exclude statutory annexation of the burden would be to say so in clear terms in the deed of covenant.

8.5.5 Registration

The fifth and final condition that must be satisfied before the burden can be enforced against a successor to the original covenantor arises because such burdens are enforced only in equity. In short, restrictive covenants are equitable interests in another’s land, and in consequence must comply with the rules of registered and unregistered conveyancing relating to such interests.

8.5.5.1 In registered land

If the person against whom the restrictive covenant is being enforced is a purchaser of a registered title under a properly registered disposition, the covenant must have been protected by the registration of a Notice against the burdened title in order to be enforceable.39 Should it not be so registered, it loses its priority and cannot be enforced (section 29 of the LRA 2002).40 Of course, most transferees of the burdened land will be purchasers and

37Mellon v. Sinclair (1996).

38Re Royal Victoria Pavilion, Ramsgate (1961).

39Given that registration will occur normally when the covenant is made, registration is likely to be with the agreement of the registered proprietor of the burdened plot (the original covenantor) and thus an Agreed Notice may be used. However, a Unilateral Notice may be used if such agreement is not forthcoming or indeed if it is desired to keep specific details of the covenant off the register and away from public inspection.

40Such a covenant would have been registrable as a minor interest under the LRA 1925 and void against a purchaser (section 20 of the LRA 1925).

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registered as title holders in this way41 and most restrictive covenants will have been protected by registration of a Notice at the time they were created. However, even if not protected by the entry of a Notice, a restrictive covenant will nevertheless remain enforceable against a transferee in two cases (section 28 of the LRA Act 2002). First, it will remain enforceable (whether registered or not) against a registered proprietor who is not a purchaser of the burdened land for valuable consideration; for example, the donee of a gift, a devisee under a will or a squatter. Second, it will remain enforceable (whether registered or not) against someone who purchases only an equitable interest in the land; for example, an equitable tenant or a purchaser who fails to register his or her disposition.42

8.5.5.2 In unregistered land

If the person against whom the restrictive covenant is being enforced is a purchaser of a legal estate in the burdened land for money or money’s worth, the covenant must have been registered against the name of the original covenantor as a class D(ii) land charge under sections 2(5) and 4(6) of the Land Charges Act (LCA) 1972 in order to be enforceable. Of course, most transferees will be purchasers of this type and most covenants will be registered. However, if the restrictive covenant is not registered in this way, it will be void and unenforceable forever if the land is sold to a purchaser43 and cannot be revived by subsequent registration when the land becomes registered. Note, however, that even an unregistered restrictive covenant can be binding in some circumstances. First, against someone who is not a purchaser, for example, the donee of a gift, the devisee under a will or a squatter; second, against someone who does not give ‘money or money’s worth’, for example, the recipient of land under the marriage consideration; and third, against someone who purchases only an equitable estate, for example, an equitable tenant.44

41Or treated as such, as with lessees under a legal lease that cannot be substantively registered (section 29(4) of the LRA 2002).

42Such a purchaser does not take under a registered disposition. In addition, it is plausible that a purchaser under a registered disposition might agree expressly to give effect to an unprotected covenant in return for paying a lower price for the land. In such a case, the purchaser may be required in equity to give effect to the unprotected covenant by means of a constructive trust (Lyus v. Prowsa Developments; Binions v. Evans).

43Such a purchaser will purchase under the rubric of unregistered conveyancing and will apply for first registration of title. If the covenant was registered as a class D(ii) land charge, it will be transferred to the new registered title and a Notice will be entered against the newly registered title. If it is not so registered, it would have become void on the sale and remains void at first registration (section 11 of the LRA 2002).

44Note also the possibility put forward in Lyus v. Prowsa Developments and Binions v. Evans noted above.

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8.5.6 The equitable nature of the remedy

To conclude, then, the burden of a restrictive covenant may run in equity to successors of the original covenantor if certain conditions are met. In the great majority of cases, the conditions will be met, and the only live issue is likely to be whether the covenant was appropriately registered. Assuming that it was – and the other conditions are satisfied – the burden runs and the defendant is liable. Even then, however, the award of equitable remedies is discretionary, and the claimant may not get what he asked for. For example, in Thamesmead Town v. Allotey, damages were awarded instead of the desired injunction.45 In the worst possible scenario for the claimant, the court might decide that he has behaved so inequitably that neither an injunction nor damages should be awarded, despite the fact that the burden of the covenant has run to the defendant. This might occur in cases where there has been unreasonable delay on the part of the person seeking to enforce the covenant or where the claimant has stood by while the defendant has breached the covenant. So, in Gafford v. Graham, the claimant was denied both an injunction and damages in respect of the breach of one covenant because he had acquiesced in the conduct which was in breach and was granted only damages in respect of another breach. Importantly, however, it is now clear that the denial of a remedy depends on the claimant having behaved unconscionably (Harris v. Williams-Wynne (2006)). For example, in Williams-Wynne, the defendant had never believed that he was bound by the covenant against building and thus the claimant’s acquiescence in the breach was not the reason why the defendant had gone ahead. Consequently, the claimant was not denied a remedy as his actions had produced no effect on the defendant, and so it was not unconscionable to seek to enforce the covenant. Damages were awarded.46 Although one can see the logic of this position – that if a defendant would have behaved as they did in any event then the claimant’s acquiescence is not the reason for the breach of covenant – the decision here might well be as far as we can go. We might argue that the relevant point is not whether the claimant’s acquiescence caused the defendant’s breach of covenant, but whether the claimant should have done something to stop the defendant breaching the covenant. Thus, if the claimant knew that the covenant was binding, and knew that the defendant incorrectly believed that it was not, then perhaps the claimant is behaving unconscionably by allowing the defendant to continue in his mistaken belief, such unconscionability becoming crystallised as an estoppel when detriment is incurred?47

45See also Small v. Oliver & Saunders (2006).

46There was no claim to an injunction or order of specific performance and, of course, it is likely that these remedies would have been denied.

47See Chapter 9 on proprietary estoppel.

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8.6Principle 3: passing the benefit of a covenant to successors in title to the original covenantee

As indicated at the beginning of this chapter, in all cases where it is proposed to enforce a covenant, it must be possible to show both that the defendant has the burden and that the claimant has the benefit of the covenant. There must be correlative rights and obligations. Before dealing with the matter in detail, a number of preliminary points relating to the passing of the benefit should be noted.

First, the benefit of a covenant may be passed at law or in equity (unlike the burden, which passes only in equity). The conditions for the transmission of the benefit in equity are slightly easier to satisfy than those needed to pass the benefit at law. Also, the benefit of both positive and restrictive covenants may pass at law and in equity, although the fact that only the burdens of restrictive covenants may pass means that if the original covenantor has parted with the land, only restrictive covenants are in issue. Second, given again that only the burden of restrictive covenants may pass, and then only in equity, in practice the claimant usually pleads that the benefit has also passed in equity (as explained in Gafford v. Graham (1998)). This will give us our claimant (benefit) and defendant (burden) suing in equity. In effect then, this means that the passing of the benefit of covenants at law and the passing of the benefit of positive covenants are relevant in practice only when the claimant is suing the original covenantor as this is the only person liable in such cases.

8.6.1 Passing the benefit of positive and negative covenants at law

To reiterate, passing the benefit of positive and negative covenants at law will be relevant only when the claimant – the successor to the original covenantee – is claiming the benefit of such covenants in order to sue the original covenantor. If any other person is the defendant, the claimant must sue in equity, and on a restrictive covenant, as it is only the burdens of these that are capable of passing. With that practical limitation in mind, the conditions for the passing of the benefit of a freehold covenant at law are as follows.

1First, the covenant must ‘touch and concern’ the land of the original covenantee (Rogers v. Hosegood (1900)). In other words, as before, the covenant must relate to use of the land and not be merely personal in nature. The test of ‘touching and concerning’ is the same as that for pre-1996 leasehold covenants and has been discussed above. In essence, we are searching for a covenant that could benefit any estate owner as opposed to the particular original covenantee or for a covenant that affects the nature, quality, mode of user or value of the land, not being one which is expressed to be personal to the original covenantee.48

48 Swift Investments v. Combined English Stores (1989) and see Sugarman v. Porter (2006).

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2Second, the claimant must have a legal estate in the land, although, by virtue of section 78 of the LPA 1925, the claimant does not have to have the same legal estate as the original covenantee. Thus, the original covenantee may have been the freeholder, but the claimant will succeed even if they have ‘only’ a legal lease. Importantly, however, any occupier (including a squatter) may enforce the benefit of a restrictive covenant. This is because section 78 of the LPA 1925 deems ‘the owners and occupiers for the time being’ to be successors in title for the purpose of enforcing restrictive (but not positive) covenants. This mirrors the position in respect of the burden of restrictive covenants.49

3Third, the benefit of the covenant must have been annexed to a legal estate in the land, either expressly or by implication. A covenant may be annexed expressly by words which make it clear that the covenant is for the benefit of certain land, or by words which make it clear that the covenant is intended to endure for successive owners of the land; for example, where a covenant is with the ‘heirs and successors of X, the owner for the time being’ of Plot 2. In either case, however, the land must be readily identifiable, and capable of benefiting from the covenant (Re Gadd’s Transfer (1966)) and this must be possible at the time the covenant is executed, rather than the (later) time when the title to which it relates (i.e. on which the benefit is conferred) is presented for registration.50 This has the happy side-effect that the benefit of a freehold covenant still annexes to the estate in the land even if the first owner of the benefited land (i.e. the original covenantee) delays or forgets to apply for registration as proprietor. This is to be contrasted with the unhappy side-effect produced by Brown and Root v. Sun Alliance (1996) in the law of leasehold covenants in pre-1996 leases, where lack of registration of the lease seriously disrupts the passing of the leasehold covenant.51 A covenant will be assumed to benefit land where it affects the value, method of enjoyment or mode of user of the land to which it is annexed. Importantly, however, as well as annexation by the act of the parties, a covenant52 may be annexed by virtue of section 78 of the LPA 1925, as discussed in Federated Homes v.

Mill Lodge Properties (1980), Whitgift Homes v. Stocks (2001) and Crest Nicholson Residential v. McAllister (2004). According to the Court of

49See section 79(2) of the LPA 1925, section 8.5.4.

50Mellon v. Sinclair (1996).

51See further Chapter 6.

52That is, covenants entered into on or after 1 January 1926. For pre-1926 covenants, express or implied annexation by act of the parties is required.

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Appeal in Federated Homes, section 78 of the LPA 1925 has the effect of statutorily annexing the benefit of every covenant – both positive and negative – to each and every part of the benefited land. The only conditions are that the land is capable of benefiting from the covenant and that the land can be easily identified from the deed. This second condition – that the land to be benefited must be easily identified from the deed for statutory annexation to apply – once generated some uncertainty, for it was not clear whether the covenant itself had to describe the land in such a way that it was identifiable (albeit with the aid of some extrinsic evidence) or whether it was sufficient (on a more generous view) for the land to be identified even if it was not described in some way in the deed. Now, however, Crest Nicholson has settled the matter. In that case, McAllister was seeking to enforce covenants that had not been expressly annexed and Chadwick LJ was faced with the puzzle posed by Federated Homes. In essence, his Lordship applied the test put forward in the earlier case of Marquess of Zetland v. Driver and decided that in order for statutory annexation to apply, the covenant must describe the land in such a way that it is easily ascertainable from the covenant, albeit with the assistance of some extrinsic evidence. This is, then, broadly in line with the narrower of the two possible interpretations of Federated Homes but it does accord with the principle that the benefit is being attached to land by the covenant and so the covenant itself must identify the land.53 Extrinsic evidence will thus be available to bring clarity to the description provided by the covenant, but not to identify the land when the covenant itself is silent. In practice, this means that, unless a contrary intention is clearly shown,54 the benefit of most covenants will now be annexed to the covenantee’s land and be available to a purchaser of it, or part of it, provided that the covenant itself identifies the land in such a way that the benefited land is easily ascertainable.55 The decision in Federated Homes was of considerable interest and this is not lessened by the clarification provided by Crest Nicholson. The overall effect is to ensure that the benefit of covenants (created after 1925) will attach to each and every part of benefited land, and (subject to the other conditions) will run to successors in title of the original covenantee, even if the original benefited land is subsequently sold off in parts. So, if X (original covenantor) covenants with Y that no trade or business is permitted on X’s land,

53This was effectively the position adopted in Whitgift Homes v. Stocks (2001).

54Roake v. Chadha (1984), confirmed in Crest Nicholson.

55It may therefore require care when drafting covenants.

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the benefit of that covenant will attach to each and every part of Y’s land, and subsequent purchasers of the whole, or part, will obtain the benefit of it.56 If we then imagine that Y is a property developer, selling off individual plots on a housing estate, the wide impact of this interpretation of section 78 seems obvious, as apparent from very similar facts in Whitgift Homes (2001). However, although much has been written about Federated Homes; for example, whether section 78 of the LPA 1925 was ever intended to have this wide effect – it is not at all clear that the interpretation has had much effect on the practical realities of freehold covenant disputes.

In most cases, the covenant will have been drafted expressly to permit annexation, expressly to exclude it or to provide for express assignment of the benefit (see section 8.6.2). This means that practical impact of Federated Homes will be felt most readily in those less frequent cases where the covenant is silent or ambivalent about its intended effect on purchasers of the benefited land (usually as a result of inattentive drafting) in which case statutory annexation to each and every part may follow. Whitgift Homes v. Stocks (2001) is just such a case, concerning a dispute over a housing development completed in the 1920s and 1930s and where statutory annexation was central to the question whether certain covenants were now enforceable.

4As an alternative to annexation, it is possible for the benefit of a covenant at law – the right to sue – to be assigned expressly to another person. This is in essence the assignment of a ‘chose in action’ within section 136 of the Law of Property Act 1925 and must be in writing, with written notice being given to the covenantor. It is not a very common method of passing the benefit at law, especially given the impact of the Federated Homes case discussed above.

So, to conclude this analysis, if the above conditions are satisfied, the claimant, being a successor to the original covenantee, may sue at law any person who is subject to the burden of the covenants. However, in practice, because of the limited ability of burdens to pass and then only in equity, the defendant to an action on the covenant at law is going to be the original covenantor. No other person can be liable at law and the same is true if the covenant is positive.

8.6.2 Passing the benefit of covenants in equity

This brings us to consideration of the principles concerning the passing of the benefit in equity. The rules about to be discussed apply equally to positive

56 For example, Robins v. Berkeley Homes (1996).

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and negative covenants, but (once again) because the burden of a positive covenant cannot run, the principles have developed primarily in the context of restrictive covenants and their enforcement against successors of the original covenantor. With that significant point in mind, there are a number of conditions to be satisfied in order to establish that the benefit of a covenant has passed in equity.

1First, the covenant must ‘touch and concern’ the land of the original covenantee (Rogers v. Hosegood (1900)). This is identical to the position ‘at law’, discussed above. We might note, however, that if the claimant is trying to use the ‘freehold’ rules to enforce a leasehold restrictive covenant against, say, a subtenant or squatter (i.e. not an assignee of the original tenant), it is arguable that the Landlord and Tenant (Covenants) Act 1995 has removed the ‘touching and concerning’ requirement for a restrictive covenant contained in a lease granted on or after 1 January 1996. So, for example, if the landlord is attempting to enforce a restrictive covenant prohibiting ‘any occupier wearing brown shoes’ – which clearly does not touch and concern – it is arguable that the benefit of this covenant runs to a new landlord because of the 1995 Act. We shall probably never know whether this is correct, because, in practice, it is unlikely that a landlord would ever wish to enforce such a clearly personal leasehold restrictive covenant against an occupier.

2Second, the claimant must have a legal or equitable estate in the land of the original covenantee. Again, this is similar to the position ‘at law’, and by virtue of section 78 of the LPA 1925, the claimant does not have to have the same estate as the original covenantee. For example, the claimant may be the equitable tenant of the original covenantee. Moreover, it remains true that any occupier (including a squatter) may enforce the benefit of a restrictive covenant because section 78 deems ‘the owners and occupiers for the time being’ to be successors in title for the purpose of enforcing restrictive (but not positive) covenants. It will be appreciated that this is particularly important given that a claim in equity will usually be to enforce a restrictive covenant against a successor of the original covenantor in a situation where the burden of a restrictive covenant may well have passed.

3Third, the benefit of the covenant must have been transmitted to the claimant in one of three ways:

(i)Annexation: express and statutory. The benefit of a covenant can be expressly annexed to the land in equity in exactly the same way as at law. Indeed, the same words will, in most cases, annex the benefit of the covenant at law and in equity simultaneously.

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Again, it is important that the words establish that the covenant is for the benefit of certain land, or make it clear that the covenant is intended to endure for successive owners of the land. This was not the case in the marginal decision in Lamb v. Midas Equipment (1999), where the Privy Council held, on appeal from Jamaica, that a covenant to X and ‘his heirs, executors, administrators, transferees and assigns’ (surprisingly) did not result in express annexation to the land but was meant to describe the covenantee personally. Moreover, the land must be readily identifiable at the time the covenant is executed – Mellon v. Sinclair (1996) – and be capable of benefiting from the covenant, according to the general test laid down in Re Gadd’s Transfer (1996). Once again, however, it is the effect of section 78 of the LPA 1925, as discussed in Federated Homes and clarified by Crest Nicholson v. McAllister that is most important here. As already explained in the context of covenants running at law, according to section 78, ‘[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.’ Although this was thought to be a ‘word saving’ provision which simply ensured that ‘successors’, and so on, were deemed to be included in the deed, but without doing away with the necessity of finding the relevant express intention to annex, Brightman LJ, in Federated Homes makes it clear that the effect of section 78 (by including these words in the deed) is to annex automatically the benefit of the covenant to the covenantee’s land. Again, of course, the land has to be readily identifiable from the deed as explained in Crest Nicholson and capable of benefiting from the covenant, but, if these conditions are satisfied, the benefit of the covenant is annexed to each and every part of the land. It will, therefore, be available to a purchaser of the whole or any part of it. Again, as noted, ‘automatic statutory annexation’ can be avoided by an express contrary intention (Roake v. Chadha (1984))57 and the doubts expressed earlier about the practical impact of Federated Homes are equally applicable here. However, as a consequence of the combination of better drafting skills (to ensure express annexation) and Federated Homes, it now seems that the other

57See also Sugarman v. Porter (2006), where there was an intention to benefit only the original covenantee, thus providing a sufficient contrary intention to prevent the operation of section 78 of the LPA 1925.

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