BLOGS

 Covenants and Enforceability

What is a covenant?

A covenant is a promise; a promise to do something (positive covenant) or a promise not to do something (negative/restrictive covenant) on or with your land. Whilst you, yourself, physically enter into the covenant, it is technically speaking your land which will either reap the benefit or be burdened and not yourself. This means that when you sell your property, it is possible for your successor in title (i.e., your buyer) to enforce or have enforced against themselves the covenant. 

Whilst this may seem daunting, covenants are very common… and can also be very strange! A common example of a restrictive covenant is the prevention of you building on your land without the written permission from your local council, whereas at the opposite end of the spectrum, your land may be restricted against how many chickens can be on your land. In the latter example, the land burdened by the covenant is the land which is restricted to the number of chickens that can be kept on their land, whereas, the land which has the benefit is the land that benefits from not having a certain amount of chickens of the burdened land. 

What is the issue?

Due to the contractual principle of privity of contract (i.e., only the parties to a contract can enforce it), the original parties who enter into the covenant can enforce the covenant between themselves; there is no issue here. However, the issue lies with successors in title who want to enforce the covenant (because they were not parties to the original agreement). Therefore, two sets of rules have been developed to pass to the successor the benefit and the burden of the covenant: the common law rules and the equitable rules.

It is important at this point to note that you cannot mix the rules (i.e., if the burden is passed by the equitable rules, the benefit must pass under the equitable rules).

Equitable rules – burden

The general rule at common law (the burden of the covenant cannot pass to a successor) lead to the introduction of the equitable rules. Henceforth, a covenant can now be enforced against the person in breach (who is a successor).

In 1848, the case of Tulk v Moxhay laid down the equitable to pass the burden of a covenant:

- The covenant must be restrictive in nature (meaning positive covenants cannot pass in equity; the common law rules can assist);

- The covenant must ‘accommodate’ the land benefiting from the covenant;

‘Accommodate’ means:

A) the covenantee and its successors must hold an interest in land at the time of creation and enforcement;

B) the covenant must touch and concern the land; and

• This means the covenant:

I) must only benefit the owner of the benefiting land whilst they are owners of the same;

II) must affect the nature, quality, value or use of the benefiting land; and

III) must not be expressly personal.  

C) the benefiting land and the burdened land must be in proximity.

- An intention for the burden to run with the land must exist; and this can be shown either:

A) Expressly: the covenant states the successors in title are to be bound; or

B) Impliedly: unless there is a contrary intention expressed, the Section 79 of the Law of Property Act 1925 deems that a covenant is intended to run with the land.

- Notice.

This depends on whether the land is registered or unregistered:

A) Registered: an entry of a notice in the charges register of the burdened land protects the covenant.

B) Unregistered: the covenant should be registered as a Class D(ii) Land Charge.

Equitable rules - Benefit

For a successor covenantee to enforce a covenant, the benefit must also pass. This is achieved in the following way:

- The covenant must touch and concern the benefiting land (this is the same as above); and

- The benefit must pass by one of three methods:

A) Annexation; or

This is where the covenant becomes a permanent part of the land

B) Assignment; or

Where the covenant has not been annexed to the land, the benefit of the covenant needs to be assigned every time the benefiting land is transferred.

C) Building scheme

The final alternative for passing the benefit entails all parties buying their properties from the same seller and there is an intention that all buyers benefit from the same covenants. 

The investigation into these three methods is beyond the scope of this blog but helpfully, statutory annexation means the covenant is simply deemed to become part of the benefiting land.

Common law – burden

The general rule is that the burden does not pass at common law. The original covenantor remains liable and therefore the covenant can be enforced against the original covenantor in respect of the original covenantor’s own breaches as well as breaches by their successor. Therefore, an indemnity covenant can used. The original covenantor can recover costs from their direct successor, who then in turn can recover from their own direct successor and so on. If this indemnity covenant is entered into every time the burdened land is sold, it may be possible for the original covenantor to recover its losses by suing down the chain of indemnity to the successor who actually breached the covenant. Please note, this does not mean the burden passes, but merely it is a way for the covenant to be enforced.

As a side note, an indemnity covenant is a method of enforcement of positive covenants. This is because the title deeds (unregistered land) or the Official Copy of the Register (registered land) may contain a covenant for the successor to the burdened land to obey all covenants already mentioned in the deeds or register; the purchaser is, in effect, promising to obey all covenants and if any of covenants are positive then the purchaser is therefore agreeing to obey such covenant.

Nevertheless, there are further exceptions to the fact the burden does not pass at common law. The doctrine of mutual benefit and burden is this exception. Whilst it is outside the scope of this blog to investigate this doctrine, the doctrine allows for the burden to pass where the benefit and burden are so closely intertwined.

Common law – benefit

The benefit passes at common law either by:

- Express assignment; or

- Implied assignment 

The investigation into this is outside the scope of this blog.

Remedies

Now you know the situations in which a covenant can be enforced, but what remedies are you entitled to if someone has threatened to breach or has in fact breached a covenant?

If a covenant has passed using the equitable rules, the covenant can be enforced against the successor owner of the burdened land. However, equitable remedies are made at the discretion of the court. Most commonly, an injunction is granted. 

However, if the benefit and burden are passed at common law, the only remedy available is damages. 

This blog has provided foundational information as to how covenants are enforced, however, you are advised to speak to a qualified legal professional if you have any covenant problems.