Introduction
Covenant land law pertains to legally binding promises that concern land, established between two or more parties. These covenants are significant because they dictate how land may be used and may affect subsequent owners. A primary technical principle is the distinction between positive and negative (restrictive) covenants, which directly impacts their enforceability. A key requirement for a covenant to run with the land is that it must 'touch and concern' the land, meaning it directly relates to the use or value of the property. These agreements, therefore, function as a crucial mechanism for regulating land usage within a framework that binds not only the original parties, but also future owners, depending on certain conditions. The legal framework governing these covenants is complex, with its origins in both common law and equitable principles, further shaping their application in property disputes.
Understanding the Nature of Covenants
Covenants in land law represent contractual agreements concerning real property. These may be found within deeds of transfer or in separate agreements, and they establish obligations or limitations on the use or development of land. A critical understanding of covenant land law begins with classifying covenants as either positive or negative. A positive covenant requires the covenantor to perform an action, such as maintaining a fence or paying a service charge. Conversely, a negative or restrictive covenant prevents the covenantor from doing something, such as building on a property or operating a business. This distinction is vital because the burden of positive covenants generally does not run with the land, while the burden of negative covenants often does under certain conditions.
The enforceability of covenants is not uniform; it is contingent upon various factors including, whether the land is registered or unregistered, and the date the covenant was made. For instance, in registered land, notice on the charges register is critical for protecting the beneficiary of a covenant. This is because a restrictive covenant can be enforced by any party that has the benefit of the covenant against any party that has the burden of that covenant, irrespective of a contractual link between the parties. This principle is a core function of covenants. Additionally, the concept of "touch and concern" is central, this refers to the extent to which a covenant directly affects the use, value, or nature of the land. A covenant must be considered to benefit the land to have the effect of binding successors in title to it.
Running of the Burden and Benefit
A crucial aspect of covenant land law is understanding how the benefit and burden of covenants pass with the land to subsequent owners. The 'benefit' of a covenant is the right to enforce it, whereas the 'burden' is the obligation to adhere to it. At common law, the burden of a covenant does not run with the land to subsequent purchasers, except for covenants in leases. This limitation is a result of the contractual nature of covenants and the privity of contract principle. However, Equity has long provided a means to enforce restrictive covenants against subsequent owners, particularly if they had notice of the covenant at the time of the purchase. This position was first seen in Tulk v Moxhay [1848] EWHC J34 (Ch). The principle arising from this case, is that a restrictive covenant can pass to a subsequent owner if that individual was aware of the covenant at the time of purchase.
The benefit of a covenant, on the other hand, can run with the land at both common law and in equity, provided that certain conditions are met. It should be demonstrated that (a) the covenant touches and concerns the land; (b) at the time of the creation of the covenant the intention was for the benefit to run; and (c) the successor of the covenantee is the owner of the land that has the benefit of the covenant. An important factor in determining whether a benefit runs with the land, is whether the covenant was expressly annexed to the land by the original agreement. In cases where a benefit is annexed to land, an express assignment of the benefit is not required, as it will run automatically: Rogers v Hosegood [1900] 2 Ch 388. The legal mechanism of annexation can ensure a high level of success in enforcing a restrictive covenant.
Building Schemes and Covenants
A building scheme, also known as a scheme of development, is a situation in which a common vendor sells plots of land subject to similar covenants, intended to mutually benefit all the purchasers. This concept is particularly relevant when considering the enforcement of covenants within residential developments. The four fundamental concomitants of a valid building scheme, as outlined in Elliston v Reacher [1908] 2 Ch 374, are:
- Common vendor: Owners derive title under a common vendor.
- Defined area: The vendor laid out a defined portion of land in lots for sale subject to restrictions intended to be imposed on all lots, consistent with some general scheme of development.
- Mutual benefit: The mutual restrictions were intended by the vendor to be for the mutual benefit of all the plots to be sold.
- Purchaser’s knowledge: The purchaser of the plots must have bought with the knowledge that the restrictions were for the benefit of other lots in the general scheme.
These conditions have been softened in case law, but the need to show some form of intention for the benefit to be mutual to all lots within the scheme remains a key characteristic. Texaco Antilles Ltd v Kernochan [1973] AC 609 clarified that if some lots of land in a building scheme come under the same ownership, their restrictive covenants become enforceable again when they come under separate ownership. However, if all lots come under the same ownership, their covenants cease. Building schemes are a prime method for enforcing restrictive covenants within the boundaries of a scheme of development.
Remedies for Breach of Covenant
When a covenant is breached, several remedies are available to the beneficiary, with the most common being an injunction. Injunctions are equitable remedies, which are not awarded as of right. However, the courts often prefer to prevent breaches by way of an injunction, unless the four conditions in Shelfer v City of London Electric Lighting are made out, a criteria which is sometimes referred to as the ‘working rule’. Jaggard v Sawyer [1995] 1 WLR 269 is also useful to illustrate that damages are only awarded where it would be oppressive to grant an injunction. The four conditions for damages being awarded in place of an injunction are; (1) the injury to the plaintiff's legal right is small, (2) the injury is capable of being estimated in money, (3) the injury can be adequately compensated by a small money payment and (4) it would be oppressive to the defendant to grant an injunction.
Other remedies include damages. These are the typical remedy at common law for breach of contract, and where an injunction is refused damages may be awarded under s 50 of the Senior Courts Act 1981. The measure of damages in cases of breach of covenant will typically aim to put the claimant in the position they would have been, had the covenant been upheld: Wrotham Park Estate v Parkside Homes [1974] 1 WLR 798. As mentioned, these damages are often limited to the amount that would have been reasonably negotiated between the parties, for the relaxation of the covenant.
In relation to leasehold covenants, forfeiture and/or re-entry are often remedies that are included in the lease itself. Where there has been a breach of covenant that entitles a landlord to re-enter the property, they must first serve notice on the tenant under s 146 of the Law of Property Act 1925. This notice must specify the nature of the breach and provide the tenant with an opportunity to remedy it (if capable). A number of authorities, including Scala House and District Property Co Ltd v Forbes [1974] QB 575, have clarified that a breach not to assign a sub-letting was not a breach that could be easily rectified.
Discharge and Modification of Covenants
Restrictive covenants are not intended to last forever. Where they do, this can be problematic for a property and its development. In order to rectify this issue, s 84 of the Law of Property Act 1925 gives the Upper Tribunal (Lands Chamber) the power to discharge or modify restrictive covenants, subject to certain criteria. The four grounds for modification or discharge are as follows:
- Obsoleteness: The covenant should be considered obsolete due to changes in the character of the locale or other relevant circumstances. Re Quaffers Ltd’s Application(1988) 56 P & CR 142, Lands Tr. is a key case in this respect.
- Impediment of Reasonable User: Its continued existence would impede some reasonable user of the land.
- Agreement by Beneficiaries: Those with the benefit of the covenant agree to the discharge or alteration.
- Lack of Injury to Beneficiaries: The proposed discharge or alteration will not injure the beneficiaries.
The Tribunal has discretion to award compensation in cases of modification or discharge, if deemed appropriate. An important development is that planning permission granted on the land is not the deciding factor as to whether a restriction should be altered or discharged, it is simply one element of a large range of factors which are considered: Re Cordwell’s Application [2008] 2 P & CR 570. The tribunal must also balance the nature of the covenant, with the benefit the covenant bestows upon other land in the surrounding areas: Re Martin’s Application (1989) 57 P & CR 119. A key consideration is whether the applicant understood that they were bound by a covenant when they entered the land in question: Re Page’s Application (1996) 71 P & CR 440, Lands Tr.
Conclusion
Covenant land law functions as an important framework in the English legal system, allowing the regulation of land use and obligations over time. Its reliance on equity as well as common law has allowed the principles to be flexible enough to react to evolving social dynamics. From the basic definition of covenants, to complex matters of annexation, building schemes, remedies, and the discharge of restrictive covenants, the application of covenants are far reaching in modern law. Understanding these complex principles is required for both law students and practitioners to effectively engage with the legal framework. The principles of covenant land law remain an important mechanism for managing property disputes and planning obligations throughout England and Wales.
