Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 All...

Facts

• The dispute involved a restrictive covenant prohibiting the construction of more than 300 dwellings on a plot of land.
• Federated Homes, the claimant, sought to enforce this restrictive covenant against Mill Lodge, the defendant, which had acquired the land with knowledge of the restriction.
• The court was required to determine whether the benefit of this restrictive covenant had passed automatically to Federated Homes as a successor in title.
• The covenant was considered within the context of a building scheme involving multiple plots intended to benefit from and be subject to common restrictions.

Issues

1. Whether section 78 of the Law of Property Act 1925 creates statutory annexation, automatically attaching the benefit of restrictive covenants to land.
2. Whether the restrictive covenant was enforceable by the claimant, as a successor in title, against the defendant.
3. Whether the common intention necessary for the operation of a building scheme was present.
4. Whether the benefit of the restrictive covenant passed to and could be enforced by successive owners within the building scheme.

Decision

• The Court of Appeal determined that section 78 LPA 1925 operates to effect statutory annexation, attaching the benefit of the covenant to the land automatically unless a contrary intention is expressed.
• The restrictive covenant in question was found to "touch and concern" the land and thus qualified for statutory annexation.
• The benefit of the covenant was held to pass automatically to successive owners of the land, making it enforceable by Federated Homes against Mill Lodge.
• The court concluded that the restrictive covenant formed part of a building scheme, and that all plots within the scheme benefited from and were bound by the covenant.
• The decision departed from prior authority requiring express annexation or assignment.

Legal Principles

• Section 78 LPA 1925 provides that covenants relating to land are deemed made with the covenantee’s successors unless otherwise stated, enabling statutory annexation.
• For statutory annexation, the covenant must "touch and concern" the land, directly affecting its use or value.
• In the context of building schemes, evidence of a common intention among original parties is required for mutual enforceability of covenants.
• Automatic annexation under section 78 facilitates enforceability of restrictive covenants by successors in title without the need for express wording.
• The court recognised potential consequences for purchasers, including being bound by restrictive covenants of which they may not have been aware.

Conclusion

Federated Homes Ltd v Mill Lodge Properties Ltd confirmed that section 78 LPA 1925 operates to annex restrictive covenants to land automatically, ensuring their enforceability by subsequent owners. The decision clarified the application of statutory annexation, especially in building schemes, and remains a leading authority on the enforceability of restrictive covenants under English property law.