Investigation of title - Positive covenants and their enforc...

Learning Outcomes

This article explores the nature of positive covenants affecting freehold land and the challenges surrounding their enforceability against successors in title. It outlines the common law position and equitable exceptions and workarounds. For the SQE1 assessments, you will need to understand the distinction between positive and restrictive covenants and identify the methods by which positive covenants may be enforced in practice. Your understanding will enable you to analyse title investigation findings and advise clients on the implications of positive covenants for property ownership and use. You should also be able to apply the mutual benefit and burden test to typical estate maintenance scenarios, recognise when a restriction on the register is being used to secure a fresh deed of covenant from successors, assess the role of estate rentcharges in enforcing contributions, and give practical, title-based advice to buyers and lenders about compliance, costs, and risk.

SQE1 Syllabus

For SQE1, you are required to demonstrate an understanding of how positive covenants affect freehold land and the practical implications for title investigation, including recognising positive covenants and advising on their enforceability, with a focus on the following syllabus points:

• the distinction between positive and restrictive covenants
• the general common law rule that the burden of positive covenants does not run with the land
• methods used to ensure the enforceability of positive covenants against successors in title
• the implications of positive covenants when investigating title.
• how a deed of covenant backed by a restriction operates to bind each buyer in turn in registered land
• the scope and limits of the mutual benefit and burden doctrine (Halsall v Brizell; Thamesmead Town v Allotey; Rhone v Stephens)
• the use and enforcement of estate rentcharges and lender concerns
• alternatives such as commonhold and grant of a lease where running positive obligations are needed

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. True or False? The burden of a positive covenant automatically binds successors in title to the original covenantor at common law.
2. Which equitable principle allows the burden of a positive covenant to be enforced if it is linked to a corresponding benefit enjoyed by the landowner? a) Promissory estoppel b) The rule in Tulk v Moxhay c) The doctrine of mutual benefit and burden d) Restrictive covenant discharge scheme.
3. Which of the following is a common method used in conveyancing to create an indirect obligation on a successor in title to comply with a positive covenant? a) Registering the covenant as a Class C(iv) Land Charge b) Including a declaration of trust in the transfer deed c) Requiring the successor to enter into a chain of indemnity d) Obtaining a court order for specific performance against the original covenantor.

Introduction

When investigating title to freehold property, you will frequently encounter covenants – promises made by deed. These can be restrictive (preventing certain actions) or positive (requiring action or expenditure). While restrictive covenants generally 'run with the land' in equity if properly protected, positive covenants present specific challenges regarding enforceability against successors in title. Understanding how these obligations function and persist is essential for advising clients accurately on their property rights and liabilities.

In practice, positive covenants commonly require owners to repair, maintain or contribute towards shared infrastructure (private roads, landscaped areas, boundary structures, drainage runs), to comply with estate regulations, or to join and remain a member of a management company and pay charges. On modern freehold estates, these obligations are often secured using a combination of private-law techniques that do not rely on the burden running with the land at common law. Your title investigation should evaluate which technique has been used and its practical effect on future owners, including your buyer client.

The Nature of Positive Covenants

A positive covenant imposes an obligation on the covenantor (the person making the promise, usually the landowner) to do something, typically involving expenditure or action relating to the land.

Key Term: Positive Covenant
A promise made in a deed that requires the covenantor to take some action or spend money in relation to land. Examples include covenants to maintain a fence, repair a shared driveway, or contribute to the upkeep of communal areas.

This contrasts with restrictive covenants, which limit the use of land (e.g., not to build more than one house or not to use the property for business purposes). The key distinction lies in whether compliance requires expenditure or action (positive) or merely refraining from action (restrictive). The form of words is not conclusive: a covenant framed as "not to allow the roof to fall into disrepair" is substantively positive because it compels maintenance and outlay.

Other typical positive covenants you may encounter include:

• to pay a fixed or variable contribution towards the cost of maintaining a private estate road, lighting and landscaping
• to keep particular boundary structures in good order
• to maintain or reinstate a shared drainage run or septic tank
• to observe estate regulations issued by a management company and to pay a service charge
• to enter into a deed of covenant with a third party (e.g., a management company or a neighbouring owner) and to procure that future buyers will do the same.

Worked Example 1.1

A transfer deed contains a covenant stating, 'The Transferee covenants with the Transferor not to allow the boundary hedge on the northern boundary to fall into disrepair'. Is this a positive or restrictive covenant?

Answer:
This is a positive covenant. Although phrased negatively ('not to allow...'), compliance requires the Transferee (and their successors, potentially) to take positive action (maintain the hedge) and likely incur expenditure.

The Problem of Enforceability: The Burden at Common Law

The fundamental issue with positive covenants is the common law rule established in Austerberry v Oldham Corporation (1885) that the burden (the obligation to perform) of a covenant does not run with the land at common law. This means that the obligation does not automatically pass to bind successors in title to the original covenantor.

Key Term: Burden (of a Covenant)
The obligation imposed by the covenant on the owner of the land affected by it.

While the original covenantor remains contractually liable for the duration of the covenant (even after selling the land), the covenantee (the person with the benefit) cannot directly enforce the positive obligation against subsequent owners of the burdened land at common law.

Key Term: Benefit (of a Covenant)
The right to enforce the covenant, usually held by the owner of the land which benefits from the covenant.

The benefit of both positive and restrictive covenants can run with the benefited land at common law if certain conditions are met (touching and concerning the land, intention for benefit to run, original covenantee held legal estate, successor holds legal estate). Section 78 Law of Property Act 1925 often operates to annex the benefit to the land in equity. However, the inability of the burden of positive covenants to run presents a significant practical problem, particularly in managing estates or properties with shared responsibilities.

Equity will not generally make the burden of a positive covenant run either. The famous equitable rule in Tulk v Moxhay allows the burden of restrictive covenants to bind successors if properly protected (notice/registration), but it does not extend to positive covenants. Therefore, practitioners rely on carefully structured alternatives.

Mechanisms for Enforcing Positive Covenants

Despite the common law position, several methods have developed to ensure, indirectly or directly, that positive obligations are performed by successors in title. For SQE1, you must be able to identify and understand these mechanisms.

Chain of Indemnity Covenants

This is a common, albeit potentially flawed, method used in conveyancing.

Key Term: Chain of Indemnity Covenants
A sequence of personal covenants given by each successive buyer of land to their immediate seller. The buyer promises to comply with the original positive covenant and to indemnify (compensate) the seller if the buyer's failure to comply results in the seller being sued by the original covenantee.

How it works:

1. The original covenantor (A) sells to B. B gives A an indemnity covenant.
2. B sells to C. C gives B an indemnity covenant.
3. C sells to D. D gives C an indemnity covenant.

Effect: If D breaches the positive covenant, the original covenantee (or their successor with the benefit) can sue the original covenantor (A) for breach of contract. A can then use the indemnity covenant to sue B, B can sue C, and C can sue D. This creates a chain reaction, indirectly pressuring the current owner (D) to comply.

Where to find it: In registered land, a standard proprietorship register entry often confirms that the transfer to the proprietor contains a covenant to observe covenants in the charges register and an indemnity in respect thereof. In unregistered land, you will find the indemnity in the conveyance itself.

Limitations:

• The chain is only as strong as its weakest link. If any party in the chain becomes insolvent, disappears, or dies without assets, the chain is broken, and the indemnity becomes worthless beyond that point.
• It creates personal contractual liability, not a direct obligation attached to the land itself.
• It can be cumbersome to operate in practice and may not satisfy third parties expecting direct enforcement (e.g., management companies).

Worked Example 1.2

Prem owns Lot 1 and sells Lot 2 to Quentin, imposing a positive covenant for Quentin to maintain a shared pathway. Quentin covenants to indemnify Prem. Quentin sells Lot 2 to Rashid, and Rashid covenants to indemnify Quentin. Rashid sells Lot 2 to Suki, and Suki covenants to indemnify Rashid. Suki fails to maintain the pathway. Prem successfully sues Quentin (as original covenantor) for damages. Can Quentin recover his loss?

Answer:
Yes. Quentin can enforce the indemnity covenant he received from Rashid. Rashid, in turn, can enforce the indemnity covenant he received from Suki. Ultimately, Suki, the current owner who breached the covenant, bears the financial responsibility through the chain of indemnities. However, if Rashid had disappeared or become insolvent, Quentin might not have been able to recover his loss.

Doctrine of Mutual Benefit and Burden

This equitable doctrine, often referred to as the rule in Halsall v Brizell [1957], provides a more direct way to enforce positive covenants in certain situations.

Key Term: Benefit and Burden Rule
An equitable principle stating that a person who takes the benefit of a deed or right (e.g., using a shared service or facility) must also accept any corresponding burden imposed by that deed or linked to that right (e.g., contributing to its maintenance), provided certain conditions are met.

Conditions for application:

1. Correlation: The benefit and burden must be explicitly or implicitly linked; the burden must be relevant to the exercise of the benefit. The contribution must relate to the cost of the specific amenity used (e.g., paying for the upkeep of the road the owner uses).
2. Choice: The successor in title must have the opportunity to choose whether or not to take the benefit. If they choose to take the benefit, they implicitly accept the linked burden. They cannot take the benefit without the burden.

The Court of Appeal in Thamesmead Town Ltd v Allotey [1998] confirmed that the burden will only run in equity under this doctrine if the successor has a genuine choice and the burden is proportionate to, and conditional upon, the use of the benefit. In Rhone v Stephens [1994], the House of Lords emphasised that the rule cannot be used to impose unrelated positive obligations (e.g., a covenant to undertake structural repairs to a roof was not enforceable simply because the benefited land enjoyed support).

Worked Example 1.3

A housing development includes a private access road. Each house sale included a deed granting a right of way over the road (benefit) and a covenant to contribute to the road's maintenance costs (burden). Tanya buys one of the houses from the original purchaser. She uses the road daily. Can the management company enforce the maintenance contribution covenant against Tanya?

Answer:
Yes, likely via the benefit and burden rule. Tanya chooses to take the benefit of the right of way each time she uses the road. The obligation to contribute to maintenance is directly correlated to this benefit. Therefore, she must accept the burden of contributing to the maintenance costs. She cannot use the road without accepting the linked obligation.

Limitations: The rule requires a clear link and a genuine choice. It cannot be used to enforce unrelated positive obligations (Rhone v Stephens [1994]). Contributions should be related to the cost of the amenity used and, where appropriate, proportionate to use (Thamesmead v Allotey).

Other Methods

• Estate Rentcharges: A legal mechanism attaching a periodic payment obligation to freehold land, which can be linked to the performance of covenants. New rentcharges are generally prohibited by the Rentcharges Act 1977, but estate rentcharges are permitted and commonly used on freehold estates to secure contributions to communal services and maintenance.

Key Term: Estate Rentcharge
A charge on freehold land securing periodic payments (e.g., estate service charges) to enforce positive obligations, typically for maintaining shared amenities on a private estate. Estate rentcharges can be enforced by action for debt and, in some cases, by remedies under section 121 Law of Property Act 1925 (including a right of entry and grant of a lease until arrears are paid). Lenders may require assurances limiting the use of draconian enforcement remedies.

• Granting a Lease: Instead of selling the freehold, the owner could grant a long lease. The burden of positive covenants does run with leasehold land between the landlord and tenant due to privity of estate. This is often used in blocks of flats to manage repairs and service charges, but it is also occasionally used for houses where freehold enforcement would be difficult.

• Commonhold Schemes: A form of freehold ownership for multi-unit properties where positive obligations are enforced through a Commonhold Community Statement. This ensures that obligations bind successive unit holders, providing a statutory solution to the positive covenant problem, although commonhold remains rare in practice.

Key Term: Commonhold
A statutory freehold system (Commonhold and Leasehold Reform Act 2002) for multi-unit developments in which unit owners are members of a Commonhold Association and are bound by a Commonhold Community Statement, allowing positive obligations (e.g., contributions to shared parts) to bind successors.

• Restriction on the Register: For registered land, a restriction can be entered requiring a certificate of compliance with positive covenants before a disposition can be registered. This indirectly enforces compliance by obliging each new owner to enter into a fresh deed of covenant.

Key Term: Restriction on the Register
An entry on the title of registered land preventing registration of a disposition unless specified conditions are met, commonly the transferee entering into a deed of covenant with a third party to perform estate obligations. This device compels each buyer to become contractually bound, providing practical continuity of positive obligations without the burden running with the land.

A deed of covenant backed by a restriction is now the most prevalent technique for new-build estates: each buyer covenants directly with the management company or covenantee; the restriction ensures that on resale the transferee must covenant in the same terms and produce a compliance certificate so their purchase can be registered.

Worked Example 1.4

A 2019 transfer of a freehold house on a private estate contains covenants to pay estate charges and to abide by estate regulations in favour of the management company. The title includes a restriction stating that no disposition is to be registered unless a conveyancer certifies the transferee has entered into a deed of covenant with the company in the form approved. The buyer, Isla, proposes to sell without giving any covenant. Will her buyer be registered?

Answer:
No. The Land Registry will not register the buyer’s title unless the restriction is satisfied. Isla’s transferee must enter the deed of covenant with the company and obtain the required certificate. The restriction compels each successor to become contractually bound notwithstanding that the burden of the original covenants does not run with the land at common law.

Worked Example 1.5

A freehold house is subject to an estate rentcharge of £250 per annum to fund road lighting and landscaped areas. The owner, Leo, falls into arrears and ignores demands. The management company threatens enforcement action under section 121 Law of Property Act 1925. Leo’s lender expresses concern. What is the risk and how might it be managed?

Answer:
Section 121 LPA 1925 gives powerful remedies to a rentcharge owner, including a right to enter and grant a lease over the property until arrears are cleared. Lenders dislike the risk that such a lease could take priority over the mortgage. In practice, management companies often agree not to use the most draconian remedies and will pursue debt recovery or apply for a court order instead. Many lenders require the rentcharge owner to enter into a deed (or the estate documents to include terms) limiting enforcement to non-draconian methods. Leo should regularise arrears quickly and, where possible, ensure that the estate documentation addresses lender requirements.

Worked Example 1.6

Omar owns a house with rights to use a private car park maintained by neighbours under a covenant to contribute to maintenance costs. Omar prefers to park on the street and never uses the car park. Can the neighbours enforce the contribution covenant?

Answer:
Under the mutual benefit and burden doctrine (as refined in Thamesmead v Allotey), enforcement depends on correlation and choice. If Omar has a genuine choice not to use the car park and does not take the benefit, he cannot be compelled to pay for its upkeep merely because the right exists. If, however, his property design necessitates occasional use of the car park (e.g., access to his garage) and he takes the benefit, the obligation to pay a fair contribution may be enforceable while he uses it.

Implications for Title Investigation

When investigating title, you must identify any positive covenants affecting the property and evaluate how, notwithstanding the common law, they may bind your client.

1. Identify the Covenant: Scrutinise conveyances, transfers, and the charges register for wording indicating positive obligations (repair, maintain, contribute, build, join, comply, pay, procure). For unregistered title, read the epitome of title and any referenced prior deed imposing covenants.

2. Assess Enforceability: Determine if any mechanisms make the covenant binding on your buyer client (the successor in title).

   • Is there an unbroken chain of indemnity covenants noted in the title documents (often mentioned in the proprietorship register for registered land)? If so, advise the client they will likely need to provide a similar indemnity upon purchase.
   • Does the benefit and burden rule potentially apply (e.g., use of shared facilities linked to contribution covenants)? Confirm that the burden relates to the specific amenity used and that there is a genuine choice (Thamesmead).
   • Is there a deed of covenant backed by a restriction on the register? If a restriction requires a compliance certificate, factor in the need to engage with the third party (management company or covenantee) and any associated fees and timescales.
   • Does the title refer to an estate rentcharge? If so, obtain details of the sum, review the rentcharge instrument, and consider lender requirements and enforcement protections.
   • Are there other mechanisms like grant of a lease or commonhold?

3. Raise Enquiries: In addition to general enquiries of the seller, obtain information and documentation about estate or communal obligations:

   • Copies of any management scheme/regulations, accounts, budgets and last three years’ demands and receipts
   • Details of calculation of contributions and any anticipated major works
   • Confirmation of compliance to date and any disputes, notices or arrears
   • Costs and process for obtaining any compliance certificate required by a restriction.

4. Advise the Client and any Lender: Explain the nature of the obligation, the method of enforcement, typical costs, and the consequences of breach. Lenders will expect clarity on mechanisms such as rentcharges and restrictions. If an estate rentcharge exists, consider whether estate documents address lender concerns about enforcement.

5. Consider Solutions:

   • If obligations are onerous or uncertain, explore whether the person with the benefit will agree variations or more transparent budgeting
   • Indemnity insurance may be available to cover risks associated with previous breaches of covenants (though prospective compliance obligations are not usually insurable)
   • Where covenants are old or unclear, and the beneficiary is unknown, insurance may be a pragmatic solution for historical issues (note insurance conditions often prohibit approaching potential beneficiaries)
   • Advise on the feasibility of commonhold or leasehold structure where positive obligations need to bind future owners (e.g., in a multi-unit development).

6. Registration and Completion: Where a restriction requires a certificate, engage early with the management company or their agents to avoid delay. Budget for any administration fees payable to issue compliance certificates. Ensure transfer drafting includes any necessary indemnity covenant or obligation to enter a deed of covenant so your buyer can satisfy the restriction promptly.

Revision Tip

Remember that the burden not running at common law is the key issue for positive covenants. Always check how a positive obligation might still be enforceable against your client (indemnity chain, benefit/burden, rentcharge, deed of covenant plus restriction) rather than assuming it is not binding simply because it is positive.

Key Point Checklist

This article has covered the following key knowledge points:

• Positive covenants require the covenantor to act or spend money, unlike restrictive covenants which prohibit actions.
• The burden of positive covenants does not run with freehold land at common law to bind successors in title.
• Mechanisms to enforce positive covenants against successors include chains of indemnity, the doctrine of mutual benefit and burden (Halsall v Brizell; refined in Thamesmead v Allotey), estate rentcharges, and restrictions on the register requiring a fresh deed of covenant.
• A chain of indemnity creates personal contractual liability passed from buyer to buyer; its effectiveness depends on the chain remaining unbroken.
• The benefit and burden rule applies where taking a benefit (e.g., using a shared road) is conditional upon accepting a related burden (e.g., paying maintenance). It does not apply to unrelated structural obligations (Rhone v Stephens).
• Estate rentcharges provide a statutory route to enforce contributions on freehold estates, but enforcement powers must be understood and, where possible, limited to address lender concerns.
• A restriction on the register can effectively compel each transferee to enter a deed of covenant, providing practical continuity of obligations on modern estates.
• Commonhold and granting a lease are structural alternatives when continuous positive obligations are essential.
• During title investigation, identify positive covenants and assess their enforceability using the mechanisms discussed. Advise buyers and lenders on compliance, costs, and risks, and plan for required certificates or consents.

Key Terms and Concepts

• Positive Covenant
• Burden (of a Covenant)
• Benefit (of a Covenant)
• Chain of Indemnity Covenants
• Benefit and Burden Rule
• Estate Rentcharge
• Restriction on the Register
• Commonhold