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.
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. This includes recognising positive covenants and advising on their enforceability.
As you work through this article, remember to pay particular attention in your revision to:
- 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.
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.
- True or False? The burden of a positive covenant automatically binds successors in title to the original covenantor at common law.
- 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.
- 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.
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).
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). 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.
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:
- The original covenantor (A) sells to B. B gives A an indemnity covenant.
- B sells to C. C gives B an indemnity covenant.
- 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.
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.
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:
- Correlation: The benefit and burden must be explicitly or implicitly linked; the burden must be relevant to the exercise of the benefit.
- 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.
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]).
Other Methods
- Estate Rentcharges: A legal mechanism attaching a periodic payment obligation to freehold land, which can be linked to the performance of covenants. This is less common now due to statutory restrictions but can still be encountered.
- 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.
- Commonhold Schemes: A form of freehold ownership for multi-unit properties where positive obligations are enforced through a Commonhold Community Statement. This is rarely used in practice.
- 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.
Implications for Title Investigation
When investigating title, you must identify any positive covenants affecting the property.
- Identify the Covenant: Scrutinise conveyances, transfers, and charges registers for wording indicating positive obligations (repair, maintain, contribute, build, etc.).
- 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)?
- Are there other mechanisms like estate rentcharges or restrictions present?
- Advise the Client: Explain the nature of the obligation, the potential for enforceability, the associated costs or actions required, and the risks if the covenant is binding and breached. Report these findings to the buyer and any lender, as they impact value and marketability.
- Consider Solutions: If a problematic positive covenant exists (e.g., onerous maintenance obligation, uncertainty about costs), explore solutions like indemnity insurance (though often difficult for positive covenants unless relating to a past breach), seeking release or variation from the person with the benefit, or advising the client on the potential ongoing liability.
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, 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), estate rentcharges, and restrictions on the register.
- 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).
- During title investigation, identify positive covenants and assess their enforceability using the mechanisms discussed.
- Advise buyers and lenders on the implications of enforceable positive covenants.
Key Terms and Concepts
- Positive Covenant
- Burden (of a Covenant)
- Benefit (of a Covenant)
- Chain of Indemnity Covenants
- Benefit and Burden Rule
