Covenant Enforcement: Privity and Equity

Introduction

Covenants are promises in a deed that bind landowners to do something (positive covenants) or to refrain from doing something (restrictive covenants). The central questions are who has the benefit, who bears the burden, and which successors in title can enforce or are bound.

Two legal ideas frame the topic:

• Privity of contract: only the original parties to the covenant can sue on the contract.
• Privity of estate: relevant in landlord and tenant law, where some promises can bind successors because of the continuing relationship of the leasehold estate.

In freehold land, rules on passing the benefit and burden are shaped by the Law of Property Act 1925, the Land Registration Act 2002 (for registered land), the Land Charges Act 1972 (for unregistered land), and a long line of cases. This guide sets out when original parties and successors can enforce covenants, the difference between restrictive and positive obligations, how building schemes work, and the remedies available.

This is focused on England and Wales.

What You’ll Learn

• Who can enforce as the original covenantee, and when that right ends
• How the benefit of a covenant can pass to successors at law and in equity
• Why the burden does not pass at common law, and when it binds in equity
• The conditions from Tulk v Moxhay for restrictive covenants to run
• How building schemes allow plot owners to enforce against each other
• Why positive covenants do not bind freehold successors, and the practical workarounds
• Remedies for breach: injunctions, specific performance, and damages
• How trusts (including Quistclose) can interact with covenant enforcement

Core Concepts

Privity and the original parties

• The initial covenantee (the person to whom the promise is made) can sue the original covenantor by virtue of privity of contract.
• If the covenantee keeps part or all of the benefited land, they may still enforce the covenant while holding that land. If they dispose of the whole of the benefited land, they cannot later assign the benefit; once they have parted with the whole, the right to assign is lost (Re Union of London and Smith’s Bank Ltd [1933] Ch 611).
• Privity of estate allows many leasehold covenants to bind successors to the lease, but this is a separate regime to freehold covenants.

Passing the benefit to successors

At common law, the benefit of a covenant can pass to successors if:

• It touches and concerns the benefited land (i.e. affects its mode of use or value).
• The original covenantee held a legal estate.
• The parties intended the benefit to run.
• The benefited land is identifiable.

Routes for passing the benefit:

• Express assignment on each transfer of the benefited land.
• Annexation to the land (expressly in the deed, or by statute). Section 78 LPA 1925 is read as automatically annexing the benefit to the land unless excluded. Modern cases stress that the benefited land must be identifiable from the documents (Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 WLR 594; Crest Nicholson v McAllister [2004]).

In equity, the benefit of a restrictive covenant runs with the land if the covenant touches and concerns the land and the benefited land is sufficiently ascertainable (Re Union of London and Smith’s Bank).

Does the burden run? Common law vs equity

• Common law: the burden of a covenant does not pass to freehold successors (Austerberry v Corporation of Oldham (1885) 29 Ch D 750). A later owner at law is not liable on the covenant simply because they own the land.
• Equity: the burden of a restrictive covenant can bind successors if the conditions in Tulk v Moxhay [1848] are met:
  • The covenant is negative in substance (it restrains use rather than requires expenditure or action).
  • It benefits identifiable land of the covenantee.
  • It touches and concerns that benefited land.
  • The original parties intended it to run with the land.
  • The successor had notice. In modern registered land, this means proper entry of a notice on the title (LRA 2002, s.32). For unregistered land, a Class D(ii) land charge must be registered against the covenantor’s name (Land Charges Act 1972) or it will not bind a purchaser for money or money’s worth.

Result: a purchaser of the burdened land will be bound in equity by a negative covenant, if properly protected and the Tulk conditions are satisfied. Positive covenants are different (see below).

Building schemes (schemes of development)

Where a developer sells plots subject to common restrictions intended to benefit all plots within a defined area, owners can generally enforce those restrictions against one another. Traditional criteria (Elliston v Reacher [1908]) and modern restatement (Birdlip Ltd v Hunter [2016]) look for:

• A defined area and common vendor.
• An intention that the restrictions benefit each plot and are mutually enforceable.
• Plots sold on terms that make that intention clear on the title documents.

An unusual feature is that if some plots come under the same ownership, enforceability between them may revive when separate ownership resumes (Texaco Antilles Ltd v Kernochan [1973] AC 609).

Positive covenants: why the burden does not run

• The burden of a positive covenant does not bind freehold successors at common law or in equity (Rhone v Stephens [1994] 2 AC 310). The original covenantor remains liable; later owners of the burdened land do not.
• Practical workarounds used in conveyancing:
  • Chain of indemnity covenants: each buyer promises their seller to perform the original positive covenant and to require the next buyer to do the same. This creates contractual liability along the chain but does not make the original covenant bind the land.
  • Mutual benefit and burden: a person who takes a benefit tied to land may be required to accept a connected burden, if there is a clear link and a real choice (Halsall v Brizell [1957] Ch 169; refined in Thamesmead Town Ltd v Allotey [1998] 1 WLR 684). Ives v High [1967] 2 QB 379 shows a related estoppel approach. This is narrow and cannot be used to impose free‑standing positive obligations.
  • Estate rentcharges: often used on private estates to secure contributions to shared services. They create proprietary remedies but must be structured carefully given the draconian enforcement powers under s.121 LPA 1925.
  • Title restrictions on registered land: a restriction can require that buyers enter into a fresh covenant with the management company or seller.

Note: in leases, many positive covenants run because of privity of estate, which is a different rule.

Remedies for breach

• Injunctions: the usual remedy for a breach of a restrictive covenant, restraining further breach. The court can award damages instead of an injunction where appropriate (now under s.50 Senior Courts Act 1981), taking guidance from cases such as Jaggard v Sawyer [1995] and the negotiating damages approach from Wrotham Park [1974].
• Specific performance: orders someone to perform an obligation, but courts avoid orders needing constant supervision (Ryan v Mutual Tontine Assoc [1893] 1 Ch 116) and will not force personal services (Page One Records v Britton [1968] 1 WLR 157).
• Damages: available, but claimants often prioritise stopping the breach rather than compensation. Equitable defences such as delay (laches) and acquiescence can affect relief.

Trusts and covenants (including Quistclose)

• Quistclose trusts arise where money is advanced for a specific purpose; if the purpose fails, a resulting trust may arise for the lender (Barclays Bank v Quistclose Investments [1970] AC 567). This sits alongside covenants to apply funds in a given way.
• A covenant to settle property can itself be held on trust for a beneficiary (Fletcher v Fletcher (1844) 4 Hare 67), but where the beneficiary is a volunteer, courts have traditionally refused to compel trustees to sue for specific performance or damages (Re Pryce [1917] 1 Ch 234). This can limit enforcement where no consideration has moved from the beneficiary.

Key Examples or Case Studies

Tulk v Moxhay [1848]

• Facts: Purchaser of Leicester Square land had notice of a promise to keep it as an open garden.
• Principle: Restrictive covenants can bind successors in equity where the conditions are met.
• Takeaway: Negative covenants can run with freehold land; ensure proper protection on title.

Austerberry v Corporation of Oldham (1885) 29 Ch D 750

• Facts: Attempt to enforce positive obligations against successors.
• Principle: The burden of covenants does not pass at common law to freehold successors.
• Takeaway: Do not assume later owners are liable at law for the covenantor’s obligations.

Re Union of London and Smith’s Bank Ltd [1933] Ch 611

• Facts: Whether the benefit could be assigned after disposal of the benefited land.
• Principle: Benefit must be tied to identifiable land; a covenantee who has parted with the whole benefited land cannot assign the benefit.
• Takeaway: Identify the benefited land in the deed and keep it if you plan to enforce.

Rhone v Stephens [1994] 2 AC 310

• Facts: Claim to enforce roof repair obligations against a successor.
• Principle: Positive covenants do not bind freehold successors in equity.
• Takeaway: Use chains of indemnity, estate rentcharges, or fresh covenants to secure performance.

Ives v High [1967] 2 QB 379

• Facts: Neighbour permitted encroaching foundations in return for a right of way.
• Principle: “He who takes the benefit must accept the burden” in limited, fact‑specific contexts; estoppel assisted enforcement.
• Takeaway: Mutual benefit and burden may help, but it is narrow and context‑driven.

Texaco Antilles Ltd v Kernochan [1973] AC 609

• Facts: Building scheme plots came into common ownership, then later separated.
• Principle: Enforceability within a scheme can revive when separate ownership returns.
• Takeaway: Properly documented schemes allow plot owners to enforce against each other.

Remedies snapshots

• Ryan v Mutual Tontine Assoc [1893]: Courts avoid specific performance that needs constant supervision.
• Page One Records v Britton [1968]: No injunction if it would effectively force personal services.
• Jaggard v Sawyer [1995] and Wrotham Park [1974]: Damages in lieu and negotiating damages as alternatives to injunctions.

Practical Applications

• During due diligence

  • For registered land, check the charges register for restrictive covenants and any restrictions.
  • For unregistered land, search the Land Charges Register for Class D(ii) entries and review title abstracts.
  • Identify the benefited land and confirm annexation (by wording or s.78 LPA 1925).
  • Ask whether a building scheme exists; look for consistent covenants across plot transfers and a defined estate plan.

• Drafting to preserve enforceability

  • Clearly identify the benefited land and state that the benefit is annexed to it.
  • For registered land, enter a notice to protect restrictive covenants (LRA 2002, s.32).
  • Use a restriction on title to require successors to enter fresh positive covenants on completion.
  • Consider an estate rentcharge to secure service charge obligations on private estates.

• Managing positive obligations

  • Build a chain of indemnity covenants through each transfer.
  • Where appropriate, structure facilities so that use (benefit) is conditional on contribution (burden), mindful of the limits in Thamesmead v Allotey.
  • Use a management company to hold rights and take covenants directly from each buyer.

• Enforcement strategy

  • Send a clear pre‑action letter identifying the covenant, the benefited land, and the breach.
  • Consider seeking an interim injunction if ongoing breach risks serious harm.
  • Weigh up an injunction against damages in lieu; consider negotiating damages where removal is unrealistic.
  • Check for potential equitable defences (delay, acquiescence) and limitation for damages claims.

• Modifying or removing covenants

  • If a covenant impedes reasonable use, consider an application to the Upper Tribunal (Lands Chamber) under s.84 LPA 1925 to discharge or modify.
  • Explore a deed of release with the benefited owner, often backed by payment.

• Lenders and developers

  • Lenders: assess whether covenants affect value or saleability; obtain indemnity insurance if needed.
  • Developers: put in place a coherent scheme of development with consistent covenants, clear plans, and proper filings to allow mutual enforcement.

Summary Checklist

• Original covenantee can enforce by privity of contract while holding the benefited land.
• Benefit can pass by assignment or annexation; the benefited land must be identifiable.
• Burden does not pass at common law; do not rely on it binding successors.
• Restrictive covenants can bind successors in equity if Tulk conditions are met.
• Protect restrictive covenants: notice on registered titles; land charges for unregistered.
• Positive covenants do not bind freehold successors; use practical workarounds.
• Mutual benefit and burden is narrow and requires a clear link and real choice.
• Building schemes enable mutual enforcement across plots where criteria are satisfied.
• Remedies: injunctions are common; specific performance is rare; damages in lieu may be awarded.
• Trusts angle: volunteers may struggle to compel enforcement of a covenant to settle.

Quick Reference