Introduction
A covenant, in the context of property law, represents a formal agreement or promise that is typically included within a deed. This agreement places an obligation upon the landowner to either perform specific actions, known as positive covenants, or refrain from particular activities, referred to as restrictive covenants. The core concept centers on the enforceability of such promises by specific parties. The technical principles that govern covenant enforceability include privity of contract, which dictates that only those who are party to a contract can enforce it; and privity of estate, which pertains to the relationship between landlords and tenants. A key requirement for covenant enforcement involves identifying who holds the benefit of the covenant, and who is bound by its burden. This determination often hinges upon statutory provisions, particularly the Law of Property Act 1925, as well as case law which has shaped the application of those principles in varied scenarios. The following analysis will review the specific instances in which individuals or entities can pursue the enforcement of a covenant.
Who Can Enforce a Covenant? Initial Covenantee
The initial covenantee, the original party to whom the promise is made, undoubtedly possesses the right to enforce a covenant. This stems from the legal principle of privity of contract. For example, if a developer sells a plot of land and, as part of the conveyance, includes a covenant restricting the purchaser from building any structure taller than two stories, the developer, as the initial covenantee, has the right to pursue legal action against the original purchaser if the latter contravenes this agreement. It is the original party to the covenant who typically holds the most straightforward legal basis for seeking enforcement. If the benefit is not assigned then the original covenantee retains the rights to enforce the covenant. As discussed in Re Union of London and Smith’s Bank Ltd [1933] Ch 611, a vendor who already has disposed of the whole of the benefited land can no longer assign the benefit of the covenant in equity.
Enforcing Covenants After the Initial Sale: Successors in Title
The question of enforceability becomes more complicated once the original parties dispose of their property. The ability of successors in title, those who acquire the land later, to enforce a covenant is a core issue in property law. The law distinguishes between the enforcement of the burden of a covenant and the benefit. At common law, the burden of a covenant does not pass to successors, as established in Austerberry v Corporation of Oldham (1885) 29 Ch D 750, meaning a subsequent owner is not bound by it. Conversely, the benefit of a covenant can pass to successors in title. This has been developed by a number of cases such as Re Union of London and Smith’s Bank Ltd which demonstrates how the benefit of a restrictive covenant can pass so long as it has been clearly annexed to the benefitted land and the land itself is identifiable in the conveyance deed. The benefit of a restrictive covenant cannot be enforced by the covenantee against an assignee of the purchaser after the covenantee has parted with the whole of his land.
Restrictive Covenants and Equity
Equity has modified the common law’s rigid stance on restrictive covenants through the principle outlined in Tulk v Moxhay [1848] EWHC J34 (Ch). This case established that a restrictive covenant can be enforced against a subsequent purchaser who has notice of the covenant. The burden of a restrictive covenant can run with the land in equity, binding subsequent owners, provided that certain conditions are met. The key condition is that the covenant must be negative or restrictive in nature; it cannot impose a positive obligation. For example, a covenant that prohibits the use of a property for commercial purposes would be deemed restrictive and may be enforceable against a later buyer who knew of the covenant's existence. Furthermore, the covenant must benefit a specific piece of land and not simply be a personal agreement between the parties.
Benefit of Covenant in Equity
For the benefit of a restrictive covenant to run with the land in equity, the covenant must touch and concern the land. The requirement for the benefit to touch and concern the land means the covenant must relate to the use, value or nature of the land, and must not be a personal agreement. The benefiting land must be identifiable and sufficiently proximate, and not just benefit a general area. In Re Union of London and Smith’s Bank Ltd [1933] Ch 611, it was found that for the benefit of a covenant to be assignable the land of the assignor must be capable of being benefited by the covenant and this land must be ascertainable from the deed of conveyance. Furthermore, the covenant cannot be enforced by the covenantee against an assign of the purchaser after the covenantee has parted with the whole of his land.
Building Schemes
A notable exception to the general rules surrounding restrictive covenants is the concept of a building scheme, sometimes also referred to as a scheme of development. This arises when a developer sells off plots of land on a development subject to a common set of restrictive covenants designed to benefit the whole development. In Texaco Antilles Ltd v Kernochan [1973] AC 609, it was shown that if some lots of land that are part of a building scheme come under the same ownership, their restrictive covenants become enforceable again when they come under separate ownership. This means that any owner of a plot within the development can enforce the restrictive covenants against any other owner within that same development, regardless of the original purchaser or who was the original covenantee. To establish a building scheme there has to be a clear indication from the original vendor of a mutual benefit and burden for each owner.
Positive Covenants
Positive covenants, which require landowners to perform certain actions, are not enforceable against subsequent purchasers under the general principles of law. The burden of a positive covenant does not run with the land in either common law or equity, as shown in Rhone v Stephens [1994] 2 AC 310, 317. The requirement for a positive covenant to be fulfilled only remains with the original covenantor. Several techniques have developed that achieve enforceability such as chains of indemnity covenants and the doctrine of mutual benefit and burden.
Chains of Indemnity Covenants
A practical, albeit indirect, method for rendering positive covenants enforceable against subsequent purchasers involves creating a chain of indemnity covenants. Each time a property is sold, the seller covenants with the purchaser to indemnify them against any liability for breach of the original positive covenant and further to secure a similar indemnity covenant from the next purchaser in favour of the vendor, and so on. This does not cause the actual positive covenant to pass to the subsequent purchasers. But rather it creates a contractual obligation on the successive owners to fulfil the obligation and to continue the chain of indemnities, resulting in indirect enforcement.
Doctrine of Mutual Benefit and Burden
Another method to indirectly enforce a positive covenant against a successor in title is the doctrine of mutual benefit and burden. This rule, primarily found in case law, states that if a successor in title to a piece of land benefits from a covenant, they must also accept the associated burden. This was seen in Ives v High [1967] 2 QB 379 in which High allowed a neighboring property’s foundation to sit on his land, in return for a right of way across his neighbour’s land. Lord Denning stated that “he who takes the benefit must accept the burden”. This means that a positive covenant may be enforced against a successor in title if it is closely connected to a right of use that the successor enjoys. This principle must be closely examined and is only applicable in limited situations.
Specific Performance and Injunctions
When a covenant is breached, the party entitled to enforce it can seek specific remedies, which primarily include an action for specific performance or an injunction. Specific performance is a court order compelling the breaching party to fulfill the terms of the covenant. This is not available in all cases. It would not be awarded if it requires constant court supervision. As shown in Ryan v Mutual Tontine Assoc [1893] 1 Ch 116, an undertaking for a constant supervision of a porter would be unlikely to be ordered. Furthermore, specific performance will only be awarded if the damages awarded will not be an adequate remedy.
An injunction is a court order which restrains the breaching party from continuing to violate the terms of the covenant. In Page One Records v Britton [1968] 1 WLR 157, the court refused an injunction as this would effectively amount to compelling the defendant to perform a contract for personal services. Injunctions can be granted for restrictive covenants as a party cannot be forced to act but they can be forced to not act.
Damages, whilst possible are unlikely to be awarded for an action regarding a restrictive covenant as there is often little harm or financial detriment.
Quistclose Trusts and Covenants
A Quistclose trust arises when money is transferred to a recipient for a specified purpose, and if that purpose fails, the money is held on resulting trust for the transferor, as described in Barclays Bank v Quistclose Investments Ltd [1970] AC 567. The application of these principles to the enforcement of covenants highlights the complexities of trust law. In Fletcher v Fletcher (1844) 4 Hare 67, it was held that a covenant to settle a sum of money can be held on trust for the intended beneficiary. However, in Re Pryce [1917] 1 Ch 234, it was shown that a trustee of a covenant cannot sue for specific performance or damages if the intended beneficiary is a volunteer as the consideration is not made through marriage. This further demonstrates that where a covenant is made for the benefit of a third party who is a volunteer there may be issues with enforcing the covenant. Where a Quistclose trust exists and a covenant has been created to ensure a benefit to a third party the covenant can not be enforced by the intended beneficiary and often by the trustee also.
Conclusion
Determining who can enforce a covenant depends on a web of rules that includes common law principles, equity doctrines, and contractual provisions. While initial covenantees have a clear right to enforce a covenant stemming from privity of contract, the ability of successors in title to enforce covenants is subject to a range of conditions. Restrictive covenants can be enforced against subsequent purchasers who have notice, under the principle outlined in Tulk v Moxhay. The benefit of a covenant can pass to successors in title if the covenant touches and concerns the land as shown in Re Union of London and Smith’s Bank Ltd. The doctrine of mutual benefit and burden, in limited cases, allows positive covenants to bind successors. Ultimately, the specific facts of each case, combined with careful attention to these legal principles, dictate whether a covenant can be enforced, and by whom. This analysis demonstrates the complexity of enforcing a covenant within the legal framework of English and Welsh property law.
