Binding Successors in Title to Freehold Covenants: Common Law, Equity, and Key Cases

Introduction

A freehold covenant is a promise made in a deed between freehold landowners, where one party promises to do (a positive covenant) or not to do (a restrictive covenant) something on their land. While these promises are binding between the original parties through contract law, the central issue in land law is whether they can bind successors in title. This essay will explain and evaluate the rules governing the passing of the benefit and burden of freehold covenants, distinguishing between the separate and complex regimes at common law and in equity. It will address key concepts and cases, concluding that the current law is confusing and in need of the reform that has been proposed.

The Position at Common Law

At common law, the rules for passing the benefit and burden of a covenant to successors are different. The common law has been more willing to allow the benefit to run than the burden.

For the benefit of a covenant to run with the land at common law, four conditions must be met. Firstly, the covenant must 'touch and concern' the land of the covenantee (the person with the benefit). This means it must affect the nature, quality, mode of use, or value of the land, and not be merely a personal advantage to the owner (P&A Swift Investments v Combined English Stores Group [1989] AC 632). Secondly, the original covenantee and the successor claiming the benefit must both have a legal estate in the land, although not necessarily the same one. Thirdly, at the time the covenant was made, the original parties must have intended for the benefit to run with the land. This intention is now generally implied by section 78 of the Law of Property Act 1925 (LPA 1925), which deems a covenant relating to land to be made with the covenantee and their successors in title.

However, the common law’s major limitation is that the burden of a freehold covenant cannot run with the land to bind a successor in title. The courts established a firm rule, based on the doctrine of privity of contract, that a person cannot be made liable for a contract they were not a party to. This was decided in Austerberry v Oldham Corporation (1885) 29 Ch D 750 and was more recently confirmed by the House of Lords in Rhone v Stephens [1994] 2 AC 310. This creates a significant gap in the law, as it means that the burden of any covenant, whether positive or restrictive, is unenforceable at common law against anyone other than the original promisor.

The Position in Equity

Equity developed its own set of rules, partly to remedy the common law's refusal to enforce the burden of covenants against successors. This intervention began with the landmark case of Tulk v Moxhay (1848) 41 ER 1143. Equity will allow the burden of a restrictive covenant to run with the land if four conditions are satisfied:

1. The covenant must be restrictive: It must be negative in substance, preventing a landowner from doing something. Equity will not enforce positive covenants, which require the landowner to expend money or perform an action, against successors (Rhone v Stephens). This distinction is a cornerstone of the modern law.
2. It must touch and concern the land: The covenant must benefit the land of the original covenantee.
3. Intention for the burden to run: The original parties must have intended the burden to bind successors. Section 79 of the LPA 1925 implies this intention unless a contrary intention is expressed.
4. Notice: The successor to the burdened land must have notice of the covenant. In modern registered land, this is achieved by protecting the covenant as a notice on the charges register of the burdened title.

For a successor to enforce a covenant in equity, they must also show that the benefit has passed to them in equity. This can occur in three ways: annexation, assignment, or through a building scheme. Annexation is the most common method, where the benefit is permanently attached to the land. This can be done expressly in the deed, but the effect of section 78 LPA 1925, as interpreted in Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 WLR 594, is that the benefit is automatically (or statutorily) annexed to the land intended to be benefited, provided the land is identifiable. This decision greatly simplified the process of passing the benefit in equity.

Evaluation and Possible Reforms

The dual system of rules at common law and in equity is complex and has been criticised for being illogical. The key problem is the rule in Rhone v Stephens that the burden of positive covenants does not run with the land. This is impractical, as obligations to maintain walls, fences or roads are often essential for neighbouring properties, yet they cannot be easily enforced against successors. Landowners have had to use complex workarounds, such as chains of indemnity covenants or creating leasehold estates, to try and enforce positive obligations.

This area of law is widely seen as unsatisfactory. The Law Commission has long recommended reform, most recently in its 2011 report, Making Land Work: Easements, Covenants and Profits à Prendre. It proposed abolishing the existing rules and replacing them with a new legal interest called a 'Land Obligation'. This new interest would be capable of being positive or restrictive and would be able to run with the land to bind successors, provided it was registered. This would simplify the law, remove the problematic distinction between positive and restrictive covenants, and make the enforceability of obligations more certain.

Conclusion

In conclusion, the rules for the passing of freehold covenants are fragmented. While the benefit can pass at both common law and in equity, the burden can only pass in equity, and then only if the covenant is restrictive, following the principles from Tulk v Moxhay. The common law’s refusal to enforce burdens against successors, confirmed in Rhone v Stephens, creates a significant practical problem, especially for positive covenants. The resulting law is a complex mix of common law, equity and statute, which is difficult to navigate. The longstanding proposals for reform from the Law Commission, centred on the creation of a 'Land Obligation', offer a clear path to a more coherent and modern system, but these have not yet been implemented by Parliament.

References

• Law Commission (2011) Making Land Work: Easements, Covenants and Profits à Prendre (Law Com No 327). Available at: <https://www.lawcom.gov.uk/project/easements-and-covenants/>.
• MacKenzie, J-A. and Nair, A. (2020) Textbook on Land Law. 18th edn. Oxford University Press.
• Austerberry v Oldham Corporation (1885) 29 Ch D 750.
• Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 WLR 594.
• P&A Swift Investments v Combined English Stores Group [1989] AC 632.
• Rhone v Stephens [1994] 2 AC 310.
• Tulk v Moxhay (1848) 41 ER 1143.
• Law of Property Act 1925.