Introduction
In the law of England and Wales, a freehold covenant is a promise made in a deed between two freehold landowners, where one landowner promises the other that they will or will not engage in a specified activity on their own land. These promises are a fundamental tool of land management, allowing for the preservation of amenities, the character of a neighbourhood, and the regulation of land use between private individuals. This essay will provide an overview of the legal framework governing freehold covenants. It will explain the essential distinction between positive and negative covenants and detail the separate and often complex rules developed by common law and equity for the transmission of the benefit and burden of these covenants to successive owners of the land. This essay will demonstrate that while the law has evolved to meet practical needs, the division between common law and equity has resulted in a system that can be difficult to navigate, particularly concerning the enforcement of positive obligations. Finally, it will briefly consider proposals for reform aimed at simplifying this area of law.
The Nature of Covenants
A covenant is a promise that creates an obligation binding on the covenantor (the person making the promise) for the benefit of the covenantee (the person to whom the promise is made). In land law, these covenants relate to the use of land. A crucial distinction is drawn between positive and restrictive (or negative) covenants. A positive covenant requires the covenantor to take some action, which typically involves the expenditure of money, such as maintaining a fence or contributing to the upkeep of a shared road. Conversely, a restrictive covenant is a promise not to do something on one's land, such as a promise not to build more than one house or not to use the property for business purposes. The test for distinguishing between the two was articulated in Haywood v Brunswick Permanent Benefit Building Society (1881), which asks whether the covenant requires the expenditure of money to be performed. This distinction is the bedrock upon which the rules on the running of covenants are built, as the common law and equity have taken significantly different approaches to each.
The Running of the Burden of Covenants
For a covenant to be an effective long-term planning tool, its effects must bind not just the original parties but also their successors in title. The "running" of a covenant refers to this process of the benefit and burden becoming attached to the land itself. The rules for the running of the burden are particularly complex.
At common law, the position is straightforward but restrictive. The burden of a covenant, whether positive or negative, does not run with the land to bind successors in title. This principle was established in Austerberry v Oldham Corporation (1885) and was more recently affirmed by the House of Lords in Rhone v Stephens [1994]. The courts reasoned that to allow the burden to run would violate the doctrine of privity of contract, which states that a contract cannot impose obligations on a third party. Therefore, at common law, a successor to the original covenantor is not bound by any covenants made by their predecessor.
However, the Court of Chancery developed a different approach in equity to mitigate the inflexibility of the common law. In the landmark case of Tulk v Moxhay (1848), the court held that the burden of a restrictive covenant could run with the land in equity and bind a successor in title, provided certain conditions were met. This decision was based on fairness and conscience; it would be inequitable for a purchaser who bought land with knowledge of a restriction to then ignore it. For the burden of a restrictive covenant to run in equity, four conditions must be satisfied:
- The covenant must be negative: Equity does not assist with the running of the burden of positive covenants, thereby upholding the common law rule in this respect.
- The covenant must accommodate the dominant tenement: The covenant must ‘touch and concern’ the land of the covenantee (the dominant tenement). As established in P & A Swift Investments v Combined English Stores Group plc [1989], this means the covenant must benefit the land itself, affecting its nature, quality, or value, and not be merely a personal benefit to the covenantee.
- The original parties must have intended the burden to run: The original covenantor and covenantee must have intended that the covenant would bind successors. This intention is now generally presumed under section 79 of the Law of Property Act 1925 (LPA 1925), which provides that a covenant relating to land is deemed to be made by the covenantor on behalf of themselves and their successors in title, unless a contrary intention is expressed in the deed.
- The successor must have notice of the covenant: The person against whom the covenant is being enforced must have had notice of it when they acquired the land. For registered land, the covenant must be protected by the entry of a notice on the charges register of the servient title (Land Registration Act 2002, s.32). For unregistered land, it must be registered as a Class D(ii) land charge.
The Running of the Benefit of Covenants
In contrast to the burden, the benefit of both positive and negative covenants can run with the dominant land at both common law and in equity.
At common law, the benefit runs if four conditions are met, as outlined in Smith and Snipes Hall Farm Ltd v River Douglas Catchment Board [1949]: the covenant must 'touch and concern' the land; the original parties must have intended the benefit to run (often implied by s.78 LPA 1925); the original covenantee must have held a legal estate in the land; and the successor must acquire the same legal estate.
In equity, there are three methods by which the benefit of a restrictive covenant can pass to a successor: annexation, assignment, and a building scheme.
- Annexation: This is the process by which the benefit of the covenant is legally "nailed" to the dominant land, so it passes automatically with any transfer of that land. Annexation can be express (through clear wording in the deed) or implied. Most significantly, statutory annexation occurs under s.78(1) LPA 1925. The Court of Appeal's decision in Federated Homes Ltd v Mill Lodge Properties Ltd [1980] interpreted this section as having the automatic effect of annexing the benefit of a covenant to each and every part of the dominant land, provided the covenant touches and concerns the land. This has greatly simplified the passing of the benefit for covenants created since 1925.
- Assignment: The benefit can be expressly assigned to a successor each time the dominant land is transferred. This is a more cumbersome method and requires the land to be transferred at the same time as the assignment of the covenant.
- Building Scheme: This is a set of rules, originating in Elliston v Reacher [1908], that applies to housing developments. It allows covenants to be mutually enforceable between the purchasers of different plots of land, creating a form of local law for the estate.
Circumvention and Reform
The inability of the burden of positive covenants to run with the land has been described as a significant "gap" in the law (Law Commission, 2011). In response, conveyancers have developed several 'workarounds' to try and ensure their enforcement against successors. These include a chain of indemnity covenants, where each successive purchaser promises to indemnify their seller if they breach the covenant. Another method is the doctrine of mutual benefit and burden, established in Halsall v Brizell [1957], which states that a person who chooses to take the benefit of a right (e.g., using a private road) must also submit to any related burden (e.g., contributing to its maintenance). However, these methods are often complex and unreliable.
The complexity and perceived deficiencies of the current law have led to calls for reform. The Law Commission, in its 2011 report, Making Land Work, criticised the law as "unnecessarily complicated, yet fails to perform the functions that the law of obligations relating to land ought to perform" (Law Commission, 2011, para 1.1). It proposed the abolition of the current system and its replacement with a new, single legal interest called a 'Land Obligation'. This new interest would allow for the enforcement of both positive and negative obligations against successors in title, provided they meet certain conditions and are registered. This would simplify the law, remove the distinction between law and equity in this context, and solve the problem of enforcing positive covenants. Despite the widespread support for these proposals, they have not yet been implemented by Parliament.
Conclusion
The law of freehold covenants is a vital part of English land law, but it is also one of the most complex. Its dualistic nature, with different rules operating at common law and in equity, has created a framework that is often difficult to apply. The key issue remains the common law's refusal to allow the burden of positive covenants to run with the land, a rule which equity has not challenged. This has necessitated the use of indirect and often imperfect methods to ensure that necessary maintenance and repair obligations are honoured by successive landowners. While the rules for the running of the benefit have been simplified to an extent by the interpretation of section 78 of the LPA 1925, the law as a whole remains fragmented. The Law Commission's proposals for a unified 'Land Obligation' offer a coherent solution to these long-standing problems, but until such reforms are enacted, practitioners and landowners must continue to navigate the intricate and sometimes archaic rules governing freehold covenants.
References
Cases
- Austerberry v Oldham Corporation (1885) 29 Ch D 750
- Elliston v Reacher [1908] 2 Ch 374
- Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 WLR 594
- Halsall v Brizell [1957] Ch 169
- Haywood v Brunswick Permanent Benefit Building Society (1881) 8 QBD 403
- P & A Swift Investments v Combined English Stores Group plc [1989] AC 632
- Rhone v Stephens [1994] 2 AC 310
- Smith and Snipes Hall Farm Ltd v River Douglas Catchment Board [1949] 2 KB 500
- Tulk v Moxhay (1848) 2 Ph 774
Legislation
- Land Registration Act 2002
- Law of Property Act 1925
Law Commission Reports
- Law Commission (2011) Making Land Work: Easements, Covenants and Profits à Prendre (Law Com No 327). Available at: <https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-11jsxou24uy7q/uploads/2015/03/lc327_easements_report.pdf>
