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Advise Simon as to the enforceability of the covenants.

Extracts from this essay...

Introduction

Matthew was the owner of a large parcel of registered land and in 2000 he decided to divide it into 2 plots, Plot A and Plot B. He retained Plot A for himself and sold Plot B to John, who covenanted to (i) use Plot B for residential purposes, and (ii) ensure that the dividing wall remains in good condition. In 2004, Matthew sold Plot A to Simon. The conveyance to Simon expressly assigned the benefit of all covenants to him. Last year, John sold Plot B to Paul and Paul covenanted to indemnify John for any breaches of covenants. Since then, Paul has neglected the dividing wall claiming that he was not responsible for its upkeep. Simon has just found out that Paul is about to start a business selling car parts in Plot B. Advise Simon as to the enforceability of the covenants. The principal concern of this question is with covenants made between freeholders and the circumstances in which successors in title to the original parties can enforce these covenants set out. Firstly we know this is a freehold covenant because we are told in 2000 Matthew divides his registered land into 2 and sells Plot B to John thus making the covenants put forward, freehold covenants.

Middle

From the scenario we can see that this condition is satisfied and the covenants do touch and concern the land. Secondly the covenantee must, at the time of the covenant, have a legal estate in land to be benefited. Thirdly the covenant must have been made for the benefit of land owned by the original covenantee. Matthew at the time covenant was made, owned legal estate in land thus satisfying this condition and lastly the claimant must have derived his/her title from or under the original covenantee. Simon bought Plot A from Matthew and derived his title. All 4 conditions have been satisfied and this shows that Simon has benefit at law. In order to see if Simon can take action we need to find out whether burden has run. Paul can only be sued if burden runs to him at law. The basic rule at common law is that the burden of a covenant (positive or negative in nature) cannot run with the land. Relevant law in this matter is stated in the case of Austerberry v Oldham Corp 1885. Only a person who is an actual party to the covenant can be sued at common law.

Conclusion

A scheme such as this will arise where an area of land is subdivided into plots by the developer, which is then later sold to different purchasers. This applies to our scenario because Matthew divided the land into 2 parts, Plot A and Plot B and was relatively sold to different purchasers. Within such schemes equity takes the view that all owners of land within the scheme can enforce the covenants. The requirements for the existence of this scheme were set out in Elliston v Reacher 1908 and stated that (i) parties must derive title under common vendor, (ii) before the sale the vendor must have laid out the land in plots, (iii) covenants intended for the benefit of all plots sold. All of these requirements are met within our scenario. In equity, a building scheme ensures that the benefit of the covenant imposed on other plots will automatically run to all successors of the original purchasers, without the need for express annexation or for assignment. This shows that Simon has the benefit in equity and can sue Paul for the breaches of the covenants thus enforcing them. Remedies will include prohibitory injunction and damages for the breach of the covenants.

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