Enforceability of freehold covenants is very complex and requires consideration of (i) common law & equity (ii) running of the benefit & burden and (iii) nature of the covenant (whether the covenant is positive or restrictive).
Covenants can be either positive or restrictive. Positive covenants require the owner of the land to take action on their own or adjoining land, requiring expenditure of money. Restrictive covenants require the owner of the land to refrain from some activity on his/her own land. In connection with the question the first covenant, relating to the use of Plot B for residential purposes is a negative (restrictive) covenant because it’s refraining the use of the land from activity other than residential. The second covenant relating to the up keeping of the dividing wall is a positive covenant because in order to ensure that the dividing wall remains in good condition John will require expenditure of money.
Covenants are regarded as proprietary interests in land, albeit equitable in nature. They comprise both a benefit (right to sue) and burden (obligation to perform) and may be ‘attached’ respectively so that it passes to later purchasers or transferees.
In the light of the question it is clear to state that Matthew can take action and enforce the covenants because he has the benefit of being the original covenantee. However the question we need to answer is can Simon enforce the covenants? In deciding whether a covenant runs with the land there are two sets of principles: the common law rules and the equitable rules. Each of these rules must be examined separately. First of all the common law rules should be applied, as it is only if these rules are inapplicable that the equitable rules need to be employed. In order for the benefits to run at law certain condition must be satisfied. Firstly the covenants must touch and concern the land. This means that the covenant must not be merely personal in nature and in the case of Smith v River Douglas Catchment Board 1949 it was made clear that this requirement must either affect the land as regards mode of occupation or affect directly the value of the land. 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. Paul is not liable at law because if the original covenantor sells on the land then the covenant could not be enforced against the new buyer. A question we can ask now is whether there are any indirect enforcements? The answer to this question is that John is the original covenantor and has burden of all covenants and because Simon has the benefit he can sue John for the breaches of the covenants. For breaches of both covenants Simon can only get damages. On the other hand, like Paul, if John took out an express indemnity covenant against Paul then he can sue him and relatively claim indemnity. From the scenario we are told that Paul covenanted to indemnify john for any breaches of covenants showing that Paul can sue john if he breached any covenants.
Now that I have examined the common law rules, I can go through whether or not Paul has burden in equity. The major case governing this section of the law is Tulk v Moxhay 1848. This case points out certain conditions that have to be satisfied in order to find out whether Paul has burden in equity. Firstly the covenant must be negative/restrictive in nature Haywood v Brunswick 1888, the covenant requires expenditure of money to ensure that the dividing wall remains in good condition thus making the covenant positive. Secondly the successors to the land must retain an interest and the covenant must touch and concern that land. Both points have been satisfied in the light of the scenario. Thirdly the burden of the covenant must have been intended to run with the land, presumed by s79 (1) LPA 1925 which states that covenants must be told to purchaser in order to be intended. in relation to the scenario we can see that conveyance to Simon ‘expressly assigned the benefit of all covenants to him’, which satisfies this condition. Lastly the covenant must be protected by appropriate form of registration; from the scenario we are told that it is a registered land. Under the doctrine of Tulk v Moxhay all conditions are satisfied and in conclusion Paul has burden in equity.
In relation to how benefit runs in equity we can see that it can pass in one of several ways; annexation, assignment and under a building scheme. In our scenario I have shown that burden in equity runs and so the benefit must also be made to run in equity. In this case it runs by express assignment of the benefit of the covenant. The most relevant way in how benefit runs in equity in the light of our scenario is under building schemes. 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.
Bibliography: - Modern Land Law – Dr Martin Dixon 5th Edition
Lecture and Seminar Notes
Nutshells Land Law
