Introduction
A freehold covenant is a formal agreement contained within a deed that imposes an obligation, or restriction, on the use of a freehold property. This legal arrangement is a form of contract that runs with the land, meaning that it may bind subsequent owners, regardless of whether they were party to the original agreement. The technical principles surrounding these covenants derive from the common law of England and Wales, specifically concerning property rights and contractual obligations. Key requirements for a valid freehold covenant include clear wording that identifies the land burdened by the restriction (the servient tenement) and the land that benefits from it (the dominant tenement), a demonstrable intention for the covenant to run with the land, and a subject matter that touches and concerns the land itself. These components ensure that the covenant is not merely a personal agreement, but is connected to the property's use and value.
Types of Freehold Covenants
Freehold covenants can be broadly categorized into positive and negative covenants. A positive covenant requires the landowner to take some action, such as maintaining a boundary wall or contributing to the upkeep of a shared facility. Conversely, a negative covenant, also called a restrictive covenant, prohibits the landowner from performing a specific action, for example, building above a certain height or operating a business from the property. The distinction between positive and negative covenants is significant because of the traditional common law stance regarding the enforceability of these agreements. While negative covenants can more easily bind future owners, positive covenants historically pose a more complex situation due to the principle that the burden of a contract does not usually pass to a successor in title. The case of Rhone v Stephens [1994] 2 AC 310 clarifies this distinction, affirming that the burden of a positive covenant does not run with the land, except in limited situations. However, the benefit of a positive covenant can pass to successors in title of the dominant land.
Touch and Concern: A Key Requirement
A fundamental principle in determining whether a covenant will run with the land is whether it "touches and concerns" the land. This concept, established in case law, is that the covenant must directly affect the nature, quality, value, or mode of use of the land, as defined in P & A Swift Investments v Combined English Stores [1989] AC 632. A covenant that simply benefits a particular person, rather than the land, will not bind subsequent owners. For example, a restriction preventing the operation of a specific business type on a property would typically touch and concern the land, whereas a promise to pay a sum of money to a specific individual would not, unless it can be related to the maintenance or upkeep of the property. The connection of a covenant to the land’s characteristics helps ensure the agreement is not a personal obligation but a property right. This requirement is crucial in distinguishing enforceable freehold covenants from other types of contractual provisions.
Enforceability of Freehold Covenants
The enforceability of freehold covenants depends on several factors, particularly whether the covenant is positive or negative. As established by Austerberry v Corporation of Oldham (1885) 29 Ch.D. 750, the burden of a positive covenant typically does not run with the land; that is, the obligation to perform an act does not automatically transfer to subsequent owners of the servient tenement, unless a specific exception applies. Common exceptions may include a chain of indemnity covenants within the title deeds. By contrast, the burden of a negative covenant can be enforced against subsequent owners of the servient tenement provided certain conditions are met. In equity, a negative covenant will run with the land if: it touches and concerns the land; the original parties intended that it should run; and the subsequent owner of the servient land had notice of the covenant. The requirements of ‘notice’ have changed due to the Land Registration Act 2002; notice is now considered to be registration of the covenant on the register. The benefit of both positive and negative covenants can also run with the land. This differing treatment of positive and negative covenants stems from the historical reluctance of the courts to impose active obligations on landowners who were not parties to the original covenant.
Registration and Notice
The Land Registration Act 2002 introduced significant changes regarding notice and registration of freehold covenants. In registered land, the only way for a covenant to be binding on a future owner of the burdened property is to enter a notice of it on the charges register at the Land Registry as detailed in section 32 of the Act. This process provides constructive notice, meaning that a purchaser cannot claim to be unaware of the covenant regardless of whether they conduct a physical search. Failure to register the notice of the covenant may render it unenforceable against a purchaser for value. For unregistered land, the doctrine of notice still applies, although land charges must be registered. Prior to the LRA 2002, a purchaser of unregistered land had to check the title deeds to be aware of the covenant. This change has facilitated the process and provides added transparency in property ownership. A covenant that has not been registered will not bind a subsequent owner of the servient land unless that person is a volunteer (i.e. receives the land as a gift).
Modification and Discharge
Freehold covenants can sometimes be modified or discharged under specific circumstances. The Lands Chamber of the Upper Tribunal holds the authority under the Law of Property Act 1925 to modify or discharge a restrictive covenant. This action is usually taken if the covenant has become obsolete due to changes in the character of the neighbourhood or is deemed to impede reasonable use of the land. An example may be a covenant prohibiting building above a single storey, which may be modified if the character of the area has changed and all surrounding houses are of two storeys. An owner seeking modification or discharge of a covenant must provide adequate grounds and satisfy a legal process to support their application. This judicial oversight ensures that while property rights are upheld, they can also be adjusted to changing circumstances, provided the dominant land can still benefit. It is possible to release or vary a covenant by the consent of those who hold the benefit of it. Furthermore, should the dominant and servient tenements come into the same ownership, the covenant will be extinguished. Wall v Collins [2007] EWCA Civ 444 addressed merger in the context of easements, it is not entirely clear how a covenant would operate. However, given that the decision did not extend to covenants, one could reasonably assume that a covenant would be extinguished in the same way.
Practical Implications and Examples
Freehold covenants impact many aspects of property ownership. For instance, a common negative covenant might restrict the building of extensions on a property, which ensures consistency of neighbourhood character. A positive covenant might oblige all residents of a private road to contribute to the cost of upkeep of said road. These types of agreements aim to maintain property value and standards. Another practical example is a development agreement whereby the developer must develop all land in accordance with a plan, this agreement, which could form part of the title, would bind future owners of the development. Freehold covenants are not only relevant for residential properties but also for commercial and industrial sites. They are important in planning as well. For example, a developer may seek to place certain restrictive covenants on a piece of land to preserve its value or protect their other land from an undesirable use. Furthermore, they can address more complex matters such as restrictions on operating a certain business, noise levels, or usage of shared facilities. These covenants are important for property rights and should be identified during the conveyance stage.
Conclusion
Freehold covenants represent a complex yet essential part of English property law. They regulate how land is used, developed, and maintained, creating a framework for property rights and responsibilities. The distinction between positive and negative covenants is crucial for determining enforceability, with negative covenants more likely to bind successors in title. The concept of “touch and concern” ensures the covenant has a direct effect on the land and is not merely a personal obligation. The Land Registration Act 2002 has made the process of registration and notice more transparent, protecting the interests of both the dominant and servient landowners. The ability to modify or discharge restrictive covenants in certain circumstances means that they are not a completely rigid or unchangeable legal feature. Understanding freehold covenants requires referencing the relevant legislation, common law and case law to navigate this important area of property law effectively. These legal devices form the background of how land in England and Wales is controlled, used, and enjoyed.
