Proprietary rights in land - Rules for passing the benefit and burden of freehold covenants

Learning Outcomes

After studying this article, you will be able to explain the legal rules for passing the benefit and burden of freehold covenants to successors in title. You will distinguish between positive and restrictive covenants, identify when equity allows the burden to run, and apply the requirements for annexation, assignment, and building schemes. You will also understand the limitations on enforcing positive covenants and the importance of registration for enforceability.

SQE1 Syllabus

For SQE1, you are required to understand the rules for passing the benefit and burden of freehold covenants. Focus your revision on:

• the distinction between positive and restrictive (negative) covenants
• the requirements for the burden of a restrictive covenant to run in equity
• the rules for passing the benefit of a covenant at law and in equity
• the enforceability of positive covenants and available workarounds
• the role of registration in binding successors in registered and unregistered land
• the operation of building schemes and mutual benefit and burden

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which of the following is required for the burden of a restrictive covenant to bind a successor in title in equity?
   1. The covenant must be positive in substance.
   2. The benefit must be expressly assigned.
   3. The covenant must touch and concern the land.
   4. The covenant must be registered as a notice in registered land.

2. True or false? The burden of a positive covenant can run with the land in equity.

3. What is the effect of failing to register a restrictive covenant as a land charge in unregistered land?

4. Which method allows the benefit of a covenant to be permanently attached to land so that it passes automatically to successors?

Introduction

Freehold covenants are promises made by one landowner to another, regulating the use of land. These covenants can shape the character and value of land for generations. Understanding how the benefit and burden of these covenants pass to successors is essential for SQE1.

A key distinction exists between positive covenants (requiring action or expenditure) and restrictive covenants (requiring the landowner to refrain from doing something). The enforceability of covenants against successors depends on whether the covenant is positive or restrictive, and whether the requirements of law or equity are satisfied.

Key Term: freehold covenant
A promise made by deed between landowners, regulating the use of land, which may be positive or restrictive.

Types of Freehold Covenant

A positive covenant requires the covenantor to do something, such as maintain a fence or contribute to repairs.

Key Term: positive covenant
A covenant requiring the landowner to perform an act or spend money.

Key Term: restrictive covenant
A covenant requiring the landowner to refrain from doing something on the land.

Passing the Burden of Covenants

Common Law

At common law, the burden of a covenant does not run with the land. This means successors in title to the covenantor are not bound by the covenant. This rule was established in Austerberry v Corporation of Oldham.

Equity: Restrictive Covenants

Equity allows the burden of a restrictive covenant to run with the land if certain conditions are met. The leading case is Tulk v Moxhay.

Key Term: restrictive covenant
A covenant that restricts the use of land, enforceable in equity against successors if conditions are met.

Requirements for the Burden to Run in Equity

For a restrictive covenant to bind successors in title in equity, all of the following must be satisfied:

1. The covenant must be negative (restrictive) in substance.
2. The covenant must benefit land retained by the covenantee at the time of creation.
3. The covenant must touch and concern the benefited land.
4. The parties must have intended the burden to run with the land (usually implied by statute).
5. The successor must have notice of the covenant (actual or constructive), which in practice means proper registration.

Key Term: touch and concern
The covenant must affect the use, value, or enjoyment of the land itself, not just confer a personal benefit.

Worked Example 1.1

A sells part of her land to B, including a covenant that B must not build above two storeys. B sells to C, who plans to build a third storey. Is C bound?

Answer: Yes, if the covenant is restrictive, benefits land retained by A, touches and concerns the land, and is properly registered, C will be bound in equity.

Registration Requirements

• In registered land, a restrictive covenant must be protected by a notice on the charges register to bind a purchaser for value.
• In unregistered land, a restrictive covenant must be registered as a Class D(ii) land charge against the original covenantor’s name. If not registered, it is void against a purchaser for value.

Exam Warning

If a restrictive covenant is not properly registered, it will not bind a purchaser for value, even if they know about it.

Passing the Benefit of Covenants

The benefit of a covenant must also pass to the claimant for them to enforce it. The rules differ at law and in equity.

At Common Law

The benefit of a covenant can pass at common law if:

1. The covenant touches and concerns the land.
2. The original covenantee held a legal estate in the benefited land.
3. The benefit was intended to run with the land (expressly or impliedly).
4. The successor derives title from the original covenantee.

Key Term: annexation
The process by which the benefit of a covenant is permanently attached to land, so it passes automatically to successors.

Key Term: assignment
The transfer of the benefit of a covenant to a successor at the time of transfer of the land.

In Equity

The benefit of a covenant can pass in equity by:

• Express annexation: The deed states the benefit is for the land and its successors.
• Statutory annexation: Section 78 Law of Property Act 1925 automatically annexes the benefit to the land unless expressly excluded.
• Assignment: The benefit is expressly assigned to the successor at the same time as the land is transferred.
• Building scheme: Where land is sold in plots with mutual covenants intended to be enforceable by and against all plot owners.

Worked Example 1.2

D owns land and covenants with E not to use it for business. E sells the benefited land to F. Can F enforce the covenant?

Answer: Yes, if the benefit has been annexed to the land (expressly or by statute), or assigned to F at the time of transfer, F can enforce the covenant.

Positive Covenants: Enforcement Limitations

The burden of a positive covenant does not run with the land at law or in equity. Only the original covenantor is bound. This creates practical problems for obligations like contributing to shared repairs.

Workarounds for Positive Covenants

• Chain of indemnity covenants: Each buyer covenants to indemnify the seller for breaches, but the chain can break.
• Mutual benefit and burden: If a successor takes a benefit (e.g., right of way), they may be required to accept a related positive burden (e.g., pay for maintenance), but only if the benefit and burden are closely linked.
• Rentcharges: An annual payment secured on land, enforceable by right of re-entry if unpaid.
• Long lease structure: Creating a long lease with positive covenants, then enlarging it to a freehold.
• Commonhold: Positive obligations can run with commonhold units, but this is rarely used in practice.

Worked Example 1.3

G and H own neighbouring houses with a shared driveway. G covenants to maintain the drive. G sells to J, who refuses to pay for repairs. Can H enforce the covenant against J?

Answer: No, the burden of a positive covenant does not run. H can only sue G. If a chain of indemnity covenants exists, H may recover from G, who can then recover from J if J gave an indemnity.

Revision Tip

For SQE1, always identify whether a covenant is positive or restrictive before analysing enforceability against successors.

Registration and Enforceability

Proper registration is essential for enforceability against successors:

• In registered land, enter a notice on the charges register for restrictive covenants.
• In unregistered land, register as a Class D(ii) land charge against the original covenantor’s name.
• Failure to register means the covenant is not binding on a purchaser for value.

Building Schemes

A building scheme allows mutual enforcement of covenants between all plot owners in a defined area, provided:

• There is a common vendor.
• The plots are laid out in a defined area.
• The covenants are intended to be mutually enforceable.
• The scheme is clearly defined.

Summary

Key Point Checklist

This article has covered the following key knowledge points:

• The burden of a restrictive covenant can run in equity if the Tulk v Moxhay conditions are met.
• The burden of a positive covenant does not run with the land at law or in equity.
• The benefit of a covenant can pass at law or in equity by annexation, assignment, or building scheme.
• Proper registration is essential for enforceability against successors in both registered and unregistered land.
• Workarounds exist for positive covenants, but are not fully effective.
• Building schemes allow mutual enforcement of covenants between plot owners in a defined area.

Key Terms and Concepts

• freehold covenant
• positive covenant
• restrictive covenant
• touch and concern
• annexation
• assignment