How Do I Know If a Covenant Can Be Enforced?
Covenants are rules which dictate how landowners can use their land. Unlike statutory rules such as those set out in acts like the Town and Country Planning Act or Building Act they are imposed by the original owner of the land, often by a developer when he sells plots on an estate or by a landowner who owns a large estate and sells parts off. As a result covenants are individual to each property.
Once a covenant is entered into and evidence of it is registered against the title to the property it will (unless it is discharged) remain there for all time, and they attach to the land itself rather than any buildings on it. As a result they can be a nuisance because they are outdated or because it s not clear who is actually entitled to enforce them. There can be many people who have the benefit of a covenant, for example an area of land that was once a country estate owned by a single individual may now be a large housing estate with thousands of homes, all of which may have inherited the benefits of any covenants imposed by the original landowner.
Fortunately there are clear rules as to when covenants can and cannot be enforced.
Is the Covenant “Positive” or “Negative”?
The first thing that needs to be established before assessing whether a covenant is enforceable is whether it is a positive covenant (i.e. some action has to be performed or some expense has to be incurred in order to comply) or whether it is negative (i.e. a person must refrain from a particular action to comply). Negative covenants are more commonly referred to as restrictive covenants. An example of a positive covenant might be “to contribute a fair proportion of the cost of maintaining the shared driveway”, whereas a restrictive covenant might be “not to erect any shed, greenhouse or other outbuilding on the property”.
Sometimes the wording of a covenant is confusing and it might not be immediately obvious whether it is positive or restrictive. For example, “not to allow any part of the property to fall into a state of disrepair” is worded negatively, however to comply it would be necessary to maintain and repair the property when necessary, so this is really a positive covenant.
This distinction is important because the rules on enforceability are quite different depending on whether the covenant is positive or restrictive.
Covenants are always enforceable between the original parties because of what is known as “privity of contract”. This just means that there is binding contract between the original parties. A contract is not however (with certain exceptions not relevant here) enforceable by or against anyone who is not a party to it therefore once either the land with the burden or the land with the benefit changes hands the rules need to be examined to establish whether the covenant is still enforceable.
Enforcing Positive Covenants
The benefit of a positive covenant (i.e. the right to enforce it, will pass to future owners of the land by virtue of s78 of the Law of Property Act 1925, unless it is clear, either from its effect or from its wording, then it was not intended to pass. For example if the wording of the covenant includes a statement that it is not to benefit future owners, or it is something which would only benefit the original covenantee and not the land itself, then the benefit would not pass.
The burden however will not generally pass. This was decided in the case of Austerberry v Oldham Corporation [1885]. The exception to this rule was created in the case of Halsall v Brizell [1957], in which it was decided that “a man cannot take the benefit of a deed without subscribing to the obligations under it”. What this means is that if for example a deed grants the owner of a property the right to use a shared drive subject to contributing toward its maintenance then he cannot exercise the right to use the drive without complying with the associated covenant.
The effect of all this is that for as long as the burdened land is owned by the original covenantor a positive covenant will be enforceable but once it changes hands then unless the exception in Halsall v Brizell applies it will not.
Enforcing Restrictive Covenants
The benefit of a restrictive covenant will pass to future owners by virtue of s78 Law of Property Act 1925 and subject to the same rules (see above). The leading case on whether the burden will also pass is Tulk v Moxhay [1948] in which it was decided that the burden of a covenant would only pass to future owners if the following conditions were met:
- the covenant is restrictive rather than positive
- the covenant benefits the “dominant” land
- it is intended to pass (this is implied by s79 Law of Property Act 1925 unless it is expressly stated that it is not intended to pass)
- the buyer has notice of the covenant (in other words it has to be contained or referred to in the official copies for registered land or the Land Charges Register for unregistered)
This means that generally a restrictive covenant will be enforceable forever provided the character of the land doesn’t change so much that enforcing it would not benefit the “dominant” land.
Indemnity Covenants
Looking back at the section on positive covenants, it might occur to you that the original covenantor will remain liable for any breach of covenant even after he has parted with the land. To get around this problem an “indemnity covenant” is usually inserted into the transfer from him and in every future transfer, whereby the new owner agrees to indemnify the previous owner against being sued for breach of covenant. This will create a “chain of indemnities” going back to when the covenant was created. If a transfer occurs where there is no indemnity covenant then the chain is said to be broken and future transfers do not require it.
Discharging Covenants
Sometimes a covenant can be a barrier to developing land and it may be advantageous to remove it. A covenant can be hundreds of years old and often the whole character of the land with the benefit will have changed since it was imposed. S84 Law of Property Act 1925 therefore allows for an application to be made to the Lands Tribunal to modify or release a covenant if any of the following circumstances apply:
- the covenant is obsolete
- it prevents reasonable use of land
- the express or implied consent of the person with the benefit has been obtained
- the person with benefit will not be injured by discharge or modification of the covenant
25 Year Rule
It is an accepted land law principle that if a breach of covenant continues for 25 years or more with no objection by the person with the benefit, that person is deemed to have accepted the breach by implication and no longer has the right to enforce the covenant.
Covenants In Leases
Where a covenant is contained in a lease the rules are different again. It would be impossible for a landlord to manage a block of flats if the positive covenant to pay service charges did not apply to the current owners for example. S79 of the Law of Property Act 1925 therefore stated that in every assignment of a leasehold interest there would be an implied indemnity covenant, so that the chain of indemnities could not be broken. In addition many landlords insist that a new owner enters into a direct covenant with him.
S79 still applies to older leases but for any granted on or after 01.01.1996 the Landlord and Tenant (Covenants) Act 1995 applies, which states that both the benefit and the burden of covenants in leases, whether positive or negative, do pass to the new owner automatically when the lease or freehold is transferred.
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