Restrictive Covenants
What is a Restrictive Covenant?
A covenant is an agreement between two landowners as to how land can be used. It is usually enacted by deed.
For example, one landowner might agree with another not to use his land for commercial purposes.
Unlike a normal deed or contract, a restrictive covenant is a property right that can bind third-parties. Breach of covenant can result in damages or a mandatory/prohibitory injunction.
- The landowner whose land use is restricted by the covenant bears the ‘burden‘ of the covenant.
- The landowner whose land benefits from the covenant has the ‘benefit‘ of the covenant.
Passing the Burden and Benefit of a Restrictive Covenant
A restrictive covenant binds the agreement’s original parties. But what if one or both parties has sold their land to someone else?
If the landowner burdened by the covenant has sold their land, you must assess whether the burden passed to their successor-in-title. If the landowner who benefited from the covenant has sold their land, you must assess whether the benefit passed to their successor-in-title. Some refer to this as the benefit or burden ‘running with the land’.
The Burden
The burden of a covenant cannot run at law. However, it can run in equity: Tulk v Moxhay (1848) 2 Ph 774. A successor-in-title can therefore inherit the equitable benefit of the covenant only. There are four conditions for the burden to run with the land:
The burden must not be purely personal to the parties: P&A Swift Investments v Combined English Stores Group Plc [1989] AC 632. It must relate to the land.
The covenant must benefit a separate plot of land – the ‘dominant’ land: London County Council v Allen [1914] 3 KB 642. This normally requires the plots of land to be relatively close. How close is necessary depends on the covenant’s nature: Marten v Flight Refueling [1962] Ch 115.
The covenant cannot impose any positive obligations on the burdened landowner. This includes any obligation to spend money or do work: Rhone v Stephens [1994] 2 AC 310.
The parties must have objectively intended it to run with the land. This is presumed to be the case unless the covenant document expresses otherwise: Law of Property Act 1925, s 79.
A covenant which imposes positive obligations can pass where the principle of mutual burden and benefit applies. This is where the benefit is dependent on a burden. For example, in Halsall v Brizell [1957] Ch 169, successors-in-title had a right to use certain facilities provided they contributed to the upkeep. As long as they continued to use the facilities, they had to take the burden. The burden must be relevant to the right and conferred in the same transaction for this rule to apply: Rhone v Stephens [1994] 2 AC 310. Also, the successor must have a choice as to whether to accept the benefit and burden: Thamesmead Town Ltd v Allotey (2000) 79 P & CR 557; Davies v Jones [2010] 1 P & CR 22.
Finally, a restrictive covenant is a registrable disposition. So, it will not bind a purchaser of the burdened land unless entered into the Charges Register. However, if the mutual benefit/burden principle applies, there is no need for the right to be registered: Elwood v Goodman [2014] 2 WLR 967. This is because this principle imposes a personal obligation rather than a proprietary one.
The Benefit
There are three ways the benefit of a covenant can pass to a successor-in-title:
The benefit can be assigned by its original owner in either law, equity or both. Assignment in equity is more useful since the burden of the covenant cannot run at law: Miles v Easter [1933] Ch 611. Solely assigning the legal rights will not necessarily allow the new owner to assert the right against the other landowner’s successors, therefore.
It can be annexed to the land expressly or implicitly in the disposition document.
s.78 of the Law of Property Act 1925 also usually annexes the benefit to a disposition. This is so unless the disposition document evidences an intention to exclude successors-in-title or the dominant land is inadequately identified: Roake v Chadha [1984] 1 WLR 40; Crest Nicholson v McAllister [2014] EWCA Civ 430.
The benefit can pass under a building scheme. This applies where there is a building development scheme in place imposing reciprocal, common covenants between landowners: Elliston v Reacher [1908] 2 Ch 374. There must be a defined area under the scheme wherein the vendor(s) intended all plot owners within to be subject to, and benefit from, the covenants: Reid v Bickerstaff [1909] 2 Ch 305.
Discharge and Modification of Restrictive Covenants
The Parties’ Actions
The dominant owner is capable of unilaterally discharging the covenant in several ways:
- The dominant owner can agree to release the covenant.
- The covenant may be abandoned if the dominant owner does not rely on it in circumstances which make it unconscionable to later insist on it (giving rise to estoppel).
- Estoppel can also arise if the dominant owner is implicated in a breach of the covenant: Sayers v Collyer (1885) 28 Ch D 103.
Statutory Discharge and Modification
s.84(1) of the Law of Property Act 1925 allows the Upper Tribunal to discharge or modify restrictive covenants if any of four grounds are met:
- Due to changes in the property or neighbourhood’s character, or any other material circumstances, the restriction ought to be obsolete (s.84(1)(a)). This solely concerns whether the covenant achieves its original purpose, not whether it is still reasonable or beneficial: Re Truman Hanbury Buxton & Co Ltd’s Application [1956] 1 QB 261.
- If the restriction’s continued existence impedes some reasonable use of the land, or would do so unless modified (s.84(1)(aa)), and the impediment either fails to secure the dominant landowner any ‘practical benefit of substantial value or advantage’ or is against the public interest (s.84(1A)). Relevant factors include any development plan, any declared/ascertainable pattern for planning permission in the area and the time period in which the covenant was created (s.84(1B)).
- That all those entitled to the covenant’s benefit are capable adults and agree expressly or implicitly to the discharge or modification (s.84(1)(b)).
- That the discharge or modification sought would not injure anyone entitled to the covenant’s benefit (s.84(1)(c)). If an order is made on this ground, the court may also order the person bearing the covenant’s burden to pay compensation to those entitled to the benefit. This reflects any loss or disadvantage suffered as a result or the extent to which the land was obtained for reduced consideration because of the covenant.
