Land Law and Covenantee - Research Paper Example

The statement that the ‘law governing whether the benefit and burden of freehold covenants runs with the land is full of arbitrary rules and illogical distinctions and needs reform’ is one that has been said countless times by commentators and legal experts. It is evident that the current law is unnecessarily complex and in need of modernisation. The problem with this area include the lack of enforceability of positive covenants against successors in title, the issue of original covenantors remaining bound even after the land is sold, the fact that restrictive covenants are not legal interests in land, and the lack of clarity and transparency with regards to the powers of the Upper Tribunal. Although there were many of calls for reform over the years, the proposals contained in the 2011 Law Commission report1 should be implemented in order to update and clarify this area of law. With regards to positive covenants, there is no issue when the original covenantee seeks to claim against an original covenantor. However, complications emerge when attempts are made to make a successor in title to the original covenantor liable on the premise that the burden of the covenant has passed to them, or when successor in title to the original covenantee wishes to sue on the premise that the benefit of the covenant has passed to them. The difficulty with this is that although the burden may pass to successors in title in restrictive covenants, this rule does not apply in positive covenants. This problem can be seen in Rhone v Stephens [1994]2 where a property owner had divided his property into two, selling one (a cottage) and retaining the other. He covenanted to maintain the roof that extended over the cottage, which subsequently leaked and damaged the cottage. The cottage owners then sued the successors in title of the original covenantor. However, the House of Lords held that because the covenant was positive, there could be no liability. Lord Templeman stated that equity could not be used to enforce positive covenants and to do so ‘would be to enforce a personal obligation against a person who has not covenanted3.’ This was based on the principle in Keppell v Bailey [1834]4 which establishes the rule that only the benefit and not the burden runs with the land. In Haywood v Brunswick Permanent Benefit Building Society [1881]5, Cotton LJ held that covenants requiring owners to ‘put his hand into his pocket’ was not enforceable6. These principles were later consolidated in Austerberry v Oldham Corporation [1885]7 and subsequently followed in Rhone v Stephens [1994]8. Proponents of this rule such as Van Houweling9 argues that it is justified as it was ‘intended to control the potentially harmful effects of land use restrictions and obligations’, especially with ‘respect to future owners’. The Austerberry position is distinguished from the position held by leasehold covenants which allows positive covenants to be enforceable as long as it ‘touches and concerns’ the land, if it is not expressed as personal, and where there is privity of estate10. Contentiously, with regards to freehold covenants, this is not so. This is controversial as, from a historical viewpoint, the court in the landmark case of Tulk v Moxhay [1848]11 did not distinguish between positive and restrictive covenants. This distinction was only established in later in cases such as Haywood v Brunswick Permanent Benefit Building Society [1881]12. This is also in contrast to other common-law jurisdictions which has implemented reforms to allow positive covenants to run, such as in Ireland13 and New Zealand14. In fact, a 1985 New Zealand committee report recommended that the distinction between positive and negative covenants is abolished15. This is because of the increasing demand for the maintenance and management of common property towards the end of the 20th century16. However, despite this illogical distinction and the growing opposition to this rule, attempts to allow positive covenants to run in equity have been met with resistance. Reports commissioned during the 1970s towards the 1990s also found this area of law to be lacking. However, any proposals for reforms were never implemented. For example, in 1991, the Law Commission proposed to categorise positive and restrictive covenants as land obligations to modernise the law17. However, this was subsequently dismissed by Parliament. Closer to the present day, the 2008 consultation paper described the incapacity of positive covenants to bind successors in title as the 'greatest and clearest deficiency' in the law18. Following this paper, the 2011 report illustrates the current ways that are used to allow positive covenants to run with the land19 such as long leases, right of entry annexed to an estate rentcharge, indemnity covenants and the 'benefit and burden' principle in Halsall v Brizell [1957]20 which was upheld by Goodman v Elwood [2013]21. However, it concludes that these methods are still inadequate because they operated ‘only indirectly, with unnecessary cost and risk'22. It also regards the 'commonhold' system introduced by the Commonhold and Leasehold Reform Act 200223 as insufficient in resolving this difficulty. This is because it is only relevant if developers of freehold land wants to establish schemes of mutually enforceable covenants and is 'designed for truly interdependent developments such as flats, or business units that share facilities and physical structure'24. Furthermore, despite its benefits, the take-up of commonhold has been fewer than expected25. Because of these inadequacies, it is proposed in the report that the law on positive covenants are amended so they are enforceable against successors in title26. However, allowing this would make the operation of covenants more burdensome. To remedy this, the 2011 report recommends that obligations should be carefully and clearly defined27. These obligations include promises not to do something on the convenantor's land, promises to do something to one's own land or on a boundary structure, and promises to make reciprocal payment. Also, it is necessary that the benefit of the promise ‘touches and concerns’ the land of the covenantee, and that the promise is not conveyed as personal. With regards to restrictive covenants in freehold land, the 2008 consultation paper noted that the rules regarding the running of benefit and burden are a flawed because of its complexity28. However, the 2011 report suggests that it should remain as it is because, as it points out, some of those who were consulted in 2008 disagreed and indicated that practitioners ‘have learnt to live with the rules and to operate them efficiently'29. However, since restrictive covenants are equitable interests in land, the report stated that it is ‘generically different from easements and profits, because they cannot exist as legal interests in land’30. It points out that the fundamental idea of a covenant is that it is a contractual right, and not a property right31. This is shown in the fact that when the land is sold, the original convenantor still remains liable. Thus, contractual liability between the original parties persists regardless of changes in the ownership of the land. Even though this is the case, restrictive covenants hold a hybrid status because it can still be made to bind a purchaser of land if it takes effect as equitable interests. The report proposes that these needs to be changed32 and restrictive covenants should now become legal interests created by deed and placed on the list in s1(2)(a) of the Law of Property Act 192533. If this is implemented, it should only be created when title to the land is registered34. To this end, clause 2(2) of the draft bill attached to the report provides that promises in the form of restrictive covenants will take effect as land obligations35. Because of this, it would run with the benefited land as interests in land, but it would not bind the original covenantor. This means that it would become unnecessary to take out indemnity covenants to protect the original covenantor against future breaches. In effect, this would make the rules less burdensome and complicated. The 2011 report further recommends that land obligations should be able to exist in equity36 if, for example, the obligation was not created by deed but is in a written agreement compliant with section 2 of the Law of Property (Miscellaneous Provisions) Act 198937 or is not registered. However, it further states that there should be very little that remains equitable because land obligations will generally be contained in transfers of land and will become legal upon registration, just as easements are38. Furthermore, the powers given to the Upper Trbunals (which was previously called the Lands Tribunals) to discharge or modify covenants under section 84 of the Law of Property Act 192539 would be better defined, more clarified, and made more transparent under these proposals. In conclusion, the current law relating to freehold covenants are certainly defective and outdated. Under close scrutiny and criticism, many of these rules are arbitrary and illogical. While reforms have been suggested over the years, they have yet to be implemented. It is suggested that the recommendations set out in the 2011 Law Commission report will bring clarity to an area of law which has been lacking for many years. Because of this, the draft bill implementing these proposals should be brought before Parliament in order to rectify these problematic issues. Bibliography Austerberry v Oldham Corporation, 1885, 29 ChD 750 Commonhold and Leasehold Reform Act 2002, Part 1 Goodman v Elwood, 2013, EWCA Civ 110 Greenwood L., ‘Commonhold tenure take-up low’, BBC News, 29 October 2005, http://news.bbc.co.uk/1/hi/programmes/moneybox/4388252.stm, (accessed 13 March 2016). Halsall v Brizell, 1957, 1 All ER 371, Ch 169 Harpum C., Bridge S. and Dixon M., ‘Megarry and Wade: The Law of Real Property’, 7th Edition, Sweet and Maxwell, 2008 Haywood v Brunswick Permanent Benefit Building Society, 1881, 8 QBD 403 Haywood v Brunswick Permanent Benefit Building Society, op. cit., per Cotton LJ Haywood v Brunswick Permanent Benefit Building Society, op. cit. Keppell v Bailey, 1834, EWHC Ch J77 Land and Conveyancing Law Reform Act 2009, (Ireland), Section 49(2). Law Commission Consultation Paper No. 186, ‘Easements, Covenants and Profits À Prendre’, 2008, available from gov.uk, (accessed 11 March 2016), Paragraph 7.39 Law Commission Consultation Paper No. 186, op. cit., Paragraph 7.37 Law Commission Report No. 201, ‘Transfer of Land: Obsolete Restrictive Covenants’, 1991, Paragraph 3.63 Law Commission Report No. 327, ‘Making Land Work: Easements, Covenants and Profits À Prendre’, 2011, available from gov.uk, (accessed 11 March 2016) Law Commission Report No. 327, op. cit., Paragraph 2.13 Law Commission Report No. 327, op. cit., Paragraph 5.1 Law Commission Report No. 327, op. cit., Paragraph 5.17 Law Commission Report No. 327, op. cit., Paragraph 5.23-5.26 Law Commission Report No. 327, op. cit., Paragraph 5.27 Law Commission Report No. 327, op. cit., Paragraph 5.4 Law Commission Report No. 327, op. cit., Paragraph 5.63 Law Commission Report No. 327, op. cit., Part 6 & Paragraph 5.70 Law Commission Report No. 327, op. cit., Paragraph 6.38 Law Commission Report No. 327, op. cit., Paragraph 6.45 Law Commission Report No. 327, op. cit., Paragraph 6.52 Law Commission Report No. 327, op. cit., Paragraph 8.38 Law Commission Report No. 327, op. cit., Appendix A, Clause 2(2) Law of Property Act 1925, Section 1(2)(a) Law of Property Act 1925, Section 84 Law of Property (Miscellaneous Provisions) Act 1989, Section 2 O’Connor P., ‘Careful What You Wish For: Positive Freehold Covenants’, 3, The Conveyancer and Property Lawyer, 191-207, 2011 Property Law Act 2007, (New Zealand), Section 303 Property Law and Equity Committee (New Zealand), ‘Positive Covenants Affecting Land, 1985, Paragraph 28(a) Rhone v Stephens, 1994, UKHL 3, 2 AC 310 Rhone v Stephens, op. cit., per Lord Templeman at 321 Rhone v Stephens, op. cit. Tulk v Moxhay, 1848, EWHC Ch J34 Van Houweling M.S., ‘The New Servitudes’, Georgetown Law Journal 96, 885, 2008 Read More