Lord McArdle was the registered owner of the 1000-acre McArdle estate.

In 1975 he developed a
four-acre area on the edge of the estate. He divided the area into four equal plots and on each plot
he built a substantial detached house. He sold the plots in succession, plot A to Ann, plot B to Bill,
plot C to Cal and plot D to Diana. Each of the purchasers covenanted ‘with Lord McArdle and his
successors in title’:

1)to maintain the house as a single-dwelling-house and

2)to keep the exterior of the house in a good state of repair.

Two years later Lord McArdle developed a further two adjoining plots and sold them, plot J to Jack
and plot K to Ken, subject to the same covenants. Since then, all the plots have changed hands and
the McArdle estate has been sold to Peter. The present owner of plot C, Harry, wants to convert his
house into flats and the present owner of plot J, Tom, wants to run a travel agency from his house.
Tom is unwilling to spend money on repainting the house. Harry and Tom want to know if they are
bound by the covenants, and if so, who can enforce the covenants against them.

Advise Harry and Tom.

Answer:

A covenant is an undertaking contained in a deed which does not require consideration, to do

something or not to do something in relation to the defined area of space. The covenantor bears the
burden of the covenant whereas the covenantee enjoys the benefit of the covenant. Lord Mc Ardle
was the owner and covenantee of the estate and in 1997, the estate is sold to Peter. Therefore,
Peter is the current covenantee. The major concern is whether the covenant which entered by the
previous covenantor is capable of binding Harry and Tom. It is a trite law that a party seeking to
enforce a covenant must establish that he is entitled for the benefit of the covenant and the person
against whom he is seeking to enforce carries the burden. Hence, the concept of burden and benefit
runs concurrently.

Issue:

-Harry wants to convert the house into flat; Tom wants to runs a travel agency

-Harry unwilling to spend money to repaint

Harry wants to convert the house into flat; Tom wants to runs a travel agency.

As a general rule, the burden shall never pass at law, according to the case of Austerberry v Oldham
Corp affirmed by the House of Lords in Rhone v Stephen. The burden between two original parties is
not capable of running to its predecessor. The justification is that positive covenant is a matter which
lies in the original contract and it would be contrary to the privity of contract concept. This is a
matter which lies for the burden which only concerns with the positive covenants.

Under equity, the burden of a restrictive covenants can nevertheless pass subject to few criteria as
per Tux v Moxhay. Firstly, by ascertaining the nature of the covenant. The distinction between a
positive covenant and a restrictive one depends on the substance of the circumstances not merely
the form of it. On the fact, it was stated that the covenant which Harry and Tom were covenanted to
maintain the house as a single dwelling house. It is somehow restrictive in nature by limiting the
mode of use of the house as per Haywood v Brunswick. Hence, this is regarded as a negative
covenant. Secondly, the covenant must touch and concern the land as per what concluded by Lord
Oliver in Swift Investment v Combined English Store. The meaning of touch and concern is threefold.
Firstly, the covenant must serve for the purpose of benefiting the covenantee even though the
ownership is capable of shifting. Secondly, the covenant must affect the nature, value and the mode
of use of the land. Lastly, the covenanted land must benefit the land but not personal. On the fact, it
can be inferred from the fact that by not changing the mode of use into a non-residential of a house
in a certain area are benefiting the appearances of the community and it also increases the value of
the land due to the intact appearance and the maintain the purpose of serving a complete
residential use. Therefore, the touch and concern test could be satisfied. Then, the covenant must
also relate to identifiable dominant tenement. This can be satisfied where the covenantee owns the
dominant tenement whereas the covenantor owns the servient tenement at the time of making the
covenant. This can be satisfied on the fact that the house is built at the edge of the estate (dominant
tenement). Lastly, there must be an intention that the restrictive covenant to run with covenantor’s
land. This can be seen in section 79 of the Law of Property Act 1925 as the burden is deemed to run
apart from the covenantor himself, but also to the successive purchaser. This presumption is subject
to contrary intention. Since the fact did not dictates otherwise, it is regarded that the burden is
capable of running to Harry and Tom.

After having discussed the passing of burden, the discussion now is shifted to the passing of benefit
under equity ie, whether the benefit is being capable to pass from Lord Mc Ardle to Peter. The
requirement which needed to be satisfied is whether the covenant touch and concern the land, the
claimant must have the legal or equitable estate and the transmission of the benefit via few
methods. The first threshold is being mentioned above. Then, it was clear on the fact that Mc Ardle
estate has been sold to Peter, it is clear that Peter will have the legal estate. Moreover, the methods
of the transmission of the benefit must also take place. On the fact, the phrase being used is
‘successor in title’. Hence, the method of annexation may take place. This is a method which is nailed
in the land and the attached benefit will automatically transfer to a new owner. However, the fact
did not state any clear words included in any existence of document or deed for the purpose of
annexation. Hence, section 78 of the Law of Property Act 1925 might take place. section 78 concerns
with the statutory power to automatically annex the benefit to a successive owner as per Wrotham
Park Estate v Parkside Homes and Federated Homes v Mill Lodge Properties.

Apart from that, it was held that the benefit may also pass under the building scheme method. It is a
normal event where the property developer may insert a covenant for every purchaser of the
property. This is somehow known as the local law imposed by the property developer which
mutually benefits the neighborhood. There are some requirements to enforce the building scheme
as per Baxter v Four Oakes Properties. Firstly, there must be an identifiable scheme which is known
by the purchaser. Then, the mutual understanding that the covenant is mutually enforceable all the
plot in the scheme. The fact is silence on the existence of the scheme. If there is an existence, the
benefit may pass.

It is advised that Harry and Tom are being subjected to oblige with the covenant since it is capable of
passing.
Harry unwilling to spend money to repaint.

On the fact, Harry is unwilling to spend money to repaint. This will raise a discussion as to whether
the covenant which requires ‘keeping the exterior of the house in a good state of repair’ is capable
of passing. It was held that requiring to keep the exterior of the house in a good state good state
amounts to a positive covenant. In the case of Haywood v Brunswick, it was held that any obligation
which requires expenses to de drawn out of covenantor’s pocket is regarded as a positive covenant.
Hence, as prima facie, the general rule held in the case of Austerberry v Oldham Corp, the burden
cannot pass at law. However, there are few exceptions where the burden can pass. Firstly, the
doctrine of mutual benefit (Hallsall v Britzell). This is nevertheless being distinguished on the fact
due to the reasons that there is no dispute as to the easement of fencing here. Then, the exception
of the chain of indemnity covenant. Under this exception, the covenantor would require a chain of
indemnity clause to be undertaken by subsequent purchaser. However, this does not change the fact
that the original covenantor still remains liable for the breaches of the initial covenant held with
covenantee. This indemnity chain can be extended indefinitely. Each subsequent purchaser will
enter the covenant with the predecessor to indemnify for any prospective breaches. The remedy
available is damages. The chain can be broken if the covenantor did not require the purchaser to
covenant on this basis as per Town v Allotey. The fact did not state such indemnity clause to Harry
hence, Harry does not need to adhere with the covenant. Since the burden did not pass, it will be
redundant to discuss benefit. Hence, Peter may sue for Cal for the breach of covenant only.

1 hours 7 minutes. 1314 words