Question 5 Zone A 2013

Restrictive Covenants (Problem)

Sarah was the owner of an area of land which she divided into three plots known as Plots 1, 2
and 3. Sarah sold Plots 1 and 2 and retained Plot 3.

(a) Sarah sold Plot 1 to Anne who covenanted with the current owners of Plots 2 and 3 to
maintain Plot 1 as “an ornamental garden” and to build and maintain an “ecological bio-sphere”
on the land for the preservation of rare plant species. It was further stated that “the benefit of the
covenant to build and maintain the bio-sphere is only to pass by express assignment”. Anne is
planning to demolish the bio-sphere and build a power station on Plot 1.

(b) Sarah sold Plot 2 to Fiona who covenanted with the current owners of Plot 1 and 3 to only
use the land for residential purposes and build no more than one house on the plot. Fiona built a
house on Plot 2 and sold it to Catriona without including an express assignment of the benefit of
any covenants. Catriona plans to build two further houses and run her property development
business from Plot 2.

Discuss the private law rights and obligations that Sarah, Anne, Fiona and Catriona have in
respect of the planned changes of use.

As Sarah kept plot 3 for herself, issues now arise with plot 1 and 2 and we will deal with them in
turn.

Plot 1

Anne covenanted to maintain Plot 1 as an ornamental garden and to build and maintain an
ecological bio sphere. The first of these covenants would be a restrictive covenant as it restricts
Anne’s usage of Plot 1 to only an ornamental garden. The second of these covenants would be a
positive covenant because its compels some form of performance by Anne.

Since Anne has not sold Plot 1 to anyone there will be no issue of passing of burden on our facts.
As such the only issue that needs to be discussed is the passing of benefits from Fiona to
Catriona, who is the new owner of Plot 2. With regards to Sarah, since she kept plot 3 for herself
and didn’t sell it to anyone as well, then there is no issue of passing of benefits.

As such our first conclusion is that Sarah will be able to sue Anne for the breaches of covenant
that Anne is planning as they are both original covenanting parties and will have privity of
contract. Sarah may sue either at law or at equity depending on the type of remedy she would
like to seek. (At law – damages, at equity – wider range of remedies, including injunctions,
specific performance and sometimes damages but it is discretionary as can be withheld if the
courts feel it appropriate).

When it comes to Fiona, she will have the right to take action against Anne as there is privity of
contract between the two of them. However, since she is no longer on the land, the best that she
can hope to gain would be nominal damages as she is not directly affected anymore.

With regard to Catriona, whether she can enforce the covenants against Anne would depend on
whether the benefits of the covenants have passed on to her. We will have to examine both
covenants separately. The passing of the benefit of the first covenant, the use covenant, can be
argued to have passed in law or in equity because there is no issue of passing of burdens on the
facts as discussed above.

The requirements for the passing of benefits at law are :-

o The covenant must touch & concern land – Swift Investments v Combined English
Stores
o There must be an intention that the benefit pass on to the subsequent occupier – s.
78 LPA’25
o The original covenantee must have held the legal estate at the time the covenant
was made – Webb v Russel
o The subsequent covenantee must have derived title from the original covenantee –
Smith & Snipes Hall v River Douglas Catchment board

(after a full discussion) It is argued that all these requirements are satisfied, and the benefits may
pass on to Catriona allowing her to sue at law.

In equity, Catriona will be advised to argue that statutory annexation has taken place. According
to Federated Homes v Mill Lodge Properties clarified by Crest Nicholson v Mcallister, the effect
of s.78 LPA ’25 is to annex automatically the benefit of the covenant to the covenantee’s land.
This means that Catriona will receive the benefit of the covenant despite there not being any
express declaration to that effect. This of course can be ousted by an express declaration to that
effect, as seen in Roake v Chadha, but on the facts there seems to be none.

With regard to the second covenant, it would seem that a very clear express declaration that the
benefits can only pass by way of express assignment is present. On our facts there seems to be
clear indication that this does not exist as such Catriona is advised that she will not be able to
enforce the second covenant against Anne either at law or in equity.

Plot 2

The issue arising here is whether the owners of plot 1 and plot 3 can enforce the covenant to use
the land for residential purposes only and to not build more than 1 house on the land against the
current owner of Plot 2 – Catriona. Both these covenants are restrictive covenants as they restrict
the land owners use of the land in some way.
As discussed, both Anne and Sarah are the original covenanting parties and as such there will be
no issue of passing of benefits to them. The benefits will already be with them by virtue of the
covenant agreement (privity of contract).

With regard to whether the covenants are enforceable against Fiona, the answer to this will be
yes as Fiona is the original covenantee and the burden will be with her. But the value of
enforcing it against Fiona is questionable as she is no longer on the land. Anne and Sarah should
be going after Catriona as she is the one who is proposing to breach the covenants. In order to do
this we must see if the burdens of the covenants have passed on to Catriona.

As a general rule, and as seen in Rhone v Stephens and Austerberry v Oldham Corp, burdens of
covenants do not run at law. There are limited exceptions to this but they only apply to positive
covenants and as such will not be applicable on our facts.

This will limit Anne and Sarah’s claim only to equity. The requirements for the burden to run in
equity are found in the case of Tulk v Moxhay

o The covenant must be restrictive in nature.

o The covenant must touch and concern land – Swift Investments as per OliverLJ

 Could the covenant burden any owner of the land as opposed to the
original covenantor only and can it benefit any reversioner of the
benefiting land as opposed to the original covenantee only

 Does the covenant affect the nature, quality, mode of user or value of the
land

 Is the covenant expressed to be personal – meaning irrespective of its

o The covenant must be imposed to benefit the land of the original covenantee –
Does it accommodate the Dominant tenement

 Burden cannot pass at all unless the covenantee had land at the time the
covenant was made and that land was capable of benefiting from the
covenant and the burden was imposed in order to benefit that land –
Whitgift Homes Ltd v Stocks

o The burden of the restrictive covenant must be intended to run with the land

 Not difficult to establish because in the absence of contrary intention, the

As such, the burden will be said to have passed to Catriona. However for Anne and Sarah to sue
they must have protected their interest and only if they have done so will it bind Catriona (the 3rd
party purchaser). We are not told whether the land on which the 3 plots are on (specifically plot
2) is registered land or unregistered land.

If it were registered land then, both Anne and Sarah should have entered a notice on the register,
and if this was done then as per s.29 of the LRA 2002, Anne and Sarah’s interest in Plot 2 will
have priority over Catriona and so Catriona will be bound by the burdens of the covenants.

If this were unregistered land then both Anne and Sarah should have entered a class D(ii) Land
Charge at the land charges office as per the LCA 1972 and as a result according to s.198 of the
LPA 1925, this would amount to actual notice to Catriona and she will be bound.

Prepared by

Daniel Abishegam