Covenants affecting freehold properties in England & Wales

The comments below do not apply to leasehold properties

English land law can be quite eccentric – not least in how it treats restrictions and obligations imposed on properties when they change hands.  It is very common for developers, in particular, to impose a wide range of restrictions and obligations when they sell off the houses they have built, but this does not necessarily mean the restrictions and obligations are enforceable.

Covenants

Such restrictions and obligations are created by the original buyer giving “covenants” (promises in a deed, rather than a contract) when they buy a house, and it is the enforceability of these covenants that is at issue.

Burden

First, while the burden of restrictive covenants (eg: not to alter a building without the developer’s consent) “run with the land, so they bind successive owners, the burden of positive covenants (eg: to contribute to the cost of maintaining a shared drive) do not.

For positive covenants to be binding or effective:

·       either each successive owner has to give covenants him or herself

·       or the exercise of a right (such as a right to use a shared driveway) has to be conditional on complying with an obligation (such as contributing to its maintenance)

·       or an enforcement mechanism such as a rentcharge (or a leasehold arrangement) needs to be used.

Also, a property owner will not be liable for a predecessor’s breach of covenant, as long as the new owner has not colluded in the breach. So, while the new owner may be bound by a covenant, he does not become responsible for what a previous owner has done or failed to do.

Benefit

Whether a covenant (positive or restrictive) is binding is only one half of the story: there must also be someone entitled to enforce it if it is to “bite”.

Much depends on the wording of the relevant covenant, but four tests must be satisfied for the benefit of a covenant to “run with the land” of the person who originally imposed the covenant:

1         The original parties must have intended the covenant to benefit a specific area of land

2         The covenant must be capable of benefiting the land – it cannot be simply a personal benefit

3         The person imposing the covenant must own the land to be benefited when the covenant is imposed

4         The person enforcing the covenant must own the benefiting land (or part of it) when enforcing the covenant.

As a result, once a developer has sold off all the plots on an estate, it will very probably no longer own any of the land benefiting from the covenant, and so be unable to enforce it.  Its successors, however, may well be able to enforce the covenant, especially if the benefit has been specifically assigned to them or the covenants are part of a “building scheme” – see below. Depending on how a covenant is worded, it may be enforceable only by the original party, and if that party no longer owns land benefiting from the covenant, or perhaps no longer exists, the covenant cannot be enforced.

Building schemes

A properly set up building scheme breaks almost all of the above rules.  A building scheme is created where a developer sets up a set of covenants affecting all the properties on an estate with the stated intention that each property owner should be able to enforce the covenants against each other. The burden and the benefit of the covenants then runs with each property, so they can be enforced by any owner indefinitely.

Warning

The above explanation is necessarily a summary one and does not try to cover all the complexities of enforceability of covenant under common law and in equity.  However, it should be sufficient to reassure many people that the covenants they thought affected them do not in fact do so, and let others know if they may have a problem or be at risk if they breach the terms of a covenant.

For more information and specific advice, please contact us to discuss your specific circumstances: 01580 767100 – mail@nelsonmclean.co.uk