Freehold covenants

Freehold covenants are contractual promises affecting land use between parties not in a landlord-tenant relationship. The fundamental distinction is between positive covenants (requiring expenditure or action) and restrictive covenants (requiring abstention). At common law, neither the burden of positive nor restrictive covenants runs with land (Austerberry v Corporation of Oldham (1885)). In equity, only the burden of restrictive covenants can bind successors under Tulk v Moxhay (1848), provided they: (1) are negative in substance; (2) protect dominant land; (3) touch and concern that land; (4) are properly registered; and (5) the successor has notice. The benefit of covenants may run at law (if touching and concerning land with intention to run) or in equity (through annexation under s.78 LPA 1925, assignment, or building schemes). This dual regime exists because equity intervened to prevent unconscionable use of land by purchasers with notice of restrictions, while maintaining the common law bar against positive burdens running to protect freedom of alienation.

Tulk v Moxhay (1848) 2 Ph 774: Lord Cottenham LC held that equity would restrain a purchaser with notice from breaching a restrictive covenant, establishing that negative covenants can bind successors in conscience. This created the equitable proprietary interest in restrictive covenants.

Austerberry v Corporation of Oldham (1885) 29 Ch D 750: Confirmed the common law rule that covenant burdens cannot run with freehold land, whether positive or restrictive. Remains binding authority preventing positive covenants from binding successors.

Rhone v Stephens [1994] 2 AC 310: House of Lords refused to overrule Austerberry for positive covenants, holding reform must come from Parliament not courts. Reinforces the stark positive/restrictive distinction despite acknowledging the law's unsatisfactory state.

Haywood v Brunswick PBS (1881) 8 QBD 403: A covenant 'not to let premises fall into disrepair' was positive in substance despite negative wording, as compliance required expenditure. Establishes the substance-over-form test for classification.

Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 WLR 594: Brightman LJ held s.78(1) LPA 1925 automatically annexes covenant benefits to dominant land unless contrary intention appears. Revolutionised benefit transmission but raised concerns about overriding parties' intentions.

Courts apply a structured analysis for covenant enforceability. First, classify the covenant: examine substance not form—does compliance require expenditure/action (positive) or mere abstention (restrictive)? Second, for burden running: if positive, it cannot run; if restrictive, check the Tulk v Moxhay conditions—dominant land existed at creation, covenant touches and concerns it, proper registration (Class D(ii) land charge if unregistered land; notice if registered land). Third, for benefit running: at law, need touching and concerning plus intention; in equity, check for annexation (express or via s.78), valid assignment, or building scheme. Fourth, consider defences: has there been delay, acquiescence, or is the covenant obsolete? For restrictive covenants, can s.84 LPA 1925 discharge apply? Common triggers include housing developments (building schemes), shared facilities (positive obligations problem), and commercial restrictions (competition covenants). Always identify the registration regime first—the rules differ significantly between registered and unregistered land.

Students consistently misidentify positive covenants—'not to permit deterioration' requires maintenance expenditure so is positive (Haywood). Many analyse only burden running, forgetting claimants need benefit too—always check both sides. The s.78 automatic annexation from Federated Homes requires the covenant to relate to identifiable dominant land; broad drafting defeats this. Registration errors abound: post-1925 restrictive covenants need Class D(ii) registration in unregistered land or they're void against purchasers; in registered land, unprotected covenants rarely override under Schedule 3. Don't apply s.84 discharge to positive covenants—it's restrictive only. Building schemes have relaxed requirements post-Re Dolphin's Conveyance but still need evidence of mutual enforceability intention.