Freehold covenants

Freehold covenants govern the enforceability of promises relating to the use of land where the parties do not stand in a landlord–tenant relationship. This topic examines when and how the benefit and burden of such covenants pass to successors in title, both at common law and in equity.

The central problem is one of privity: at common law, only parties to a contract can sue or be sued upon it. Because covenants are contractual in origin, successors in title were originally unable to enforce or be bound by covenants made by their predecessors. Over time, equity developed mechanisms to allow certain restrictive covenants to bind successors, giving rise to the dual regime that persists today.

The distinction between positive and restrictive covenants is critical. A positive covenant requires the covenantor to expend money or do something (e.g. to maintain a fence, contribute to repair costs). A restrictive covenant requires the covenantor to refrain from doing something (e.g. not to build, not to use premises for business purposes). The burden of a positive covenant does not run at law or in equity; the burden of a restrictive covenant runs in equity under the rule in Tulk v Moxhay, subject to conditions.

This note proceeds through the historical evolution of the doctrine, the statutory framework (including registration under the Land Charges Act 1972 and Land Registration Act 2002), the requirements for running of benefit and burden, academic controversies, and practical application in problem and essay questions. The Law Commission's long-standing proposals for reform are addressed, as are the limits and lacunae of the current law.

The development of freehold covenants illustrates the tension between freedom of contract and the policy against encumbering land with indefinite obligations.

Common law origins

At common law, only the original parties to a covenant could sue or be sued: the doctrine of privity of contract. This created difficulties where land changed hands. In Keppell v Bailey (1834) 2 My & K 517, Lord Brougham LC refused to enforce a covenant against a successor in title, emphasising that 'incidents of a novel kind cannot be devised and attached to property at the fancy and caprice of any owner'.

The common law did develop limited exceptions. The benefit of a covenant could pass at law if it 'touched and concerned' the land of the covenantee and if there was an intention that it should run—principles analogous to those governing leasehold covenants (see Week 9). But the burden could not run at law: Austerberry v Corporation of Oldham (1885) 29 Ch D 750 confirmed this rule, which remains good law.

Equity's intervention: Tulk v Moxhay

Equity took a different approach. In Tulk v Moxhay (1848) 2 Ph 774, the defendant purchased land in Leicester Square burdened by a covenant not to build on the garden. The covenant was expressly noted in the conveyance to the defendant. Lord Cottenham LC held that equity would restrain a successor in title who acquired with notice of a restrictive covenant. The justification was that 'it would be inequitable that a purchaser with notice should be permitted to use the property in a manner inconsistent with the contract entered into by his vendor'.

This equitable jurisdiction was rooted in conscience and notice. Over time, it crystallised into a proprietary interest capable of binding successors, provided certain conditions were met. The restrictive covenant became, in effect, an equitable interest in land.

Twentieth-century consolidation

The twentieth century saw codification of registration requirements and attempts at statutory reform. The Law of Property Act 1925 provided the framework for transmission of benefit at law (s 78) and equity (s 79 for burden, though its effect is limited). The Land Charges Act 1972 and Land Registration Act 2002 govern registration of restrictive covenants.

Despite periodic Law Commission proposals (1984, 2011), there has been no comprehensive reform. The current law remains a patchwork of common law, equity, and statute.

The enforceability of freehold covenants depends on whether the benefit and the burden have passed to the respective successors in title. The analysis differs at law and in equity.

Running of the burden

At common law: The burden of a covenant, whether positive or restrictive, does not run at law. Austerberry v Corporation of Oldham (1885) and Rhone v Stephens [1994] 2 AC 310 confirm this rule. In Rhone, the House of Lords rejected an invitation to overrule Austerberry, holding that any reform must come from Parliament, not the courts.

In equity: The burden of a restrictive covenant may run in equity under the rule in Tulk v Moxhay, provided:

1. The covenant is negative in substance (not merely in form): Haywood v Brunswick Permanent Benefit Building Society (1881) 8 QBD 403.
2. The covenant was made to protect land of the covenantee (the 'dominant tenement') at the time of creation.
3. The covenant 'touches and concerns' the dominant land: it must affect the land's value or mode of occupation, not be merely personal.
4. The burden is registered as a land charge (Class D(ii) under LCA 1972 in unregistered land) or as a notice on the charges register (LRA 2002, registered land). In registered land, there is also a possibility of an overriding interest under Schedule 3, para 2, if the covenantee is in discoverable actual occupation—though this is rare in practice.
5. The successor to the burdened land has notice (in unregistered land) or the covenant is protected by registration (in registered land).

Foundation

1. Explain the distinction between positive and restrictive covenants and why it matters for the enforceability of freehold covenants.

1. What are the requirements for the burden of a restrictive covenant to bind a successor in title in equity?

Standard

1. 'The rule in Federated Homes undermines freedom of contract by imposing annexation on parties who may not have intended it.' Discuss.

1. Anna sells part of her garden to Ben, who covenants (i) not to build on the land, and (ii) to maintain the boundary fence. Ten years later, Ben sells to Claire. Advise Anna whether she can enforce the covenants against Claire. How, if at all, would your answer differ if title to Ben's land were unregistered?

Challenge

1. 'The refusal of English law to allow the burden of positive covenants to run with freehold land is a doctrinal anomaly that frustrates legitimate commercial expectations and impedes efficient land use. The time for reform is long overdue.' Critically evaluate this statement with reference to case law, academic commentary, and comparative perspectives.

Essential

• Law Commission, Making Land Work: Easements, Covenants and Profits à Prendre (Law Com No 327, 2011), Part 6 (land obligations)
• S Gardner, 'The Property in Thin Air' (1991) 107 LQR 214 [seminal critique of the distinction between positive and restrictive covenants]
• M Pawlowski, 'The Demise of Federated Homes' [2017] Conv 502

Important cases (primary sources)

• Rhone v Stephens [1994] 2 AC 310 (essential reading: Lord Templeman's speech)
• Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 WLR 594 (Brightman LJ on s 78)

Broader context

• S Bright, 'Freehold Covenants: Formatting the Estates' in Modern Studies in Property Law (ed. Cooke, Hart 2003)
• K Gray & SF Gray, Elements of Land Law (5th edn, OUP 2009), ch 5.3 [comprehensive doctrinal treatment]
• M Dixon, 'The Reform of Property Law and the Land Registration Act 2002: Risk, Rationality and the Politics of Land Law' (2003) 119 LQR 575
• Law Commission, Transfer of Land: The Law of Positive and Restrictive Covenants (Law Com No 127, 1984)
• C Harpum, 'Long Leases and Covenants: Positive and Negative' in The Law of Landlord and Tenant (ed. Bridge, Butterworths 2009) [comparative treatment of leasehold and freehold covenants]
• Law Commission, Reinvigorating Commonhold (Law Com No 379, 2020) [contextualises failure of commonhold and renews case for positive obligations]