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Land Law – Passing the Benefits of Covenants in Equity between Successors in Title
Just a brief reminder that the benefit of the covenant must also be demonstrated to pass in equity in order for the burden of the covenant to pass in equity. Both positive and restrictive covenants may transfer in equity, but there are a few requirements that must be fulfilled:
The benefit of the covenant was meant to flow with the land, therefore it must "touch and concern" the land, and the person who succeeds to the original covenantee must have a legal or equitable estate therein. Three more categories can be created out of this:
- by annexation by statute, stated, or inferred under section 78 LPA 1925 By way of explicit or implicit assignment, the disputed land is included in a "building scheme."
After discussing the first two requirements earlier in the chapter, we will now talk about how the covenant's benefit can run alongside the land.
In express, implicit, or annexation under s. 78 LPA 1925
This was covered in full in the section on "passing of the benefit of covenants in law," but the following is a quick summary of those general guidelines:
by express annexation
When the deed specifically states that the covenant will benefit a certain plot of land and that it is meant to pass to subsequent landowners, using some sort of annexation language. Under these conditions, the benefit of the covenant will automatically transfer to subsequent owners of the land.
by implied annexation
If the case's circumstances demonstrate that the land being benefited by the covenant is sufficiently identifiable, the court could be willing to infer that the benefit will transfer to successors in title. However, because express annexation and the statutory provisions of s. 78 LPA 25 are both available, both are employed relatively infrequently.
Statutory Annexation pursuant to LPA 1925 Section 78
This is the annexation strategy that is most likely to be used in a problem.
query. It implies that all covenants that are held to affect or touch the land will be automatically annexed to that land, and the benefit of those covenants will automatically transfer to the land's successors in title in equity. This has helped to address the express and implicit annexation difficulties in some way.
Assignment, explicit or implicit
The transfer of land occurs through an assignment, and it's critical to understand the distinctions between annexation and assignment.
Important word: assignment
The transfer of land occurs during assignment, which may occur years after annexation. If a chain of indemnity is broken—that is, if it is not assigned in the deed to a successor in title—the covenant's benefit may be forfeited.
The advantage of that covenant is transferred to a specific individual through this kind of assignment. With this manner of transmission, the benefit will only pass along with the land provided that the next deeds contain terms of assignment.
Revision advice
Since the passage of Section 78 LPA 1925, implied assignment may be considered as having little value, yet clear assignment is still crucial when it comes to covenants.
Three main criteria are outlined for the assignment:
The covenant must be able to benefit the land.
The land must be able to be identified.
The covenant assignment needs to happen concurrently with the ownership transfer.
Case example
Dona owns a large plot of land and builds a house known as ‘The Poppy’. She gives Nicki a piece of land, but the deed has a restriction on using the land for commercial purposes. Since the deed specifies that the benefit of this covenant would not pass without specific assignment, the covenant is not annexed to the land. Dona subsequently transfers the benefit of the covenant to Harry through the sale of "The Poppy," which is recorded in the deed. Harvey may enforce the covenant if Nicki later begins to operate any kind of business on her property.
Later on, Harry gives Lemar "The Poppy," but he neglects to assign the deed's benefit of the covenant. Is Lemar able to hold Nicki accountable for any breaches of this covenant?
No, even though the land is capable of benefiting from the covenant and can be identified, in this case the "chain of assignment"—also referred to as the "chain of indemnity"—has been broken, making it impossible for Lemar to enforce the covenant. Moreover, Harvey cannot make this right later on because he is no longer the owner and cannot assign the benefit. Since the deed makes it very plain that the covenant would not pass without express assignment—which would be against the intention of Section 78—and since it does not supersede that written condition, S. 78 will not apply to save this covenant.
The disputed land is a component of a "building scheme."
This has to do with a specific parcel of land that is later divided up and sold to several buyers. These are frequently connected to newly constructed housing estates, when a large number of homes are constructed, sold, and then moved into by other homeowners, depriving the original owner, known as the covenantee, of any land.
Since the builder no longer owns any land, the enforcement of the covenants discussed in this chapter may not be applicable. As a result, the homeowners would have no means of taking advantage of or upholding these covenants. The concept of a construction scheme is that each home on the housing estate continues to benefit from the covenants, which are enforceable amongst the current homeowners.
To determine whether a building scheme exists, there are two primary requirements that must be met: proof of a shared intention among all buyers that the land will be sold in plots, and a clear intention that each buyer of a specific plot will be bound by those reciprocal and mutual covenants.
Case Example
Ali owned a large plot of land known as the Seaham View Estate. He died and the estate was sold off in plots. There were nine transfers in total, the first four were administered by Ali’s daughter and the other five by his brother. They had identical restrictive covenants within them detailing what could be built upon these plots of land. One of the purchasers planned to build on the plot in a way that would have been inconsistent with the terms of this covenant. Could this purchaser claim that they were not bound by the covenants and no building scheme was established as there was no common vendor in line with the authority at the time?
This is based on the facts of Re Dolphin’s Conveyance (1970) in
which the High Court held that a building scheme had been established despite there being no common vendor. Considering all the other circumstances of the case there was a very clear intention that the covenants were to be enforceable by each owner against all other owners. The covenants were clearly for the mutual benefit of every homeowner on the estate
Just a brief reminder that the benefit of the covenant must also be demonstrated to pass in equity in order for the burden of the covenant to pass in equity. Both positive and restrictive covenants may transfer in equity, but there are a few requirements that must be fulfilled:
The benefit of the covenant was meant to flow with the land, therefore it must "touch and concern" the land, and the person who succeeds to the original covenantee must have a legal or equitable estate therein. Three more categories can be created out of this:
- by annexation by statute, stated, or inferred under section 78 LPA 1925 By way of explicit or implicit assignment, the disputed land is included in a "building scheme."
After discussing the first two requirements earlier in the chapter, we will now talk about how the covenant's benefit can run alongside the land.
In express, implicit, or annexation under s. 78 LPA 1925
This was covered in full in the section on "passing of the benefit of covenants in law," but the following is a quick summary of those general guidelines:
by express annexation
When the deed specifically states that the covenant will benefit a certain plot of land and that it is meant to pass to subsequent landowners, using some sort of annexation language. Under these conditions, the benefit of the covenant will automatically transfer to subsequent owners of the land.
by implied annexation
If the case's circumstances demonstrate that the land being benefited by the covenant is sufficiently identifiable, the court could be willing to infer that the benefit will transfer to successors in title. However, because express annexation and the statutory provisions of s. 78 LPA 25 are both available, both are employed relatively infrequently.
Statutory Annexation pursuant to LPA 1925 Section 78
This is the annexation strategy that is most likely to be used in a problem.
query. It implies that all covenants that are held to affect or touch the land will be automatically annexed to that land, and the benefit of those covenants will automatically transfer to the land's successors in title in equity. This has helped to address the express and implicit annexation difficulties in some way.
Assignment, explicit or implicit
The transfer of land occurs through an assignment, and it's critical to understand the distinctions between annexation and assignment.
Important word: assignment
The transfer of land occurs during assignment, which may occur years after annexation. If a chain of indemnity is broken—that is, if it is not assigned in the deed to a successor in title—the covenant's benefit may be forfeited.
The advantage of that covenant is transferred to a specific individual through this kind of assignment. With this manner of transmission, the benefit will only pass along with the land provided that the next deeds contain terms of assignment.
Revision advice
Since the passage of Section 78 LPA 1925, implied assignment may be considered as having little value, yet clear assignment is still crucial when it comes to covenants.
Three main criteria are outlined for the assignment:
The covenant must be able to benefit the land.
The land must be able to be identified.
The covenant assignment needs to happen concurrently with the ownership transfer.
Case example
Dona owns a large plot of land and builds a house known as ‘The Poppy’. She gives Nicki a piece of land, but the deed has a restriction on using the land for commercial purposes. Since the deed specifies that the benefit of this covenant would not pass without specific assignment, the covenant is not annexed to the land. Dona subsequently transfers the benefit of the covenant to Harry through the sale of "The Poppy," which is recorded in the deed. Harvey may enforce the covenant if Nicki later begins to operate any kind of business on her property.
Later on, Harry gives Lemar "The Poppy," but he neglects to assign the deed's benefit of the covenant. Is Lemar able to hold Nicki accountable for any breaches of this covenant?
No, even though the land is capable of benefiting from the covenant and can be identified, in this case the "chain of assignment"—also referred to as the "chain of indemnity"—has been broken, making it impossible for Lemar to enforce the covenant. Moreover, Harvey cannot make this right later on because he is no longer the owner and cannot assign the benefit. Since the deed makes it very plain that the covenant would not pass without express assignment—which would be against the intention of Section 78—and since it does not supersede that written condition, S. 78 will not apply to save this covenant.
The disputed land is a component of a "building scheme."
This has to do with a specific parcel of land that is later divided up and sold to several buyers. These are frequently connected to newly constructed housing estates, when a large number of homes are constructed, sold, and then moved into by other homeowners, depriving the original owner, known as the covenantee, of any land.
Since the builder no longer owns any land, the enforcement of the covenants discussed in this chapter may not be applicable. As a result, the homeowners would have no means of taking advantage of or upholding these covenants. The concept of a construction scheme is that each home on the housing estate continues to benefit from the covenants, which are enforceable amongst the current homeowners.
To determine whether a building scheme exists, there are two primary requirements that must be met: proof of a shared intention among all buyers that the land will be sold in plots, and a clear intention that each buyer of a specific plot will be bound by those reciprocal and mutual covenants.
Case Example
Ali owned a large plot of land known as the Seaham View Estate. He died and the estate was sold off in plots. There were nine transfers in total, the first four were administered by Ali’s daughter and the other five by his brother. They had identical restrictive covenants within them detailing what could be built upon these plots of land. One of the purchasers planned to build on the plot in a way that would have been inconsistent with the terms of this covenant. Could this purchaser claim that they were not bound by the covenants and no building scheme was established as there was no common vendor in line with the authority at the time?
This is based on the facts of Re Dolphin’s Conveyance (1970) in
which the High Court held that a building scheme had been established despite there being no common vendor. Considering all the other circumstances of the case there was a very clear intention that the covenants were to be enforceable by each owner against all other owners. The covenants were clearly for the mutual benefit of every homeowner on the estate
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