Property Law uk

Maintained by Gary Webber

Positive covenants

This page deals with two cases on the enforcement of positive covenants:
  • The owner of the communal parts of a holiday village was entitled to enforce positive covenants against bungalow owners in the village in respect of the costs of maintaining various shared areas and facilities. Although some of the owners were successors-in-title to the covenants, it was held that the covenant to pay was sufficiently relevant to the rights granted to the purchasers to be enforceable under the “benefit and burden” principle.

  • Section 609 of the Housing Act 1985 allows a local housing authority to enforce a restrictive covenant against a covenantor's successor in title even though the authority does not retain any benefiting land. However, it does not enable it to enforce a positive covenant against any such successor.

Benefit and burden principle

Costs of maintaining various shared areas and facilities

Wilkinson v Kerdene
[2013] EWCA Civ 44

Summary

The owner of the communal parts of a holiday village was entitled to enforce positive covenants against bungalow owners in the village in respect of the costs of maintaining various shared areas and facilities. Although some of the owners were successors-in-title to the covenants, it was held that the covenant to pay was sufficiently relevant to the rights granted to the purchasers to be enforceable under the “benefit and burden” principle.

Facts

The As owned and occupied various bungalows in a holiday village, which included a leisure complex and various recreational facilities, roads and footpaths.

The conveyances for the sales of the bungalows to the As were in standard form but some had a slight difference in wording, according to when they were purchased. All of the conveyances contained a schedule granting rights to the purchaser for the use of recreational facilities, roads, footpaths and lawns. The conveyances also contained an identical clause 4 in which the vendor covenanted to maintain the roads, drives, car parks, car parking spaces, footpaths, lawns and other recreational facilities in the holiday village, paint the external surfaces of the bungalows and maintain the sewer system.

One of the two types of conveyance (Form A) contained a covenant that the purchaser would pay an annual sum or a proportionate part for maintaining the roads, car parks, pleasure grounds and other recreational facilities at the holiday village. The second type of conveyance (Form B) contained a covenant for the payment to be made for the purpose of carrying out the various matters specified in clause 4.

Some years ago the communal parts of the holiday village had fallen into a state of disrepair and were sold to B. B had attempted to restore it, but had not complied fully with the requirements in clause 4 of the conveyances. B sought to recover from the residents in the holiday village the sums payable under the covenants in the conveyances. However, many of the owners refused to pay.

Issues

The As argued that the burden of the positive covenant to pay had ceased to be enforceable and could not be enforced on the basis of the benefit and burden principle outlined in Halsall v Brizell [1957] Ch. 169. They argued that the payment covenant was personal to the original covenantors, and that it formed part of an entire contract so as to be unenforceable unless and until the purchasers had fulfilled all of their own obligations under clause 4.

Furthermore the owners also argued that the fixed sum payable did not correlate with the only benefits that which the defendants chose to take i.e. the use of roads and footpaths in the holiday village.

First instance

The judge rejected the arguments that the payment covenant was personal to the original covenantors, or that it formed part of an entire contract. The judge did not accept the As’ contention that because the charging covenant provided for a fixed sum covering all the maintenance obligations and could not be broken down and apportioned between the corresponding rights there was no correlation with the benefit the As had chosen to take. It was held that, whilst a relevance or correlation between the benefit and burden needed to established, the two provisions did not need to coincide. The judge entered judgment against all the As for the sums claimed. Permission to appeal was sought in respect of the correlation/choice of benefit argument and this was granted by the judge.

Decision on appeal

The Court of Appeal dismissed the appeal and found for O. The court found that the charging provision was relevant to, and correlated with, the right to use the access road. The difference in wording between Form A and Form B, which both contained maintenance charges, did not produce a different outcome.

The court referred to Rhone v Stephens [1994] 2 A.C. 310, where the House of Lords had emphasised that a successor-in-title to the original covenantor did not incur a liability to perform a positive covenant unless it had some real relation to a right granted in his favour under the conveyance which he did wish to exercise. The exercise of those rights being conditional upon the performance of the positive obligation was not limited to cases in which it was expressly so conditional. In practice, the payment of an annual charge for the maintenance of facilities which the covenantors were only entitled to use by virtue of rights granted under the deed was relevant to the continued exercise of those rights even though it was a contribution to the cost of their maintenance. As Pattern LJ said,
    “…the payment is intended to ensure that the rights remain capable of being exercised. The authorities require one to look beyond the express terms of the conveyance and consider what in substance the covenantor is paying for. Here, as in Halsall v Brizell, the payment, at least in substantial part, is intended to provide a contribution to the cost of maintaining the roads and other facilities over which the owners of the bungalows are granted rights. None of them has ceased to use the roads nor wishes to do so.”
The Court held that the As’ submission regarding the inability to apportion the maintenance charges (the consequence of this being that the burden of the fixed sum did not correlate with the exercise of the rights granted) was a ‘non-sequitur’. In Form A the payment was due for the purpose of maintaining the roads, car parks, pleasure grounds and other recreational facilities under Schedule 1. In Form B, it was a payment towards all matters referred to in clause 4, which included the Schedule 1 facilities along with the upkeep of the lawns and the painting of the bungalows. Unless the charge could be apportioned, which it was common ground it could not be, then it was recoverable provided that it also related at least in part to the rights that were included in Schedule 1.

The As therefore had no answer to the claims unless they could show that the payment covenant had no relation to the Schedule 1 rights which they had continued to exercise, which was not the case.

The Court concluded that here, as in Halsall v Brizell, the payment was at least for the most part intended to be a contribution towards the costs of maintaining the facilities and roads over which the As were granted rights. None of them had ceased to use the roads or intended to, and the link between the payment covenant and the Schedule 1 rights could not be severed.


Section 609 Housing Act 1985

Restrictive and positive covenants

Cantrell v Wycombe District Council
[2008] EWCA Civ 866

Summary

Section 609 of the Housing Act 1985 allows a local housing authority to enforce a restrictive covenant against a covenantor's successor in title even though the authority does not retain any benefiting land. However, it does not enable it to enforce a positive covenant against any such successor.

Facts

Mr Cantrell purchased a house from a housing association which was subject to an agreement between a previous owner (a housing association) and the council whereby the council had the right to require the housing association to let the property on a periodic tenancy to persons nominated by the council. The question in the case was whether that agreement was binding on Mr Cantrell. The council relied upon s609 of the 1985 Act. "It [was] common ground that the Association's obligations are positive rather than negative both in form and in substance."

Section 609

The section is so far as relevant in the following terms:
    "Where—
      (a) a local housing authority have disposed of land held by them for any of the purposes of this Act and the person to whom the disposal was made has entered into a covenant with the authority concerning the land, or

      (b) an owner of any land has entered into a covenant with the local housing authority concerning the land for the purposes of any of the provisions of this Act,

    the authority may enforce the covenant against the persons deriving title under the covenantor, notwithstanding that the authority are not in possession of or interested in any land for the benefit of which the covenant was entered into, in like manner and to the like extent as if they had been possessed of or interested in such land."
The general law

There is a neat explanation of the law relating to the enforceability of covenants in the judgment of Lewison J (paras 10-15):
    "I begin with some uncontroversial propositions of law. At common law the burden of a covenant affecting freehold land does not bind subsequent purchasers from the original covenantor: Rhone v Stephens [1994] 2 AC 310.

    The burden of a covenant will bind subsequent purchasers in equity (but not at common law) where:


      i) The covenant is negative in substance: Rhone v Stephens;

      ii) The covenant is made to protect land retained by the covenantee; and the covenantee continues to retain that land when he seeks to enforce the covenant: LCC v Allen [1914] 3 KB 642;

      iii) The burden is intended to run with the land of the covenantor;

      iv) The subsequent purchaser is not a bona fide purchaser for value without notice of the covenant.


    Lord Templeman explained the rationale for the distinction in Rhone v Stephens at 318:


      'Restrictive covenants deprive an owner of a right which he could otherwise exercise. Equity cannot compel an owner to comply with a positive covenant entered into by his predecessors in title without flatly contradicting the common law rule that a person cannot be made liable upon a contract unless he was a party to it. Enforcement of a positive covenant lies in contract; a positive covenant compels an owner to exercise his rights. Enforcement of a negative covenant lies in property; a negative covenant deprives the owner of a right over property.'


    Because the burden of a covenant runs only in equity, only equitable remedies are available. This is usually an injunction; although damages may be awarded in lieu. But common law damages for breach of contract are not recoverable.

    The fourth of the traditional requirements of equity was that the assignee is not a bona fide purchaser for value without notice. Registration of the covenant now takes the place of notice. Where the covenant is a local land charge, it should be registered under the Local Land Charges Act 1975. But non-registration does not invalidate the charge: it entitles a purchaser to compensation: s. 10. However, the fact of registration does not itself confer validity on what has been registered.

    Thus if one inquires: in what manner and to what extent may a covenantee enforce a covenant against a purchaser of freehold land who is not the original covenantor, the answer is:


      i) The manner of enforcement is by injunction or damages in lieu;

      ii) No enforcement is possible unless the covenantee retains land which has the benefit of the covenant (i.e. there is no extent to which the covenant may be enforced);

      iii) If enforcement is possible at all, the extent of enforcement is:

      a) the extent to which the covenants are negative in substance; and

      b) the extent to which the covenants were taken to protect the land of the covenantee.
Decision - effect of s609

The Court of Appeal held that as the obligation was positive in nature it was not binding on Mr Cantrell. It rejected the submissions by the Council that s609 applied to positive as well as negative covenants. Lewison J at para 18:
    "Parliament must be taken to have legislated against the background of the general law. In the absence of contrary authority I would hold that the intention must have been to disapply the requirement that the covenantee retains land, and the requirement that the covenants are enforceable to the extent that they benefit land of the covenantee. This is the limit of what the section actually says. I do not consider that Parliament can be taken to have done more. In particular I do not consider that by the concluding words of section 609 Parliament can have intended to put a local housing authority into a position that no private landowner could achieve, namely to make the burden of positive covenants run with freehold land, without saying so."


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