Property Law: The Rule On The Enforceability Of Positive Freehold Covenants Through Its Development History And Effects

The land is a unique product that comes with its baggage and benefit. A person may want to sell a piece of land but retain some of the interests inland such as a statue attached to it or even access to one of the buildings fixated on that land. The burdens and benefits attached to land together with the sentimental value on the things attached to land have created a lot of difficulties in conveyance law and the commercialisation of land as a product. This essay, therefore, intends to critically analyse and explain the law operating on the transfer of the freehold covenants and majorly on the positive freehold covenants. To do so, the essay will explain the rule on the enforceability of positive freehold covenants through its development history and effects. This essay will also analyse some of the current solutions used in circumventing the rigid law on the transfer of positive freehold covenant and the potential proposal for reforms.

To have an apparent understating of the law relating to positive freehold covenants, it is judicious first to elucidate the meaning of some operative terms that will be continuously used throughout this discourse. One of the terms is freehold interest. It is an unlimited interest inland in terms of time. That means that the ownership of land is for an undefined period. The second phrase to take note of is the term freehold covenant. Freehold covenant is a promise made by the covenantor to the covenantee to do or not do something on land. The promise can be positive or of a negative nature. A positive freehold covenant is where the covenantor promises to do something on land to benefit the covenantee. The restrictive freehold covenant is where the covenantor has agreed not to do something on the land. Lastly, the covenantor’s successor in title is the person who acquires land from the person who originally made the covenant. The successor in title is not a party to the initial covenant entered between the covenantor and the covenantee.

The Developments of the Austerberry’s Rule in Rhone V Stephens

The law relating to freehold covenants can be traced from the decision of Cotton LJ in Austerberry v Oldham Corp . The rule is sometimes called the Austerberry rule. The case set the common law position that both positive and restrictive covenant could not pass with title inland. In this case, a piece of land was given to the trustees together with their heir with a positive freehold covenant of maintaining the road. The land was later transferred to the covenantor’s successor in title who did not keep the promise of maintaining the road. The covenantee field a suit pleading with the court to issue an order of specific performance to the covenantor’s successor in title. The court held that the transfer of title in common law did not pass with the positive freehold covenant. This means that a covenantor cannot pass a positive obligation as a burden to the new purchaser of the land. The rationale used was that of the common law of the privity to contract principle. The effect of this is to say that one cannot be subjected to perform the obligations in a contract which he or she was not a party to.

The second locus classicus case law that affirmed Austerberry v Oldham Corporation was the case of Rhone V Stephens. However, in Rhone, some adjustments were made in the enforcement of the freehold covenants. Remember that in Austerberry, both the restrictive and positive covenants could not be enforced against the covenantor’s successor in title. However, before the decision in Rhone, some developments had been experienced such as a rule in Tulk v Moxhay which made it possible in equity to enforce a restrictive freehold covenant against the covenantor’s successor in title. There was also the case of Halsall v Brazell which established the benefit and burden principle as an exception to the general rule in the common law. RvS, therefore, came later to settle the confusion created by the authorities as mentioned above, among others.

In Rhone V Stephens, there was a house called the Walford House which was primarily a house attached to a cottage. The roof of the Walford House formed part of the roof of the bedroom of the cottage. Initially, the property was owned by one person. The property was later divided into a Walford House and Walford Cottage. The vendor decided to sell the Walford Cottage, and he made a positive freehold covenant of maintaining the part of the roof of Walford House that covered the Walford Cottage. The obligation was to maintain it not to leak or pass excess light into the Walford Cottage. The two properties were later on transferred to subsequent successors in title. The covenantor’s successor in title left the part of the roof that covered the cottage unmaintained, and it started to leak into the cottage. The covenantee filed a suit claiming for damages and specific order of performance. He won the case but later, the case was dismissed on appeal both at the court of appeal and at the House of Lords.

Lord Templeman believed that equity did not come to defeat the law but to supplement it. In common law, one cannot be subjected to perform obligations in a contract that he or she was not a party to. It is of this reason that the court found the covenantor’s successor in title of Walford House not liable for any obligation.

One of the differences found between Austerberry and Rhone is that Rhone recognises the equity principle that a restrictive freehold covenant is enforceable against the covenantor’s successor in title. The rationale for this principle is due to the fact that the restrictive freehold covenant limits the transfer of full bundles of rights inland. The new purchaser must, therefore, use the land and restricted by the person who transferred the bundles off right to him or her. Tulk v Moxay provides that a restrictive freehold covenant can only be enforced against the successor in title as it benefits the dominant tenant, restrictive in nature, and it was a common intention of both the covenantor and the covenantee that the burden will run with the title of the covenantor. To determine if a covenant is restrictive or positive, the case of Haywood v Brunswick Permanent Benefit provides a useful test of the “Hand in a pocket.’ If the party to a covenant has to put his hand in the pocket and contribute something to meet the obligation of the contract, then it is a positive freehold covenant, and if not then the reverse is true.

The second issue settled by Lord Templeman in Rhone V Stephen was that of the principle of mutual benefit and burden. Lord Templeman averred that the equitable principle was not to be used to defeat common law. He suggested that in Rhone, the principle was not applicable because the covenantor’s successor in title was not going to get any benefit by performing the obligation under the covenantor’s contract.

Therefore, the effect of Rhone was that it affirmed the rule in Austerberry and also affirmed that restrictive covenants could be enforced against the successor in the title based on the principles of equity. The rigidity of this law has created a lot of problems in the transfer of property rights and enforcement of freehold covenants. The rigidity in common law has led to some current solutions being used to circumvent the common law and enforce positive freehold covenants against the covenantor’s successors in title. The problem with these current solutions is that they are expensive and undesirable; thus, the only better solution is to reform the rule in Rhone. Some of the current solutions are discussed in the subsequent paragraphs.

Current Solutions

These are some of the ways used around Rhone V Stephen rule. They include the doctrine of the chains of indemnity, the right of reentry and the use of long term leasehold estate. The use of chains of indemnity is where the obligation of the covenantor is offered by the covenantor’ successor in title due to the official agreement between them. The covenantor enters into a separate contract with his or her successor in title to indemnify any liability that arose concerning his or her obligation under the contract with the covenantee.

The second way is through Estate Rent charges. It is also applicable if the property is subjected to a right of reentry. It is where a periodic amount of money is paid to someone who does not own the land. The owner of such interest is allowed to reenter the land and enforce the performance of the covenant. The problem with these methods is that it is not liked with many developers because of the continuous payment of rent charges or an overage.

Thirdly, one can also create a long leasehold estate of let say 999 years. This will have the effect of freehold tenure because 999 years is very long. However, the difference will be that the person creating the leasehold will be able to transfer some of the positive covenants to the leaseholder. The undesirable nature of this method is that few people will prefer to hold title under longer leases than doing so under freehold tenure. Due to the undesirability depicted in these circumventing methods, the proper solution is to reform the law and to reduce the rigidity of the common law.

Proposals for Reform

The reforms will help in simplifying the complexities experienced in enforcing the freehold covenants. It will also help in reducing the rigidity of the common law. Thirdly, the reforms will also be vital in ironing out the inconsistencies in the application of both the common law and principles of equity in freehold covenants. The journey of reform has been one of the underlying issues since the decision of Austerberry. Several scholars have highlighted the limitations of common law as provided in Austerberry and Rhone. The Law Commission has also made several attempts to reform the law governing the transfer and enforceability of the freehold covenants.

The general proposal in this issue is to make both the positive and restrictive freehold covenants to be enforceable against the covenantor’s successor in title. The best way to achieve this is to go by the proposal of the Law Reform Commission. The positive and negative obligations together with easements and profit, need to be classified under a stand-alone category of rights in a property. These rights should be considered as an obligation inland and need to be registered as a separate interest inland. Their registration needs to be under the Land Registration Act 2002. The statute stipulates that the benefit of the obligation need to touch the benefited land. The obligation needs to be either of doing or not doing something on the burdened land or its boundary. Such obligations need only to be restricted within the freehold tenure and not leaseholds. The benefit of this proposal is that the successor in tittle will have notice of the land obligations rights attached to the title inland and will also decide whether to take the land together with those titles. This will create the freedom of transferring land obligation rights within parties without the subjective method created in the common law.

Bibliography

Legislations

1. Land Registration Act 2002
2. Landlord and Tenant (Covenants) Act 1995

Cases

1. Austerberry v Oldham Corp (1885) 29 Ch. D. 750; [1885] 5 WLUK 19 (CA)
2. Halsall v. Brizell [1957] Ch. 169
3. Haywood v. Brunswick Permanent Benefit Building Society [1881] 8 Q.B.D. 403
4. Oceanic Village Ltd v United Attractions Ltd [2000] Ch. 234; [1999] 12 WLUK 257 (Ch D)
5. Rhone v Stephens [1994] 2 A.C. 310; [1994] 3 WLUK 266 (HL)
6. Tulk v. Moxhay [1848] 2 Ph. 774
7. Wilkinson v Kerdene Ltd [2013] EWCA Civ 44

Journal Articles

1. Bevan C, ‘The Doctrine of Benefit and Burden: Reforming the Law of Covenants and the Numerus Clausus Problem’ (2018) 77 Cambridge Law Journal 72 accessed 3 August 2020
2. Lawyer AC-TC and P and 2017 undefined, ‘Freehold Covenants and the Potential Flaws in the Law Commission’s 2011 Reform Proposals’ (2017) 3 eprints.hud.ac.uk 212 accessed 3 August 2020
3. Survey AP-, ‘Restrictive Covenants on Land: Common Examples of Restrictive Covenants and the Challenges of Dealing with Them on Freehold Land’ (2016) 5 Journal of Building Valuation, Appraisal &Valuation 70 accessed 3 August 2020
4. Walsh E, Lawyer CM-C and P and 2015 undefined, ‘Enforcing Positive Covenants: A Practical Perspective’ [2015] researchportal.port.ac.uk accessed 3 August 2020