Site Acquisition and Development
Online Lecture
The use of Constructive Trusts in commercial negotiations
Restrictive and Positive Freehold covenants
Constructive Trusts of
the Family Home
Typically a family home scenario will involve a couple where
the house is held in the name of one of them and upon
breakdown of the relationship the other seeks to establish that
they have a beneficial interest in the house. An interest may
be awarded by the court under a constructive trust
Leading case Lloyds Bank Plc v Rosset (1991) 1 A.C. 107
Constructive Trusts in Joint
Venture Agreements
Banner Homes Holdings Ltd (formerly Banner
Homes Group Plc) v Luff Developments Ltd (No.1)
(2000) 2 All ER 117
The Pallant v Morgan Equity
Pallant v Morgan (1952) 2 All ER 951
Articles
Constructive Trusts and non-binding agreements
M.P. Thompson, Conveyancer and Property
Lawyer 2001 (Conv. 2001, May/June, 265-276)
The Pallant v Morgan “equity”?
Nicholas Hopkins, Conveyancer and Property
Lawyer 2002 (Conv.2002, Jan/Feb 35-49)
Restrictive and Positive
Freehold Covenants
Restrictive or Positive
Covenant?
The general test:
What is the general test?
Exercise: + or -?
1. To keep no sheep
2. To use for only as a public house
3. Not to build more than 20 houses
4. Not to build within 20 yards of the boundary
5. To contribute to the cost of maintaining a shared
drive
6. Not to allow the property to become infested with
rabbits
7. To keep the property in good repair
Restrictive Covenants –
passing the burden
AT LAW - the burden CANNOT pass
Austerberry v. Oldham Corporation (1885).
IN EQUITY the burden CAN pass PROVIDED the conditions
laid out in Tulk v Moxhay (1848) 2 PH 774 (and
established by subsequent case law) are satisfied [see
next slide]
Restrictive Covenant –
Passing the Burden.
Tulk v Moxhay
1. Covenant must be restrictive (negative)
2. Covenantee must retain land at date of covenant
LCC v Allen [1914] 3 KB 642]
3. Covenant must accommodate covenantee’s land
Restrictive Covenant –
Passing the Burden.
Tulk v Moxhay
4. Parties must intend the burden to run with
covenantor’s land - can be express, or implied under
s.79 LPA 1925 (next slide)
5. Notice/Registration requirements must be met
Restrictive Covenants –
Passing the Burden
s.79 LPA 1925
A covenant relating to any land of a
COVENANTOR … shall, unless a contrary
intention be expressed, be deemed to be
made by the covenantor on behalf of
himself and his successors in title
Restrictive Covenants –
Passing the Benefit
AT LAW
the benefit can pass
- see later
BUT FIRST
we will consider the rules
IN EQUITY
Restrictive Covenants –
Passing the Benefit in Equity
3 METHODS:1. ASSIGNMENT
2. ANNEXATION
1. express
2. statutory
3.
BUILDING SCHEMES
(SCHEMES OF
DEVELOPMENT)
Express Assignment
The benefit of a covenant is a chose in action
Effect
What is the effect of an assignment?
There must be an unbroken chain of assignments
Annexation
means that the benefit
- is ‘nailed to’ the land
- becomes ‘dug into the soil of’ the land
- is ‘stamped on’ the land
& therefore automatically passes with the land
whenever it is sold
Express annexation
Sample wording evidencing an intention to
annex :
‘The Covtor with the intent and so as to bind
the Property into whosoever hands the same
may come and to benefit and protect the land
retained by the Covtee or any part thereof,
hereby covenants with the Covtee
not to keep pigs on the Property’
Express Annexation
An issue that arose in the case of
Re Ballard’s Conveyance [1937] Ch. 473
If a covt. purports to annex the benefit to all
the land but, in
fact, only part of the land is capable of
benefiting, does the
benefit get annexed to that part?
Statutory Annexation
Addressing the issue:
appropriate wording in the deed of covt
The later case of Federated Homes v Mill Lodge
Properties Ltd [1980] per Brightman L.J.
“I find the idea of annexation of a covt to the whole
of the land but
not to a part of it a difficult conception fully to
grasp. ..I would
have thought that, if the benefit of a covt
is…annexed to the land
…it is annexed to every part thereof, unless
the contrary clearly appears
Statutory Annexation
s.78(1) LPA 25
‘A covenant relating to any land of the
covenantee shall be deemed to be made with
the covenantee and his successors in title and
the persons deriving title under him or them,
and shall have effect as if such successors and
other persons were expressed’
Statutory Annexation
Brightman LJ:
“if the condition precedent of s.78 is
satisfied, that is to say, there exists a
covenant which touches and concerns the
land of the covenantee,
that covenant runs with the land for the
benefit of his successors in title …”
Building Schemes
THE EFFECT OF A BUILDING SCHEME
‘A local law’
All purchasers of plots in the scheme can
enforce the restrictive covts between
themselves (irrespective of the date on which they or
their predecessors in title bought their plots).
Building Schemes
What are the two requirements for a
building scheme?
-
Elliston v. Reacher [1908] 2 Ch 374.
Re Dolphin’s Conveyance [1970] 2 All ER 664
Positive Covenants –
Passing the Burden
AT LAW & IN EQUITY
the BURDEN of POSITIVE COVTS
CANNOT pass
Austerberry v. Oldham Corporation (1885) 29 CHD
750.
Rhone v Stephens (1994) 2 ALL ER 65
per L.Templeman:
[it is knowledge] imparted at an elementary stage to every
student of the law of real property that positive covenants
affecting freehold land are not directly enforceable except
against the original covenantor
Positive Covenants –
Passing the Burden
Indirect methods of enforcement include:1. the rule in Halsall v Brizell [1957] Ch 169 see
next slide)
2. creating a chain of indemnity covenants
E
R sells to S sells toT
i.c
i.c.
3. E requiring a direct covenant from each
successor
Also:
4. creating a long lease when the property is first sold
5. creating, instead of a covt, an easement of fencing (in the case of
fencing!)
Halsall v Brizell
A successor cannot take the benefit of an
agreement unless he also accepts its related
burden
Halsall v Brizell
Rhone v Stephens
 The burden must be RELATED
to the exercise of the right which gives
the benefit; &
 The successor must be able to
choose whether or not to accept
the benefit
Thamesmead v Allotey (21st January 1998 LSG 28)
Passing the benefit at law
Smith & Snipes Hall Farm Ltd v River Douglas Catchment
Board [1949] 2 KB 500
1 The covenant must touch and concern the land of the
original covenantee:
P&A Swift Investments v Combined English Stores Group [1989]
AC 632
2 The covenant must have been intended to benefit the
covenantee’s land at the time it was made and it must
have been intended for this benefit to run with the land
- express words
- implied under s.78(1) LPA 1925
Passing the benefit at law
3. The original covenantee must have held a legal estate
in the benefited land at the time the covenant was made
4 A successor in title must have acquired a legal estate
(but it does not need to be the same legal estate as the
original covenantee)
Smith & Snipes Hall Farm Ltd v River Douglas Catchment
Board
Mrs. Smith (freehold)
Purchaser (freehold)
Tenant (leasehold)
Discharge of Covenants
Automatic discharge: dominant and
servient land in same ownership
Application to the Lands Tribunal to
discharge or modify the covenant
s.84(1) LPA 1925
Application for Discharge of
Covenants
An application can be made to discharge or modify ‘any
restriction arising under a covt. or otherwise as to the user
[of land] or the building thereon’
Grounds to be established:
1. Obsolescence
2. Impediment to reasonable user
3. Holders of the benefit of the covt have agreed to its discharge
4. No injury to the holders of the benefit
(plus certain additional factors)
Tribunal has power to order compensation