Site Acquisition and Development

Online LectureThe use of Constructive Trusts in commercial negotiations

Restrictive and Positive Freehold covenants

Constructive Trusts ofthe 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 PositiveFreehold 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 house3. Not to build more than 20 houses4. Not to build within 20 yards of the boundary5. To contribute to the cost of maintaining a shared

drive6. Not to allow the property to become infested with

rabbits7. To keep the property in good repair

Restrictive Covenants – passing the burden

AT LAW - the burden CANNOT passAusterberry 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 [seenext 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 AnnexationAddressing 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 canenforce 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 65per 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

successorAlso:4. creating a long lease when the property is first sold5. 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 lawSmith & Snipes Hall Farm Ltd v River Douglas CatchmentBoard [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