Restrictive Covenants

• Pages: 115-145

DOI: 10.4324/9781003186946-8

Freehold covenants– that is, covenants entered into by one freeholder in favour

of another freeholder– are an important means of controlling the use of land.

The majority of such covenants are restrictive in substance– for example, a

covenant not to carry on any trade or business on the land, or a covenant not to

build more than one dwelling house thereon; consequently, this topic is usually

referred to as the law of ‘restrictive covenants’.

Covenants, being promises made by deed, are contractual obligations that

remain enforceable as between the original parties. The main difficulty is in

determining whether: (a) the benefit of such a covenant has run to a successor-

in-

title of the covenantee; and (b) the burden has run to a successor-

in-

title of

the covenantor. The basic problem may be illustrated as follows: V (covenantee)

sells part of his land to P (covenantor), who covenants not to use the land other

than for residential purposes. Later, V sells his retained land to X and P sells his

land to Y. In what circumstances can X (the assignee of the covenantee) enforce

the covenant against Y (the assignee of the covenantor)?

In this example, the covenantee was the vendor of land, and the covenan-

tor the purchaser. This would be the usual position; however, the positions

may be the reverse, viz, the vendor may be covenantor and the purchaser

covenantee. Further, the parties may not be vendor and purchaser at all, but

may have acquired their respective plots (Blackacre and Whiteacre) from a

third person, or from two different persons; later, in order to preserve the

value of Blackacre, the owner may agree to pay the owner of Whiteacre

$50,000 in return for a covenant that Whiteacre should be used for residen-

tial purposes only. When the owner of Whiteacre enters into the covenant,

the value of Whiteacre will depreciate, whilst the value of Blackacre will

appreciate.

The position may thus be summarised by saying that:

(a) covenants usually involve a sale between covenantee and covenantor, but do

not necessarily do so; and

(b) if a sale is involved, the vendor may be covenantee or covenantor, and the

purchaser may be covenantor or covenantee.

In dealing with the running of the benefits and the burdens of covenants between

freeholders, it is essential to bear in mind that common law and equity have dierent

rules, and that there are always two main questions, as follows.

(a) Has the benefit of the covenant passed to the assignee of the covenantee?

(b) Has the burden of the covenant passed to the assignee of the covenantor?

For purposes of exposition, it is more convenient to deal with the passing of the

burden before considering the passing of the benefit.

CHAPTER 8

RESTRICTIVE COVENANTS

116 Restrictive covenants

RUNNING OF THE BURDEN

The position at common law

It is well established that the burden of a covenant between freeholders does not

run at common law. The position is dierent where leaseholds are concerned, as the

burden of a covenant in a legal lease runs under the rule in Spencer’s Case.1

The leading case that illustrates the proposition that the burden of a free-

hold covenant does not run at common law is Austerberry v Oldham Corp.2 In this

case, X conveyed the freehold of part of his land to trustees, who covenanted for

themselves, their heirs and assigns, that they would form the piece of land into

a road, and would forever afterwards keep it in repair. The road was duly made,

and, later, X sold to the plainti the part of his land that ran along both sides of

the road. The defendant corporation then took over the road from the trustees

under statutorypowers, and sought to make the plainti bear a share of the cost

of maintaining the road for which frontagers were liable by statute. The plainti

contended that the burden of the covenant to maintain the road had passed from

the trustees tothe defendant corporation, and that the latter was accordingly

liable to bear the cost of maintaining the road. It was held that the plainti

’s

argument failed, since the burden of a freehold covenant can never run with the

land of the covenantor at common law.

It will be noticed that, in Austerberry, the covenant was positive – that is, it required

the covenantor to do some positive act on the burdened land that would involve

expenditure on the part of the covenantor. If the covenant had been restrictive (that

is, negative in substance), then, as we shall see, the burden would have run in equity

under the rule in Tulk v Moxhay.3 Since the covenant was positive, however, the bur-

den could not run either at common law or in equity.

The position in equity

In the leading case of Tulk v Moxhay, equity introduced what was then a revolution-

ary principle, to the eect that the burden of a restrictive covenant entered into by the

owner of Whiteacre with the owner of neighbouring Blackacre imposes an equi-

table burden on Whiteacre that is enforceable against all successors- in- title, except

for a bona fide purchaser for value of the legal estate in Whiteacre having no notice

of the covenant. In other words, where the covenant is restrictive, the common law

rule that the burden of a freehold covenant does not run with the burdened land is

outflanked, and equity will enforce the covenant against successors in title by grant-

ing an injunction to restrain any breach. The rule in Tulk v Moxhay introduced a new

right of property, since its eect was that a restrictive covenant was not only enforce-

able against the original covenantor as a contract, but also became an incumbrance

on the land binding on successors- in- title of the covenantor.

1 See pp 78, 79, above.

2 (1885) 29 Ch D 750. The principle in Austerberry was followed in E and GC Ltd v Bate (1935) 79

LJ News 203, in which it was held that the burden of a covenant to construct a road did not

pass to the devisee of the covenantor. See also Half Moon Bay Ltd v Crown Eagle Hotels Ltd (2002)

60 WIR 330.

3 (1848) 41 ER 1143.