Restrictive Covenants: Declaratory Relief from the Court?

Restrictive Covenants: Declaratory Relief from the Court?

The freeholders (Mr and Mrs Stanfield) of a piece of land wished to sell the land to a developer proposing to demolish the existing motor garage on the land to construct a convenience store. Difficulties arose when a 1929 Conveyance revealed a restrictive covenant prohibiting any building erected on the land to be used other than as a motor garage and title indemnity insurance was unobtainable to cover the risk of breach with satisfactory terms.

Mr and Mrs Stanfield (the “Claimants”) sought declaratory relief from the Court under section 84(2) of the Law of Property Act 1925 (the “LPA 1925”) that the land was unaffected by the restrictive covenant and therefore could not be enforced by successors in title to Mr and Mrs Worthington (the “Original Vendors”).

The Issue

Any person with an interest in the land can apply for a court declaration under section 84(2) LPA 1925. This might happen when there is sufficient uncertainty over whether or not a covenant benefits or burdens land and the Court is asked to determine the issue.  

In this case, questions arose as to whether the restrictive covenant was capable of being enforced by any of the successors in title of the Original Vendors.

The Claimants argued that the 1929 Conveyance neither indicated any express intention to transfer the benefit of the covenant to successors, nor confirmed which part of the retained land would benefit from it. In short, the covenant had neither been expressly assigned nor annexed pursuant to Section 78 LPA 1925. 

Section 78 LPA 1925

Section 78 provides that 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 as if such successors and other persons were expressed. In order for Section 78 to apply, the covenant must ‘touch and concern’ the land (i.e. it must affect the land and not merely be a personal benefit to the original contracting party) and the benefitting land must be sufficiently ascertainable. 

The Decision

On the facts, the Court held that it was sufficiently clear from the 1929 Conveyance, despite the lack of reference to successors in title and despite the lack of any expression that the covenant was for the benefit of the retained land, that the covenant ‘touched and concerned’ the retained land.  The covenant was clearly intended to enure for the benefit of the Original Vendors as well as their mortgagee who originally charged the property. 

The Court also held that the benefitted land was, on the evidence and by reference to a plan, sufficiently ascertainable.  

Accordingly, the restrictive covenant, in the absence of an express assignment, was held to have been annexed to the whole, and to each and every part, of the land conveyed to the Original Vendors by way of statutory annexation pursuant to and in accordance with section 78 of the LPA 1925.

The Court suggested that an alternative form of relief may however be available to the Claimants under section 84(1) LPA 1925. A powerful case could potentially be put forward in saying that either (1) by reason of changes in the character of the property or the neighbourhood or other circumstances of the case, the restrictive covenant might now be deemed obsolete or (2) that its proposed discharge or modification would not injure the persons entitled to the benefit of the restriction.  This was however a matter for the Upper Tribunal. 

Practice Points

Whilst the application was not challenged, the Court will not simply grant a declaration sought.  In this case, the Court found that it was not appropriate to make a declaration in favour of the Claimants and each case will be considered on their own facts.  

It remains that three requirements must be fulfilled for the burden of a restrictive covenant to be transferred: (1) the covenant must be negative in nature; (2) the covenant must be either for the protection of land retained by the covenantee or part of a scheme and (3) the subsequent purchaser must have notice of the covenant. These were all fulfilled in the present case.

Also, a crucial question as to whether the benefit of the covenant can be enforced will require: (1) that the covenant must ‘touch and concern’ the land; (2) the benefit must have passed to the subsequent purchaser by annexation, assignment or pursuant to a scheme and (3) there must be no good ground for depriving him of the right to enforce the covenant. All were satisfied in the present case. 

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