Allyson Colby tackles a recent High Court decision on the enforceability of restrictive covenants where the ownership of the land has since changed.
Key points
- Land that benefited from a restrictive covenant imposed in 1922 need only be “identifiable” – as opposed to “easily identifiable”
- Pre-1926 covenants were enforceable because a reasonably accurate assessment of the extent of the seller’s retained land (as opposed to complete precision about its extent) would suffice
There are always two aspects to the question of the enforceability of restrictive covenants where the ownership of land benefited and burdened by them has changed. Were the benefit and burden transmitted to successors in title of that land?
Bath Rugby Ltd v Greenwood [2020] EWHC 2662 (Ch); [2020] PLSCS 185 concerned land sold to the rugby club in 1922 by its then-president, Captain Forester, subject to covenants providing that nothing was to be built or done on the land that “may be or grow to be a nuisance and annoyance or disturbance or otherwise prejudicially affect the adjoining premises or the neighbourhood”. And, because the club wanted to improve the stadium in order to provide better facilities, as well as a number of commercial outlets, it sought a declaration that no one was entitled to enforce the restrictive covenants.
There was no argument about the burden of the restrictions. So the case turned entirely on the transmission of their benefit, which could occur in one of three ways: by annexation, by a chain of assignments, or if the land was part of a building scheme. But, as no one seriously sought to claim that there was a chain of assignments, or a building scheme, the court focused on whether the benefit of the covenants had been annexed to Captain Forester’s retained land.
Annexation
The full force of section 78 of the Law of Property Act 1925 was brought home to a lecture theatre, packed with law students, of whom I was one, stunned by the sudden cancellation of a lecture as a result of a decision covered in the law reports that morning. Section 78 deems covenants to be made with “successors in title” and the law had been turned upside down by a Court of Appeal ruling that it operates to annex the benefit of covenants to a covenantee’s land automatically: Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 EGLR 113.
But section 78 was not applicable here, as the covenants were made in 1922. So the court had to revisit the rules that applied before section 78 came into force. It began by explaining that express words of annexation were not required. Instead, it was necessary to show, by construing an instrument in the light of surrounding circumstances, that the parties had intended to annex the benefit of covenants to some, or all, of the covenantee’s retained land.
Intention
The rugby club suggested Captain Forester had imposed the covenants for his personal benefit, in order to extract a further premium if the land were to be developed in the future. But the judge ruled that the covenants focused on actions that might prejudicially affect adjoining properties, thereby indicating a desire to protect neighbouring land.
It was also relevant that Captain Forester had not prohibited residential development, which was not a sensible omission where covenants were imposed to provide a means of profiting from future development. Also, the covenants were expressed to be made “with the vendor his successors in title and assigns” and, in its ordinary property law sense, the phrase “successors in title” refers to those who become owners successively of an estate or interest in land.
Identifying land
The Court of Appeal decision in Crest Nicholson (South) Ltd v McAllister [2004] EWCA Civ 410; [2004] 2 EGLR 79 suggests that, in addition to demonstrating an intention to benefit land, the land that is to be benefited must be so defined as to be “easily identifiable” in order to prevent covenants from being oppressive due to difficulties in identifying those entitled to enforce them. And the 1922 conveyance did not include a plan. Captain Forester had made a contemporaneous signed plan available identifying the land included in the conveyance. But the plan did not show the extent of the land that he was retaining. Surprisingly, however, the judge decided that the land that benefited from the covenant need only be “identifiable” – which he explained by contrasting identical covenants, evidenced in one case by a comprehensive and easily accessible conveyancing file, but, in the other case, only by chasing down copies of old deeds from third parties and local archives. Could it really be the law that the first covenant was enforceable, but the second was not? What if the comprehensive file were subsequently destroyed? Or, what if the conveyancing file came to light in the second case?
The judge thought it would confuse substance with evidence if rights were to exist only if, for the time being, there are certain types of evidence of them – and considered that the substance should be judged as at the time of the transaction. He also suggested the Court of Appeal’s discussion about annexation in Crest was “obiter” because the court decided that the covenants in that case benefited the seller alone. Furthermore, the covenants considered in Crest post-dated 1925.
Outcome
The 1922 conveyance mentioned “adjoining premises or the neighbourhood” – and these words were clear enough for the judge. So he rejected the rugby club’s argument that the owners of land nearby, who could demonstrate their properties did form part of Captain Forester’s retained land, should be deprived of their ability to enforce the covenants because it was impossible to identify the precise extent of Captain Forester’s retained land. Next stop: the Court of Appeal? We must wait and see.
Allyson Colby is a property law consultant
