The litigation in City Inn (
The Court of Appeal has upheld the High Court ruling that the benefit of the covenants remain vested in the PLA and that its successors in title have no right to enforce them. The court noted that the transfer that imposed the covenants defined the “transferor” as the PLA, without referring to successors in title. The court reminded the parties that when conveyancers want to include successors in title, they say so, and that the classic formula used in conveyances and transfers includes both successors in title and others claiming under them. The court ruled that it would be reasonable to assume that the lawyer who drafted the transfer was aware of this and that he had chosen not to use the formula for a reason.
The PLA’s successor in title argued that it would not make commercial sense to decide that the covenants were personal to the PLA. The Court of Appeal accepted that these arguments had some force, but it rejected them. It decided that the parties had not addressed the issue of successors in title because the PLA had been well ensconced in its building and had not contemplated relocating elsewhere.
The case highlights the importance of distinguishing between instances where terms such as “the transferor” or “the seller” include successors in title and those where their meaning is limited to the original parties.
The Court of Appeal did not stop there. The transfer stated that historical and archaeological objects found on the land transferred belonged to the transferor. It also reserved rights to alter or rebuild for the benefit of the transferor and contained an agreement and declaration that the light and air enjoyed by the buildings on the land transferred were enjoyed with the permission of the transferor. The court ruled that all these provisions were personal to the PLA and did not enure for the benefit of its successors in title. The court accepted that it would have been better, commercially, had PLA been able to pass the benefit of these rights to its successors in title, but ruled that it was not commercially absurd to hold that the rights were vested solely in the PLA.
The decision offers a salutary lesson. When investigating title to a property, conveyancers should not assume that the benefit of covenants and other rights will automatically pass with the land.
The Law Commission is aware that the law of easements and covenants often causes difficulties. It is reviewing the position and hopes to publish a detailed consultation paper later this year. Practitioners will welcome the consultation with open arms.
Allyson Colby is a property law consultant
