Covenant – Communal areas – Service charge – Conveyance containing maintenance charge relating to recreational areas – Appellants declining to pay maintenance charge on ground that they had taken no benefit – Judge holding covenant enforceable and holding appellants liable – Whether judge erring in law in concluding that burden of positive covenant enforceable against successor in title to original covenantor – Appeals dismissed
The appellants owned and occupied various bungalows in a holiday village in Cornwall. The properties had been conveyed to the appellants with rights, contained in the first schedule, “to use and enjoy and pass and repass with or without motor vehicles over and along the roads drives parking places and car parks laid out… in the… village”; and to use and enjoy the “lawns pleasure grounds and other recreational facilities”. Part 2 of Schedule 3 to the conveyance provided that the purchaser should pay a sum each year for the purpose of maintaining the roads, car parks, pleasure grounds and other recreational facilities.
The village had become dilapidated and overgrown when the respondent purchased it in 2000. Thereafter, the respondent made serious attempts to bring it back into a proper state of repair. It had not carried out all the work it was required to do under the covenants contained in clause 4 of the original conveyances. However, as a consequence of the maintenance it had carried out, the respondent sought to recover from the owners of the bungalows the sums payable under Part 2 of Schedule 3. Some of the owners were the original purchasers, who were contractually liable on the covenant, but most were successors in title against whom the positive covenant to pay could be enforced only if the respondent could bring into play the equitable benefit and burden principle applied in Halsall v Brizell [1957] 1 Ch 169.
The respondent brought proceedings against the appellants who refused to pay. The appellants contended, inter alia, that the payment covenant was linked to the clause 4 obligation to repair rather than to the grant of rights under the first schedule so that they were not obliged to pay if they made no use of the rights granted under that schedule.
The judge held that the relevant benefit was the legal right contained in the first schedule, including the right to use the access road. He held that, although a relevance or correlation had to be established between that right and the charging provision, the two provisions did not have to coincide. He entered judgment against all the appellants for the sums claimed. The appellants appealed.
Held: The appeals were dismissed.
(1) A successor in title to the original covenantor did not incur a liability to perform a positive covenant, such as the covenant to repair, unless it had some real relation to a right, granted in his favour under the conveyance that he wished to exercise. Cases where the exercise of those rights was conditional on the performance of the positive obligation were not limited to cases in which it was expressly so conditional: Rhone v Stephens [1994] 2 AC 310 applied.
(2) In substance, the payment of an annual charge for the maintenance of facilities that the defendants were only entitled to use by virtue of rights granted under the deed was relevant to the continued exercise of those rights, even though it was in fact, and in terms, a contribution to the cost of their maintenance. The two were not inconsistent. In some cases, the positive obligation might be completely unrelated to the rights that the owner sought to exercise; alternatively, the property owners on an estate might be asked to contribute to the cost of repairing landscaped and community areas over which they had been granted no rights at all. In such cases, it was possible to apportion the amount claimed for repairs between the various facilities on the estate, just as in a conventional service charge for a block of flats. In so far as the defendants had no rights to use the communal areas, they could not be compelled to pay that part of the bill: Thamesmead Town Ltd v Allotey [1998] 3 EGLR 97 considered.
(3) In the present case, the payment of a fixed annual amount increased by reference to an index of inflation, rather than the actual cost incurred, was not capable of being apportioned. Therefore it remained recoverable, provided that it also related at least in part to the rights that were included in the first schedule. Although the continued exercise of the first schedule rights was not made expressly conditional on payment, the payment was intended to ensure that those rights remained capable of being exercised. One had to look beyond the express terms of the conveyance and consider what, in substance, the covenantor was paying for. Here the substantial part of the payment had been intended to provide a contribution to the cost of maintaining the roads and other facilities over which the appellants had been granted rights. None of them had ceased to use the roads or wished to do so. There was also a covenant by the original site owner to carry out the repairs but the court was not persuaded that that was sufficient in itself to sever any link between the payment covenant and the first schedule rights. It merely provided the covenantor with the added assurance that, at least while the site remained the property of the original covenantee, the work would be carried out. However, the performance of that covenant was not the determinant of liability. That remained the subsistence of the first schedule rights.
The appellants appeared in person; Alan Johns (instructed by Shoosmiths LLP) appeared for the respondent.
Eileen O’Grady, barrister
