The benefit of a restrictive covenant may run in equity in one of three ways. The benefit of the covenant may be annexed to the land, or may be expressly assigned to subsequent owners of the land as and when the land changes hands, or may pass if the land in question forms part of a building scheme.
The following conditions must be satisfied in order to establish the existence of a building scheme. There must have been a common vendor who, before selling the land, laid it out for sale in lots subject to restrictions, which, although varying in detail (for example, as to the value of houses in different parts of the estate), are consistent only with there being a building scheme. Furthermore, the parties must have intended the restrictions to benefit all the lots and must also have purchased their lots on the basis that the covenants would be mutually enforceable (as opposed to being enforceable only by the builder): Elliston v Reacher [1908] 2 Ch 374.
The advantage of a building scheme is that restrictive covenants will be mutually enforceable by all parties within the scheme, regardless of when the plots were sold. As a result, purchasers of plots that are sold earlier can enforce restrictive covenants against purchasers of plots that are sold subsequently (even though the benefit of restrictive covenants is not usually annexed to land that has already been sold).
Birdlip Ltd v Hunter [2015] EWHC 808 (Ch); [2015] PLSCS 110 provides us with a useful reminder of the way in which the rules operate. The covenants in question were more than 100 years old and had been imposed by conveyances spanning a period between 1908 and 1914. The conveyances did not actually define the estate. However, such evidence as there was suggested that there were significant differences between plans attached to contracts for sale of land on the estate at the beginning and end of this period.
Reciprocity of obligations between the purchasers of different plots is essential to a building scheme. So there must be a defined area within which the scheme is operative. A purchaser of one parcel cannot be subject to an implied obligation to purchasers of an undefined and unknown area. He must know the extent of his benefit and burden. The owner of the land burdened by the covenants pointed to the discrepancies between the 1908 and 1914 plans and tried to persuade the judge that the omission of lots from the 1914 plan was fatal to the existence of a building scheme. However, the judge concluded that the 1914 plan did not purport to show all the estate boundaries, whereas the 1908 plan did.
Did the parties intend the covenants to be for the common benefit of all the purchasers? The restrictions in the conveyances were in substantially the same form, but the vendor had reserved the right to vary them, or not to enforce them. The judge noted that there was a conflict between the authorities as to whether a power to vary covenants is consistent with the creation of a building scheme – and decided that the existence of provisions like this should be considered in the context of the whole. There were some variations between the restrictions, but they were immaterial and the judge was satisfied, on the balance of probabilities and by reference to past history, that there was a building scheme.
Allyson Colby is a property law consultant
