Where land is subject to restrictive covenants, one of the key questions to ask is whether they are enforceable. The benefit of a restrictive covenant is usually passed by assignment, annexation or through a building scheme.
Where restrictive covenants are annexed to land that forms part of an estate, the landowner is entitled to enforce them against parties that entered into them previously. However, the effect of covenants is not reciprocal and landowners will not be susceptible to enforcement action by such parties. This is because the benefit of restrictive covenants is not usually annexed to land that has already been sold. Consequently, the first purchaser of land on an estate will be liable to all subsequent purchasers, but will be unable to enforce the restrictive covenants against anyone else.
Within a building scheme, by contrast, restrictive covenants are mutually enforceable by every one, regardless of when the plots were sold. As a result, the subsequent buyers of first-built plots can enforce restrictive covenants against those of plots. The prerequisites are that: (i) there was a common vendor; (ii) before sale, the vendor laid out the estate for sale in lots subject to restrictions to be imposed on all the lots, which, though varying in details, are consistent only with there being a scheme of development; (iii) the parties intended the restrictions to benefit all lots; and (iv) the parties purchased their lots on that footing.
Mutual obligations will not arise merely because a builder imposes the same restrictive covenants on every disposal. The court will also need to be satisfied that the covenants were intended to be mutually enforceable, as opposed to being enforceable only by the builder.
In Clarke v Murphy [2009] PLSCS 165, the Lands Tribunal had to decide whether a residential estate was affected by a building scheme. Each purchaser had entered into restrictive covenants “to benefit and protect the remainder” of the vendor’s estate. The owner of one of the plots so burdened argued that the covenants benefited the final three plots on the estate, which had remained unsold on the date on which the covenants were given.
However, by construing the words in context and taking into account the fact that the builder had adopted the same wording in all its conveyances, including the last (when it would have retained nothing but a roadway), the judge concluded that the reference to “the remainder” of the estate was a reference to the estate as a whole, subtracting only the land comprised in the particular conveyance (as opposed to all the parcels that had already been sold). Consequently, the covenants were reciprocal and a building scheme was in place.
Draftsmen can avoid similar problems by stating whether restrictive covenants are intended to be mutually enforceable and/or by declaring that the land does, or does not, form part of a building scheme.
Allyson Colby is a property law consultant
