The High Court has recently provided significant clarity on the enduring enforceability of restrictive covenants, particularly those created when a covenantee holds only an equitable interest in the benefited land.
Background:
This case revolves around the enforceability of a restrictive covenant, dated 5 August 1977, preventing building on part of 28 Redwalls Meadow, and whether the benefit of that covenant has passed to the owners of neighbouring properties (21-27 Redwalls Meadow).
The claimants, Mr. Bradley Simon Hughes (owner of part of No. 28) and the second claimant (owner of the remainder), seek a court declaration under Section 84(2) of the Law of Property Act (LPA) 1925 that a restrictive covenant on their land no longer binds it. It appears they wish to construct a building on the "hatched green" area of their property, which the covenant forbids.
The conveyance, dated 5 August 1977, was made between London and County Securities Ltd., as mortgagee of land, Richard Norman Darbey Langdon, and Chantreys Building Company Ltd., of the one part, and Ronald William Peacham and Joan Peacham, of the other part – the intending owner-occupiers.
The covenant explicitly stated it was "FOR the benefit and protection of the remainder of the Purchaser's Redwalls Meadow Estate" and intended to run with the land. The "Second Schedule" of the conveyance contained various covenants, including the condition: "Not to erect any buildings of any kind upon the land hatched green on the plan annexed hereto and to lay out the same with trees and shrubs."
At the time of the 5 August 1977 conveyance, Chantreys had a contractual equitable interest in the other plots (Nos. 21-27 Redwalls Meadow), having agreed to purchase them from London and County Securities Ltd. However, Chantreys only acquired the legal title to these other plots on the 18th of August 1977.
The claimants (owners of No. 28) are successors in title to the Peachams, and the defendants (owners of Nos. 21-27) are successors in title to Chantreys regarding the beneficial land. Chantreys Building Company Ltd. (the original covenantee) informed the claimants that its records were destroyed and that it does not intend to assert a right to enforce the covenant.
Decision:
The High Court concluded that all the restrictive covenants are enforceable by the owners of 21-27 Redwalls Meadow against the claimants.
HHJ Paul Matthews agreed that Chantreys did not hold the legal estate in plots 21-27 on 5 August 1977. However, he found that Chantreys did hold an equitable interest in these plots at that time, having already entered into a contract to purchase all of Redwalls Meadow plots (21-28) from the previous owner's mortgagee. Citing established case law (Shaw v Foster, Rogers v Hosegood, Re Rutherford's Conveyance), the Judge reasoned that an equitable interest in retained land is sufficient for a covenantee to validly receive the benefit of a restrictive covenant and for the burden to subsequently run with the burdened land.
The Court found that a covenant restricting building on one residential plot is inherently capable of benefiting and protecting adjacent residential properties within the same development. There was no evidence to rebut the presumption of capability to benefit.
The Court reasoned that any property lawyer reading the conveyance and viewing its plan would "immediately understand" these references to designate the entire row of properties, Nos. 21-28 Redwalls Meadow. This interpretation was not deemed oppressive for a purchaser. Therefore, the land to be benefited was "easily ascertainable" and thus the benefit of the covenant was effectively annexed to it and has consequently passed to the current owners of Nos. 21-27 Redwalls Meadow.
Implications:
The most significant implication of this case is the clear affirmation that an equitable interest in retained land is sufficient for a covenantee to take the benefit of a restrictive covenant at the time of its creation. It is not strictly necessary for the covenantee to hold the legal estate at that precise juncture.
The judgement reinforces that the land intended to be benefited by a restrictive covenant does not need to be described solely within the four corners of the covenant deed for the benefit to be annexed. Extrinsic evidence, such as annexed plans clearly showing the wider development, can be used to make the benefited land "easily ascertainable". This approach allows a more holistic interpretation of the conveyance documents.
The claimants attempted to argue against the enforceability of a covenant that was nearly 50 years old, although this judgement demonstrates the robustness of well-drafted restrictive covenants and the Court's willingness to interpret them to give effect to the original parties' intentions, even when modern conveyancing practices might differ. This makes it harder for property owners to escape the burden of restrictive covenants based on technical arguments about the original creation, especially if the underlying documents, including plans, clearly illustrate the intended benefited area. It reinforces the stability and predictability of land burdens.