topic 10 – covenants · • there is a privity of contract for burden of positive covenant • if...
TRANSCRIPT
Topic10–CovenantsWhatisacovenant?• Promisesinadeedwhenyousellland
• Contractualrightsandobligationsthatrelatetolandandbindthepartiestoactinacertainwaytowardstheland
• Positivecovenant–selllandandotherpersonpromisestheywillpositivelybuildandmaintainfences
• Negativecovenant–covenantthatthebuyerwillnotbuildaskyscraperontheland• Contractualinnaturebutcantakeonproprietaryelementandbecomeattachedtoland
• Ifthisoccurs,covenantswillbindsuccessiveownersofthelandandpartiesthathaveprivityofestateinrelationtoland
• Despitenothavingprivityofcontractwiththeoriginalcontractualinstrumentthatexpressthecovenants
• Purposetopreventtheeconomicvalueofthelandwhichcanbeaffectedbyincompatibleuseofneighbouringproperty
• Positivecovenantburdenmaynotbeenforcedagainstsuccessivetitleholders• NegativecovenantburdenmaybeenforcedagainstsuccessivetitleholdersPositivecovenants• ThecovenantormustdoX,Y,Z• Generalruleofthumbisthatifitinvolvesspendingofmoney,itisapositivecovenant• EG.Thecoventormustbuildandmaintainthefence
• Thecoventormustcontributetothemaintenanceofashareddriveway• Thecoventormustrepairasharedroof
• RemedyforbreachofpositivecovenantisspecificperformanceNegativecovenant• ThecoventormustnotdoX,Y,Z• Generalruleofthumbisthatitisanythingthatdoesn’trequirethespendingofmoney
• Cancomplywiththecovenantbydoingnothing• EG.Thecovenantorisnottobuildoveracertainheight
• Thecovenantorisnottobuildmorethanonehouseontheland• Thecovenantorisnottodecorateoutsidetheheritagecolourscheme
• Canberegisteredontitle• IfXisbeneficiaryorburdened,youcanregisteritonthetitle
• RemedyforbreachofnegativecovenantisaninjunctionCovenantvs.Easement• Bothareincorporealinterests
Covenantee–thevendor,personwhobenefitsfromthecovenantCovenantor–thepurchaser,personwhoownstheburdenedlandPositivecovenant–acovenantthatapersonMUSTDOsomething,usuallyentailsspendingofmoneyNegativecovenant–acovenantthatapersonMUSTNOTDOsomething
• Anegativeeasement–EG.Preventingapersonfrombuildinginfrontofaview• Basedonproprietaryrights• Benefitisthatitisaproprietaryinterestandpassesontosuccessorsintitle
• Enforceableinrem• Fundamentally,aninterestintheland
• Weaknessisthatnegativecovenantsarelimitedtotypicallyairandlight• Restrictivecovenants
• Similartonegativeeasement• Contractualrights,andnoproprietaryinterests
• Contractualobligationenforceableagainstcurrentpartiestoestate• Benefitisthatthecategoriesarenotclosedandcancovenantforanything
• Consequencesisthatsomeonemaynotbeinterestedinbuyingland,butyouareallowedtohavethecovenantsnonetheless
• WeaknessisthatitdoesnotautomaticallybindsuccessorsintitleRequirementsforrestrictivecovenant1. Dominanttenementbenefitedbyrestrictivecovenantandservienttenementburdenedbyrestrictive
covenant2. Thecovenantisnegative3. Instrumentmustexpressaclearintentiontobindthelandandsuccessorsintitle• Restrictivecovenanttoberecordedonregister–TransferofLandActs88
• EG.XsellslandtoY• Covenantstatesthat“unlessYobtainsconsentofX,Yshallnotconstructmorethanone
dwellingontheburdenedlot;usetheburdenedlotforanypurposeotherthanasaprivatedwelling;subdividetheburdenedlot;oroperateupontheburdenedlotabusiness”
• DTisX’sland,STisY’slandbecauseheisburdened• CovenantisnegativebecauseitpreventsYfromdoingthings
Contractualnatureofcovenants• Covenantisapromiseinadeed
• Canbecontractualrightthatregulatesthewayinwhichlandistobeused• Ifrelevanttestsofinterconnectednessbetweencovenantandlandaresatisfied,thecovenantwilltake
onaproprietarynatureandbecomeaffixedtoland• Anyconveyanceoflandwillalsoconveythecovenantandbindthethirdpartypurchaser
• CovenantcontractuallyenforceablebetweenXandY• Ifitsatisfiestherelevanttests,covenantcanattachtolandandpasstoanyTPpurchaserYsells
to• BindstheTPandallowXtoenforcethecovenantagainsttheTP
Successorsintitle,andpassingbenefit/burdenforpositive/restrictivecovenants
SuccessorsintitleforBENEFITTEDland• Commonlawallowsbenefitofcovenanttopasstosuccessorintitle,aslongasthecovenanttouches
andconcernstheland• Purchaserofbenefittedlandmayenforcethecovenantagainstownerofburdenedland,ifthe
benefitpasseswiththeland
• Atcommonlaw,benefitwillpassbyannexationorexpressassignment• IfXisbenefittedbyrestrictivecovenantforY,thenXandYareinprivityofcontract• XiscovenanteewhosellsthelandtoZ–Zbecomesthecovenantee• Cantransferthebenefitofrestrictivecovenantasanexceptiontoprivityofcontract
• XandZowenoobligationandsounderprivityofcontract,XcanassigncovenanttoZSuccessorsintitleforBURDENEDlandofnegativecovenant
• Thereisprivityofcontractforburdenedland• IfYsellsburdenedlandtoZwithnotice,atcommonlaw,Xcannotenforcetherestrictivecovenant
againstZ• Inequity,thecovenantcanbeenforced• Burdenofcovenantcannotpasstosuccessorintitle,butitcanbepassedinequity• Butmustbeannexedtoland,covenantmustbenegativeonly,andthatthereisanintentionto
bindsuccessorsintitle
PrivityofcontractXsellslandtoY
XsellslandtoZ
CanZenforcetherestrictivecovenantagainstY?Covenantmustbeannexedtoland
PrivityofcontractXsellslandto
YsellslandtoZ
IfYsellsburdenedlandtoZ,canXenforcetherestrictivecovenantagainstZ?Commonlaw=noEquity=yes Mustbeannexedtoland
CovenantmustbenegativeIntentionthatsuccessorsintitle
bound
SuccessorsintitleforBURDENEDlandofpositivecovenant• IfXsellslandtoYwithcovenantthatYmustbuildandmaintainfences
• YisburdenedbythecovenantandXisbenefitted• Thereisaprivityofcontractforburdenofpositivecovenant
• IfYsellsburdenedlandtoZ,XcannotenforcethepositivecovenantagainstZ• Burdenofpositivecovenantdoesnotbindsuccessorsintitle–AusterberryvCorporationof
Oldham(1885)
• ExceptionstoAusterberryvCorporationofOldhamthatpositiveburdencannotbepassedonto
successor• Chainofdeeds
• Eachcovenantoragreestoalwaysincludesamecovenantinanysubsequentsale• Subsequentpurchaseragreestobeliableofcovenantisbroken
• Ancientprincipleofbenefit/burden–ThamsemeadTownvAllotey(1998)• Cannottakebenefitofdeedwithouttakingitsburden• Benefitsrunwithland• OnlyapplieswherecovenantwasintendedtoconveyabenefitontheSTaswellasa
burden• Usuallyinsituationswerenumberpeoplehaveenteredintocovenantsubjecttoa
burden,butformutualbenefitofallpartiestothecovenant
AusterberryvCorporationofOldham(1885)• 1937,peopleformedacompanyandsoldafractionoftheirland• Positivecovenantthatthecompanywhoownedthehighwayhadtobuildandmaintainthehighway• CompanybuiltthehighwayandsoldittoOldham• Austerberryboughtthebenefittedlandfromthecompany,andOldhamwasthesuccessorintitlefor
theburdenedland• Thecompanywasoriginallyburdenedbypositivecovenanttopayforroadrepairs,butcompanysold
thatlandtoOldham• AusterberrysoughtcostsofrepairfromOldhamin1881• HELD:Positivecovenantdoesnotbindsuccessorsintitle
• Personalobligationtoperformcannotbeenforcedagainstapersonnotprivitytothecontract• Covenantbetweenoriginallandownersandcompanywhoboughtthelandwasapersonal
covenant• Cannotenforcepersonalobligationonsomeonewhoisnotprivytocontract
ThamsemeadTownPtyLtdvAllotey(1998)• Landdevelopersoldlandtopurchaserwithcovenant• Successorintitleownedanestatewithcommunalgardenpathsandroads• Onehousesoldtoapurchaserunderacovenantthat“purchaserandsuccessorintitlemust
contributeandpayforthemaintenanceofthepathsandroadsandgardens”• Partofinitialcontractwasthatpurchaser,iftheysoldtheland,hadtoincludesamecovenantto
obligenextowner• PurchasersoldtoXandforgottoincludecovenantthatXwouldpayforpathandroadsandgardens• Ruleofreciprocityneedstwoconditions:
• Correlationbetweenburdenandbenefit• Covenanter’ssuccessorsintitlemusthaveopportunitytoelectwhethertotakeorrenounce
benefit• HELD:Willrecogniseruleofrecpriocity,butnotfulfilledhere
PassingBENEFITofpositivecovenantatcommonlaw• • Requirementsforpassingbenefitofpositivecovenantatcommonlaw
• Mustbeabenefitandnotaburden• Musttouchandconcerntheland
• Directaffectsthebenefitedland• Intentionforsuccessorsintitletobenefitfromthecovenant• Thesuccessorsintitletotheoriginalcovenanteemusthavelegalinterestinthelandtobe
benefited• Thelandwhichisbenefitedmustbeidentifiedoridentifiable
• “Touchandconcerntheland”test• Theburdenofpositivecovenantcannotbeenforcedagainstsuccessorintitlewithnonotice• Thebenefitofpositivecovenantcanbindsuccessorsintitleifittouchesandconcernstheland• Theremustbeanintentionthatbenefitofthecovenantrunwiththeland–SmithandSnipes
HallFarmvRiverDouglasCatchmentBoard• Thereisastatutorypresumptionthattherewasanintention–PropertyLawActs78
• “Itmustaffectthelandasregardsmodeofoccupation,oritmustbesuchasperseandnotmerelyfromcollateralcircumstances,affectsthevalueofland,anditmustthenbeshownthatitwastheintentionofthepartiesthatthebenefitthereforeshouldrunwiththeland”–SmithandSnipesHallFarmvRiverDouglasCatchmentBoard
PrivityofcontractXsellslandtoY
XsellslandtoZ
CanZenforcethepositivecovenantagainstY?Covenantmustbeannexedtoland
X(covenantor)ownsLot1andLot
2XsellsLot2with
Y(covenantor)purchases
benefittedland
Z(covenantee)purchasesburdenedlandwithcovenantthathemustrepair
thefences
TownofCongletonvPattison(1808)• TownleasedthelandtoXfor300years,Xcovenantedandburdenedhimselfthathewouldgive
noticeofthepersonsworkingatthesilkmillandnotemployanypersonfromoutsidetheparish• XsoldmilltoPattison,whobreachedthecovenants• HELD:Pcouldonlybeboundbythecovenantifittouchesandconcernstheland
• “Inordertobindtheassignee,thecovenantmusteitheraffectthelanditself,suchasthosewhichregardthemodeofoccupation;oritmustbesuchasperseandnotmerelyfromcollateralcircumstances,affectthevalueofthelandattheendoftheterm”
• Barringoutsidesfromworkinginthemillhasnodirecteffectontheland’svalue• Maycollaterallyaffectthevalueifthetownisseenas‘ghetto’,butwon’taffectthe
land• Covenantstorestraintheexerciseofparticulartradesdonottouchandconcernland• Here,stateofpremiseswouldbethesameattheendoftheterm,whethertheparishbe
moreorlessburdenedwithpoor
• PropertyLawActs78• Atcommonlaw,rulethatassigneehadtoacquiresameestateastheoriginalcovenantee
• EG.Tenantcouldnottakebenefitiftheoriginalestatewasfeesimple• S78(1)–“Acovenantrelatingtoanylandofthecovenanteeshallbedeemedtobemadewith
thecovenanteeandhissuccessorsintitle,andthepersonsderivingtitleunderhimorthem,andshallhaveeffectasissuchsuccessorsandotherpersonswereexpressed”
• Covenantappliestoallcornersoffeesimple• Evenifyouforgottowriteintentiontobindsuccessorsintitle,there’llbeanassumption
thatyouintendedtoPassingtheBURDENofarestrictivecovenantinequity• Equitywillenforceburdenofacovenantbywayofaninjunctionorcompensationinlieu,whereitis
clearthatthepurchaserwasawareofthecovenant–TulkvMoxhay• Successorsintitle
• IfXsellstoYwithanegativecovenanttonotbuildaskyscraper,andYsellstheburdenedlandtoZ,XcannotenforcethecovenantonZatcommonlaw
• XcanenforcethecovenantonZinequity,underTulkvMoxhay• Requirementsforpassingburdenofarestrictivecovenantinequity–TulkvMoxhay
• Restrictivecovenantmustbeannexedtotheland• Covenantmustbenegative• Intentionthatsuccessorsintitlebebound
• Restrictivecovenantmaybeenforceableagainstsuccessorsintitleinequity,whereitisclearthat
successorhasenteredintocontracttobuythelandandisawareoftheexistenceofthecovenant• Notwhethercovenantrunswithland
TulkvMoxhay• TownedlandinLeicesterSquarethathadhousessurroundingagarden,Tretainedownershipof
somehousesandsoldthegardentoELMSwithrestrictivecovenantsayingELMSandsuccessorsintitlewouldkeepandmaintainsquaregardeninanopenstate,uncoveredwithanybuildings,allowinhabitantsofLeicesterSquaretohavekeysandadmissionatanytime
• ELMSsoldtoMwithnoticeofcovenant,butnoformalinclusionofcovenant• Msoughttodevelopongarden,Tsoughtinjunction• Atcommonlaw,Misn’tboundbytherestrictivecovenantasMnotprivytocontract• HELD:BurdencouldbepassedbecauseMknewoftheburden
• Didn’tmatterwhetherburdenranwiththelandornot• “Thequestioniswhetherapartyshallbepermittedtousethelandinamanner
inconsistentwiththecontractenteredintobyhisvendor”• Nothingcouldbemoreinequitablethanthattheoriginalpurchasershouldbeabletoseelthe
propertythenextdayforagreaterprice• Ifitwascontractbetweentwopeople,courtmaygiveestoppel,andthereforetheyshouldbe
abletodoithere• Requirement–“theburdenofrestrictivecovenantswillonlyrunwiththelandinequity
againstsubsequentholderwithnoticeofthecovenantwhenthecovenantisenteredintoforthebenefitofsomeparcelofland”
• Havetoknowwhatparceloflandwillbebenefited• Morevaluablelandiflivedingardens,thannexttoskyscraper• “Certainarrangementsdesignedtoprotectsuchvalueandwhichgobeyondtheframe
ofcontractmaybeenforcedinequity,ifnotatlaw”•
• Requirementsforpassingburdenofrestrictivecovenantinequity–ForestviewvPerpetual• Itisarestrictivecovenant• Thereisanintentiontoimposetheburdenonaknowingsuccessorintitle• Noticeismadetothesuccessorintitle• Thebenefitedlandcanbeidentified
• Itisarestrictivecovenant• Restrictivecovenant=restrictsortakesawayrightofpurchaseroverlandthatthepurchaser
wouldhaveotherwisehad• Equitywillonlyenforceburdenofrestrictivecovenant• Todetermineifrestrictiveorpositive,courtexamineseffectofcovenant,ratherthanwording• Generally,ifrequiresinactionofsomekind/refrainingfromactinginaway,itisrestrictive
• Intentiontoimposeburdenonknowingsuccessorintitle• Designedtopreventpersonfromescapingcovenantthattheywereawareofwhenpurchasing
theland• Focusonpurchaserratherthanwhethercovenanttouchesandconcernsland• Intentionofpartiesdeterminedwithreferencetotermsofcovenant
• EG.“toXandhisheirs,assigneesandsuccessors”• Noticetothesuccessorsintitle
• Successorintitleonlydeemedtohavebeennotifiedofcovenantwhereexistenceandnatureofrestrictionandlandsaffectedbyrestrictionareclearlyindicatedindocument,notedontitleoravailabletopersonssearchingtheregister–ReDennerstein91963)
• Identificationofbenefittedlandorbenefitofaninterestintheland• Covenant,tobeenforceableagainstsuccessorsintitle,mustspecifyandidentifythebenefitted
land,asopposedtomerelyprovidingapersonalbenefittoowner–LondonCountyCouncilvAllen(1914)
• Equitywillonlyenforceburdenofcovenantagainstsubsequentpurchaserwithnoticeifcovenantisenteredintoforthebenefitofaninterestinland–ClemSmithNomineesPtyLtdvFarrelly
• Benefittedlanddoesnotcurrentlyneedtobeownedbyoriginalcovenanteeforownerofburdenedlandtobeboundbycovenant
• Todeterminewhethercovenantbenefitsidentifiablelanddependsoncircumstances
Forestview&SilkchimevPerpetual• Perpetualboughtshoppingcentreandabitofextraland,Xretainedsomeofthelandadjacentto
P’slane• XagreedtorestrictivecovenantsayingthatXdoesnotuselandforretailsaleofgoods• Phadthebenefittedland• ForestviewboughtthelandXhadretained,andFwantedtobuildshoppingcentreonburdened
land• Psaidno,andthatitbreachedtherestrictivecovenantwithX• FsaidthewaytheagreementwasdraftedmeantthatTulkvMoxhaydidn’tapply• Phadtheshoppingcentre,andwantedrestrictivecovenantbutdidn’twanttenantsinthe
shoppingcentretryingtoenforcetherestrictivecovenant• HELD:“Itwouldbeunconscionableinthosecircumstancesforthecovenanttobeunenforceable
againstF”• Ptooknoticethatrestrictivecovenantwasinplace,anditwasenforceableevenifitwas
notannexedtotheland• Thecovenantdid‘touchandconcern’thelandbecauseitenhancedthelandsvalue
• Solongastherestrictivecovenantprovidesabenefit,itcanbeconsideredastouchingtheland
• Tenantscouldnotenforcethecovenantbecausetheylackedprivityofestate
• Factorstakenintoaccount:• Distancebetweenburdenedlandandpurportedbenefittedland• Whethercovenantrelatestothewayinwhichthelandisused• Whethertherestrictioniscapableofbenefitingthewholeland
• WherelandisregisteredonTorrenssystem,covenantmustbereasonablyidentifiablefromdocumentationofregisteredtitle–ClemSmithNomineesvFarrelly
PassingtheBENEFITofrestrictivecovenantatcommonlaw• Benefitofpositiveorrestrictivecovenantmayrunwiththelandsoastobeenforceablebysuccessorin
titletooriginalcovenantee• Passingthebenefitofrestrictivecovenantatcommonlawisthesameaspassingthebenefitofa
positivecovenantatcommonlaw• Musttouchandconcerntheland• Intentionforsuccessorsintitletobenefitfromtherestrictivecovenant• Thesuccessorintitletotheoriginalcovenanteemusthavelegalinterestinlandtobebenefited• Thelandwhichisbenefitedmustbeidentifiedoridentifiable
• Allowssuccessoroforiginalcovenanteetoenforcethecovenantonlyagainsttheoriginalcovenantor
PassingtheBENEFITofarestrictivecovenantinequity• Forbenefittopassinequity,itmustbeestablishedthatittouchesandconcernsthelandandan
intentionforthebenefittorunwiththeland,subjectivetolegislativepresumptionins78• Forestviewtestsfor“touchandconcern”and“identifyingthebenefittedland”
• S78–oncethresholdrequirementisreached(thatcovenanttouchesandconcernstheland),s78deemsthatcovenantwillinfactrunwiththelandandshallhaveeffectasifthecovenantwasmadewithallthesuccessorsintitle–FederatedHomesvMillLodgeProperties
• Equitycanfillthegapsandenforcethecovenantwhereclaimantonlyhasanequitableinterestinland
• Requirementstopassthebenefitofrestrictivecovenantinequity
FederatedHomesvMillLodgeProperties(1980)• Mowneddevelopmentsite,3acres• 1871,MtransferredbluelandtoD,Drequiredtoenterintocontractrestrictingnumberof
dwellingsbuiltonlandsoasnottoreducethenumberofunitswhichthevendormighteventuallyerectontheretainedland(greenandredland)
• intentiontoburdenbluelandandbenefitredandgreenland• Partiescouldonlybuild900dwellingsallup,soifmorethan300housesbuildonblueland,it’ll
eatintotheamountofhousesthatcanbebuiltongreenandredland• Fwasthecovenantee,andbecameownersofgreenandredland,benefitwasannexedin
paperworktogreenland• Forredland,transfersdidn’tcontainexpressassignmentofbenefitofcovenants• HELD:Benefittoredlandwasannexedasaconsequenceofs78PropertylawAct
• Aslongasbenefittouchesandconcernsland(requiredbys78),s78deemsthatcovenantistobindallfuturesuccessorsofthatland
• Determineds78tobeappliedbroadly• S78providespresumptionofintentioninsituationwherenointentiontothe
contrarycanbeinferredfrompartiesconduct• Ifthebenefittouchesandconcernstheland,s78immediatelymakesbenefitenforceable
bycovenantee’ssuccessorsintitle
• Musttouchandconcerntheland• Intentionforsuccessorsintitlebenefitfromtherestrictivecovenant• Thesuccessorsintitletotheoriginalcovenanteemusthaveanequitableinterestinthelandto
bebenefitted• Thelandwhichisbenefittedmustbeidentifiedoridentifiable
Assignments
Assignmentofthebenefitnotannexedtoland• Wherethebenefitofacovenanthasnotbeeneffectivelyannexedtothecovenantee’slandortoavoid
ambiguityaboutwhetherthecovenantwilltouchandconcerntheland,thepartiesmaydoaformalassignment
• Canbeexpresslyassignedtosuccessorintitle• Equivalentoftransferralofchoseinactionfromoriginalcovenanteetosuccessorintitleofcovenantee• AssignmentmustbecontemporaneouslywithtransferofbenefitedlandtoTP
• Annexationpreferred–moreconvenientthanannexationwherecovenantautomaticallytransferstoland
• Assigneewhoseekstoenforceagainstoriginalcovenantoronlyhastocomplywithstatutoryprovisionsforassigningchoseinaction
• “Anabsoluteassignmentbywritingunderthehandoftheassignorofanydebt,orotherlegalthingin
action,ofwhichexpressnoticeinwritinghasbeengiventothedebtor,trusteeorotherpersonfromwhomtheassignorwouldhavebeenentitledtoclaimsuchdebtorthinginaction,shallbeandshallbedeemedtohavebeen,effectualinlawtopassandtransfer,fromthedateofsuchnotice(a)thelegalrighttosuchdebt,(b)Alllegalandotherremediesforthesame;and(c)thepowertogiveagooddischargeforthesamewithouttheconcurrenceoftheassignor”–S134PropertyLawAct
• Requirements:• Assignmentmustbesetoutinwritingbyassignor• Covenantmustbeintendedtobenefitidentifiableland,notthecovenanteepersonally
• Beanabsolutetransferoftherightandthewholeblockofland• Assignmentmustoccurcontemporaneouslywithtransferofbenefitedland
• Covenantcanonlybeenforcedoverthebenefittedlandandtherefore,mustbemutuallyconferred
• Covenantcannotbetreatedasindependentinterestbecauseitformspartoftheland
• Oncethelandistransferredwithoutcovenant,itceasestoexist
Vendorofbenefitedland
Successorintitleofbenefitedland
Covenantor
Expressassignment
Enforceablesolongasexpressassignmentcomplieswithstatute
• Adequateproofofanintentiontoassignthebenefitofthecovenantandcovenanteemusthavedoneeverythingnecessarywhichtheyalonecandotovalidassignment
• Expressnoticeinwritingmustbegiventocovenantor• Annexationvassignment
• Oncecovenantisannexed,itrunswiththeland• Assignmentrequiresapositiveactoftransfer
• Mustbesetoutexpressly• Assignmentinvolvestransferinitsownright,andcovenantisnotattachedtoland
Failuretocomplywithformalities• Assignmentwillbeinvalidandbenefitofcovenantwillnotbelegallyenforceablebyassignee• Assignmentmaybeenforceableinequityifequitabletestofintentionissatisfied
• Clearthatintentionofpartieswastoassignthebenefitofthecovenantdespitefailingtocomplywiththeformalityrequirements
• PresumptiveintentiontoensurethatthebenefitrunswiththelandRequirements• Ifassigneewishestoenforcecovenantagainstsuccessortotheoriginalcovenantor,theymustcomply
withrequirementsforassignmentinequity• Therestrictivecovenantisintendedtobenefitthecovenantee’sland• Thecovenantwasassignedwiththeland
• Cannotassignburdenofrestrictivecovenantatcommonlaw• Equitywillassist,andwillonlydosoforcovenantsthatareannexedtotheland
Buildingschemes
• EG.Allhousesofasimilartype–reciprocalcovenant• Subdivisionanddevelopmentoflargeareasoflandinthecaseofahousingestate
• Subdividesthatlandandsellsoffpartsofittopurchasersatdifferenttimes• Developmentmayrequirethatallpurchaserstoenterintorestrictivecovenanttomaintain
characterofestate• Restrictivecovenantovereachlotaimedatsustainingthevalue,characterandamenityofthe
land• Purposetoprovidereciprocalbenefitsandburdenstoeachlottoprovidesystematisedland
developmentscheme• Problemwithdevelopmentschemes
• Difficultytoanyrestrictivecovenantsovertheentirelandbecausebenefitofacovenantwillonlybeenforceablebytheoriginalcovenanteeorsuccessorsintitleofbenefitedland,wherebenefitrunswithland
• EG.Xowneroflargeblock,subdividesintodevelopmentscheme;makeseveryonesignrestrictivecovenantsayingtheywon’tbuildinacertainway;it’llbenefitotherpeoplesothathousesandneighbourhoodaresimilar;everyoneburdenedbyeveryonebenefits
• Issuethatdeveloperwon’tsellallthelotsatthesametime• XsellsLot1toA,XcovenantswithAthatAwillnotdoanythingtochangethecharacter
oramenityofherlot,Aisburdenedandrestofthelargeblockbenefited;• XsellsLot2toB,andcovenantsthesame,butBisburdenedandbyA’scovenant,A’slot
cannotreceivebenefitofB’scovenant–ithasalreadybeensoldsonolongerbelongstoX
• Continuesupuntillastlotwhichwillhavebenefitofallthecovenantsitself,butthereisnolandlefttoreceivebenefitfromitscovenant
• Equitableprinciplessetoutthatincaseofdevelopmentscheme,mutualcovenantscanbeenforced,despitedateofsale
• Basisisequitableprincipleofmutuality
• Buildingschemes
• Mutuality/reciprocityunderlyingelementofbuildingscheme• Commonvendorintendedtoconferreciprocalburdensandbenefitsoversubdividedlots• Purchaserswereawareatthetimeofpurchasethatrestrictionsweretobenefit
commonvendorandsubsequentpurchasersderivingtitlefromcommonvendor• Mutualitymustbeclearlyestablishedonthefacts–SmallvOliver&Saunders• Purchaserintendedtotakeboththebenefitandburdenoftherestriction• Anintentiontoconfermutualitymustbeclearfromthegeneralbuildingschemeplan
EllistonvReacher(1908)• Restrictivecovenantthatpurchasercouldn’tbuildhotelonpropertyorusebuildingashotel• PandDeventuallyboughtlots,DbuiltahotelandPsoughttoenforcetherestrictivecovenant
againstD• HELD:Doctrineofbuildingschemes–requirementtohavereciprocalcovenantsenforced
• Benefitofcovenantcannowbeenforcedbymutualownersoflotsunderabuildingscheme,regardlessofdateofsale
• Ifitcanbeestablishedthatdevelopmentexists,thebuildingschemeruleswillbeenforcedbyequity:
• Thereisacommonvendorfromwhomalltherespectivetitlesintheestatescanbederived
• Generalschemeofdevelopment,thatentirelandissubjectedtocovenants• Vendorhaslaidouttheestateindefinedlotssubjecttorestrictions
intendedtobeimposedonallthelots• Therestrictionswereintendedbythecommonvendortobeandwereforthe
benefitandburdenofallthelotsintendedtobesold• Bothpartiespurchasedtheirlotfromthecommonvendorwiththeintention
mutualitythattherestrictionsweretorunwiththelandforthebenefitofallthelotsincludedinthegeneralscheme
• Ifallrequirementsabovearemet:• Eachlotshallbesubjecttotheburdenandhavethebenefitoftherestrictive
condition• Restrictivecovenantswillbeenforcedagainstsuccessorsintitlebyequity
• BuildingschemesandTorrensland
• WherebuildingschemeexistsoverTorrensland,theexistence,benefitsandrestrictionsofanyrestrictivecovenantsonlyvalidifnotedonthetitleorinaninstrumentthatisavailabletoapurchaserwhoissearchingtheRegister–ReDennerstein
• Mustbeindicatedinthenotification
Extinguishment
Modificationandextinguishmentofcovenants• Mutualownership
• Restrictivecovenantextinguishedbylawifbenefitedandburdenedlandcomeintocommonownership
• Onceextinguished,cannotberetrieved–ReTiltwood(1978)• Notapplicabletobuildingschemes,becauseofequitablecreation
• Wheretherehasonlybeenpartialunityandthewholeareahasnotcomeintocommonownership,itisinappropriatetoassumethatthepartiesintendedextinguishment–TexacoAntillesLtdvKernochan
• Theremustbecompleteunity,notmerelyofownershipbutalsoofpossession–PostInvestmentsPtyLtdvWilson(1990)
• Release• Expressagreement–s84(1)(b)PropertyLawAct
• Deedofreleasebetweenownersofbenefitedandburdenedland• Impliedagreement–s84(1)(b)PropertyLawAct
• Ownercannotenforcetherestrictivecovenantwhereshehassubmittedtoacourseofusagewhichisdirectlyinconsistentwiththerestrictivecovenant
• Statute
SmallvOliver&Saunders(2006)• Lotssubdividedovertime,eachhadsamerestrictivecovenanttouselandasprivateresidence• N1chosetosubdividelandandusepartofitforaroad• N2saidthatitwasnotusingitforuseofprivateresidence• Noclearevidencethatpurchaserswereawareofreciprocalnatureofthecovenants• HELD:Nocovenant
• Wasn’tclearthatpurchasersknewthattherewerereciprocalcovenantsinplace• Smallhadthebenefitviaannexation,butnotviabuildingscheme• Noevidencetoshowthatthepersonusinglandasroadkenwofthereciprocalcovenants
involved• EllisonvReachertestused
• Despitetwosuccessivetransferors,itdidnotdetractfromcommonvendorrequirement
• Clearlycommonvendor,anddoesn’tmatterthatpartiesweregenerationsdowninsuccessorsintitle
• Therewassystematicsale,anddevelopmentofestateisindicationthatestatehasbeenlaidoutinplots
• Therequirementofthecommonbenefitisindicatedbycovenantsthemselves• Therewasnomutualintentiontobenefitorbeburdened
• Areamustbedefinedandmustbenoticetovariouspurchasers• “Reciprocityisthefoundationoftheideaofascheme…hemustknowboththeextentofhis
burdenandtheextentofhisbenefit”
• Statutoryprovisionsallowingformodificationofextinguishmentsofrestrictivecovenantuponspecificstatutorygrounds
• Cangotocourtandaskthemtochangeorextinguishrestrictivecovenant• Iftherearechangesmakingtherestrictivecovenantobsolete,orifrestrictivecovenant
continueditwouldimpedereasonableuseoftheland
Remedies• Infringement
• Contractualremediesapplytocovenants• Generallydamagesforbreachofcovenant• Alllossflowingfrombreachtorestorecovenanteetooriginalposition
• Actuallossincurredandlossofbargaindamage• Equitableremedies
• Specificperformance• Equitycompensationincludingdamages• Mandatoryinjunction• Usualequitablediscretionsapply
StanhillPtyLtdvJackson&Ors(2005)• Jwantedtoknockdownhouseanddeveloptownhouses• 81ownersofotherhousesprotested,soughttomodifyrestrictivecovenantunders84• Jarguedtherehadbeensignificantchangesinthecharacterofneighbourhoodsincethecovenant
wascreatedthatrenderedthataspectofthecovenantobsolete,andthatnopersonwouldbesubstantiallyinjuredbymodification
• HELD:Covenantnotobsolete,despitechangestoneighbourhood• Covenantsobjectiveistopromoteresidentialareathathasonehouseperlot• Willonlybeobsoleteiforiginalpurposecannolongerbefulfilled• Questionoffacts• S84(1)(a)–reasonableuseofthelandisbeingimpededbythecovenantbecauseitisa
reasonableuseofsuchlargelandtohavemorethanonedwelling• S84(1)(c)–fivetownhouseswouldcreatesubstantialinjurytoothers,detrimentalto
neighbourhood