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Introduction
19thC rising middle class, development
and property ownership
Little government control over development
Need for environmental regulation
Contract as the model
Contractual agreements regarding land bind
the parties but that is of little use into the
future when the property changes hands
The movement from contract to property
Introduction
Covenant The term covenant, at
law, refers to a promise made in a
deed so a term of a deed. However,
in practice we use the term covenant
more loosely to refer to a contractual
obligation affecting a land owner so
could arise under a contract not
effected by deed.
Introduction
Positive Covenant A covenant that
requires an act to be done.
Negative Covenant A promise that
requires an act not to be done.
Covenantor Person making the
promise
Covenantee Person taking the
benefit of the promise
Introduction
Burden of the Covenant The burden
of the covenant is the obligation to
act or not to act under the covenant.
So if a person bears the burden of
the covenant then they are the
person who is required or restrained
from acting in respect of their land.
The person subject to the burden is
called the covenantor (the person
who has covenanted to act or not to
Introduction
Benefit of the Covenant The benefit
of the covenant is the benefit that
flows from the other party bearing
the burden. So this is the benefit that
flows from that person acting or not
acting in a certain way with respect
to land. The person who obtains the
benefit of the covenant is the
covenantee (the person who has
sought the promise that the other
Introduction
A (Covenantor)
(Covenantee)
C
Burden of Covenant
D
Benefit of Covenant
Annexation of covenants
When will the burden of a covenant run with the
land such that the original covenantee can
enforce the covenant against successors in title
to the original covenantor in law and at equity;
When will the benefit of a covenant run with the
land such that a successor in title to the original
covenantee can enforce the benefit against the
original covenantor? in law and at equity
When will successors in title of the original
covenantee be able to enforce covenants against
successors in title of the original covenantor?
stated that the rule was not that any party deriving any
benefit from a deed must accept any burden that is
contained in the same document. Instead, the burden
must be relevant to the exercise of the rights granted.
Therefore, the important thing is that the burden must
relate to the reciprocal benefit claimed and not be a
separate independent provision. Here, the benefit of
support from the neighbouring house was independent of,
and separate to, the covenant to repair the roof.
In the present case the owners of Walford House could
not in theory or in practice be deprived of the benefit of
the mutual rights of support if they failed to repair the
roof.
The case came to court when Tulk tried to enforce the covenants
against a purchaser of the fee simple from Elms, who was proposing to
erect buildings on the site. The purchaser of the fee simple had notice
of the Covenants. The court found that equity would enforce the burden
of the covenant against a purchaser of the land who takes the land with
notice of the covenant. The court said that if a purchaser takes the land
with notice of a covenant, then they will receive a reduced purchase
price to take the covenant into account and it would be inequitable to
allow them to escape the obligation in those circumstances.
Notice
Because negative covenants will only be
enforced against successors in title
(outside of finding a conveyancing trick
to do it legally) in equity, the right to
have equity enforce the covenant will
depend on whether the land is taken by a
bona fide purchaser for value without
notice. Therefore for old system land a
BFPVWN will not be bound by the
covenant.
Notice
Notice includes actual constructive
and imputed notice
Torrens system has slightly different
rules.
Assignment of covenants
Covenants can also be assigned under s 12 CA
1. There must be a clear intention to make an immediate and
irrevocable transfer of the chose in action to the assignee:
Norman v FCT, at 32. It is not sufficient to merely authorise the
debtor or other person to pay someone else.
2. The assignment must be absolute and not by way of charge
3. The assignment must be in writing and signed by the assignor.
No particular form of words is necessary. So long as it is clear
that the debt or chose in action has been assigned, this
requirement of the statute will be satisfied: William Brandts
Sons & Co v Dunlop Rubber Company Limited, at 462.
4. Express notice in writing must be given to the debtor by either
the assignor or assignee: Norman v FCT, at 29. Notice can only
be given at the time of, or after, the assignment: Bishop v
Financial Trust Limited [2008] NZCA 170, at [35]. There are no
formal requirements as to the notice and it need not even state
the date of the assignment. The importance of the notice is that
the debtor be advised as to whom he or she must pay:
Creation of covenants
Old system deeds or part performance s 23B, s 23E
Torrens A purchaser of Torrens land will take an indefeasible
title free of the burden of any restrictive covenant unless it is
noted on the register (s 42 RPA). RPA s 88(3)(c) states that a
restrictive covenant is an interest within the meaning of s 42
of the RPA. So for land held under Torrens in addition to the
common law requirements for creation/enforcement of a
covenant need to note it on the folio of the burdened land.
Creation of covenants
RPA s 46A allows a covenant to be
created where both the burdened and
benefitted land are owned by the
same person
CA s 88B allows for registration of a
plan of subdivision indicating
covenants to apply. These covenants
are recorded and annexed to the land
via s 88B.
Creation of covenants
CA s 88(1) imposes additional requirements for the creation of
covenants applying to either old system or Torrens title land. We
looked at s88(1) in the context of easements. If you remember the
section requires any covenant created over land to clearly identify:
the benefited land;
the burdened land;
any additional persons who may have the right to release, vary or modify
the right; and
the persons whose consent is necessary for a release, variation or
modification of the right.
Creation of covenants
In Kerridge v Foley (1964) 82 WN (NSW) (pt 1) 293 (10) land was
conveyed subject to a covenant concerning the number of
dwellings on each 40 feet of frontage and as to the use of the
premises. The defendants intended to convert the house into
two dwellings and the plaintiff objected.
The court held that the covenant was not enforceable as it did
not meet the requirements of section 88. The conveyance
described the land to which the benefit was appurtenant as "the
whole of the land shown in the said plan". The plan was
endorsed on the conveyance and showed lots 52, 53, 54, and
61. The land being sold was lot 53. Jacobs J found that the
inclusion of lot 54 in the plan was not correct as lot 54 had been
sold previously to a named purchaser and was not owned by the
original vendor, the A A Co, at the time of the first sale of lot 53.
Building Schemes
How do you create covenants over a
subdivision?
Problem of privity of contract
overcome by doctrine of equity
No longer hugely problematic
because of of s 88B CA
Relaxation
Professor Peter ButtsLand Law [1794]
The modern trend is to relax the stringency of the fourElliston v
Reacherrequirements and to look primarily for the intention between the
common vendor and the respective purchasers to impose a local law
under a mutually enforceable system of covenants. Equity then gives
effect to this common intention notwithstanding any technical difficulties
involved in creating the covenants. The central concept being reciprocity
of obligations, the four requirements are a guide, not an inviolable formula
to be strictly applied in all cases.
[1795] To illustrate this relaxation of stringency: it is not necessary that all
the lots in the scheme be sold at the one time. A scheme of development
can exist where the common vendor sells the lots over a period of time. ...
What is crucial is that each purchaser from the common vendor accepted
that the covenants the purchaser gave were to enure for the benefit of the
vendor and those deriving title from the vendor, and that the purchaser
correspondingly would enjoy the benefit of similar covenants entered into
by all other purchasers.
Interpretation of covenants
Ordinary principles of interpretation apply.
Normally the words of a covenant are
interpreted in their colloquial or ordinary
sense, not in any technical or legal sense:
see Bradbrook and Neave, Easements and
Restrictive Covenants in Australia (2nd Ed,
2000) [15.5]; Ex parte High Standard
Constructions Ltd (1928) 29 SR (NSW) 274
at 278 per Harvey CJ in Eq.
Interpretation of covenants
Ferella v Otvosi [2005] NSWSC 962 at [21] per Hamilton J :
In this case, the covenant was created in a transfer under the Real
Property Act 1900 (the RPA), which is, on registration, to have
the effect of a deed: RPA s 36(11). In any event, the covenant has
the nature of a grant by the transferee of rights affecting the land.
That rule is that, in case of doubt or ambiguity, a covenant or
grant should be construed against the covenantor or grantor.
Covenant: That not more than one main building shall be erected
upon the said land and that such building shall not be more than
two storeys in height
Land sloped down to harbour shore could they build two storeys
from the highest point or two storeys from wherever the land was?
Held not uncertain: two storeys from ground level not the highest
ground level. Construction was halted
Extinguishment of Covenants
Common ownership in old system would destroy covenants:
Kerridge v Foley (1964) 82 WN (NSW) (Pt 1) 293 a person
cannot be regarded subject to the burden of a covenant of which
he alone has the benefit.
Torrens - Post Investments v Wilson (1990) 26 NSWLR 598 the
doctrine of extinguishment by merger has no place in the law in
so far as land registered under the provision of the RPA is
concerned (at 640).
Post 2005 created covenants s 47(7):
(7) An affecting interest (being an affecting interest that benefits
land) recorded in the Register shall not be extinguished solely by
reason of the same person becoming proprietor of separate
parcels of land respectively burdened and benefited by the
affecting interest, notwithstanding any rule of law or equity in
that behalf.
Extinguishment of Covenants
old systems BFPVWN defeats
equitable interest (unlikely not to
have notice)
Torrens registration of interest
take subject to s 42
Extinguishment of Covenants
Release of Covenants
Person(s) entitled to benefit may release it at
general law by deed or if just in writing provided
equity will specifically enforce the contract.
Torrens Deed of release registered in the Register.
Implied release Benefitted owner has impliedly
released covenant if:
Submitted to long inconsistent course of use;
Disregarded breaches such that reasonable person
would assume release; or
Where character of neighbourhood has changed so much
that there is no value left in the covenant.
Extinguishment of Covenants
The Conveyancing Act s 89 allows Supreme Court to modify or wholly
extinguish covenants where:
change of use of land or neighbourhood conveyance deemed
obsolete, or impacts reasonable use of burdened land.
Benefit holders have offered to release or waived rights to
covenant.
Idea is for removal of covenants that have no practical utility to the
benefitted land. If you use the first limb you must show either that
the changes in the neighbourhood or use of the benefitted land
have made the covenant obsolete; or impeded the reasonable use
of burdened land with no practical benefit to benefitted land.
Obsolete if the purpose of the covenant can still be fulfilled (or one
of the purposes) it wont be obsolete.
Reasonable use Courts tend to give this a narrow construction
(although not clear if narrow or broad is required). Question tends
to be does the covenant hinder, to a real, sensible, degree, the
land being reasonably used, having due regard to the situation it
occupies, the land surrounding and the purpose of the covenants.
Extinguishment of Covenants
Post Investments v Wilson (1990) 26
NSWLR 598
This case involved the subdivision of a
largish piece of land in Mosman. The
owner of the estate kept a large bit of land
on which was built a large house which
had nice gardens and a magnificent view.
In 1910, subdivided 4 lots on the road with
a covenant preventing the building of
anything except a private dwelling house
no more than one storey high on each of
the lots.
Extinguishment of Covenants
In the mid 1980s three of the lots came
into the common ownership of one Mr
Reed and his company Post Investments.
Reed wanted to knock down the three
existing houses and put up an apartment
block of five various sizes apartments over
five levels. Post sought an order under s
89 that the covenants were obsolete and /
or impeded reasonable uses of the land
especially as the areas had been zoned for
medium density housing and some other
blocks on the street had been converted to
Extinguishment of Covenants
Powell JA: Obsolete? Designed to protect
the view of the main house and privacy of
garden. Still doing this job. Therefore not
obsolete.
Reasonable uses? Some of the
neighbourhood converted to medium
density but not all still houses left. Use
as single dwelling properties has
continued for 70 odd years no reason
why still cannot be used in this way and
done in keeping with the character of the
neighbourhood - no order of