Archive for the ‘Land Covenants’ Category

Clear words needed for a general waiver

November 30, 2012

Real Honest Investment Ltd v Attorney-General ([1997] 2 HKC 436, PC) concerned a restrictive covenant in a 1923 Government Lease that prohibited the erection of any building exceeding 35 feet in height. In 1948, the site had been redeveloped and the Government had waived the height restriction. Now RHI proposed a further redevelopment and argued that the 1948 waiver had been a general waiver and that the height restriction no longer applied. This failed. The 1948 waiver had been a waiver in respect of the particular development then proposed. Clear words are needed to express an intention to grant a general waiver (Lord Clyde at 440) and they were not present in the 1948 waiver.


Covenant only to build domestic houses

November 29, 2012

Expressluck Development Ltd v Secretary for Justice ([2007] HKEC 1352, CFI) concerned land on which houses had been built. The Conditions of Exchange under which the land was held provided that “The lessee will not be allowed to erect any buildings on the lots except domestic houses.” From the 1940s onwards, the ground floors of the houses had been used for commercial purposes without the Government taking any formal action in respect of the breaches of covenant. Where, however, other major changes of use had been proposed, consent had been sought by the owners. Expressluck now intended to build a block of residential units but with the ground floor being used for commercial purposes. It did not want to apply for a variation or release of the covenant. Instead it sought, inter alia, declarations to the effect that the proposed development did not amount to a breach of covenant, that the covenant had been abandoned or waived (because of the long history of tolerating commercial use) or that the Government’s demand for rent based on commercial use of the ground floor of the development gave rise to an estoppel. Expressluck failed in all respects.

First, there was a breach. The covenant did not affect only the type of building that could be built but also its subsequent use. Second, although the Government may have waived breaches of the covenant, it had not waived the covenant itself:

’81. What I glean from the authorities is that waiver of a covenant cannot be lightly inferred. It can be, but only where acquiescence by the grantor is sufficiently clear and unambiguous that it would be inherently unfair for him to be permitted to go back on his word, either actually spoken or derived from his conduct.
82. Further, it is important to distinguish between waiver of a breach of a covenant and the covenant itself.
83. Acquiescence will not amount to a waiver of the covenant unless in the particular circumstances, there was a clear intention to do so for all time.’ (Deputy Judge Gill)

Finally, there was no estoppel the Commissioner for Rating and Valuation had issued the demand but this did not bind the relevant department of Government (the Director of Lands).

Building schemes

November 28, 2012

In Elliston v Reacher ([1908] 2 Ch 665, CA (Eng)) a building society bought land. A deed was prepared in which the building society and the purchasers were said to covenant with each other not to use any plot of land on the estate as a hotel (unless the building society’s consent was obtained). This was stamped but was not executed by the building society or any of the purchasers. The sales materials for the first sale of the plots identified the estate and the plots to be sold and stated that each purchaser would covenant with every other to observe the restriction on building a hotel without consent. The first conveyance of each plot expressed an intention that the purchaser and his successors in title would be bound by the restrictions in the deed of covenant. It identified the plot and the estate. It was held that this created an effective building scheme so that the restriction against building a hotel could be enforced by a successor in title against a successor in title. Every lot was purchased subject to the understanding that it had the benefit and burden of the restrictions.

Tulk v Moxhay explained: purchasers with notice only take subject to restrictive covenants

November 21, 2012

In Haywood v The Brunswick Permanent Building Society ((1881 – 82) L.R. 8 Q.B.D. 403, CA (Eng)) E covenanted with C that E would keep in repair the houses on the land conveyed to him. The building society and H were the successors in title of E and C respectively. H brought proceedings against the building society for breach of the repairing covenant. These failed. The equity referred to in Tulk v Moxhay only arose where the covenants in question were restrictive covenants and the purchaser took with notice of them.

Halsall v Brizell: benefit and burden

November 16, 2012

In Halsall v Brizell ([1957] Ch 169) O and J bought a large area of land near Liverpool and built a housing estate on it. They retained ownership of common parts including the roads and the sewers under them. No easements were granted over these common parts but they were held on express trust for the use and enjoyment of the owners and occupiers of the houses on the estate. The owners covenanted to contribute to the maintenance and repair of the common parts. Decades later, F became the owner of one of the houses. The question was whether, as a successor in title, he was obliged to contribute to the cost of maintenance and repair. Clearly, the burden of this positive covenant had not passed to successors-in-title of the original covenantor. Upjohn J. pointed, out that, ‘it is ancient law that a man cannot take benefit under a deed without subscribing to the obligations thereunder.’ (at p. 182). F clearly wanted to carry on using the estate roads and so he would have to make the contributions.

Squatter of land subject to a DMC takes subject to DMC covenant not to convert common parts to private use

October 15, 2012

In Mountain View (IO) v Heart Cuisine [2012] 4 HKLRD 628, CA) S was a former owner of a shop in a building covered by a DMC. There was a service lane next to the shop which was a common part of the building. S sold the shop but retained possession of the service lane. The IO brought proceedings to enforce the covenant not to convert common parts to private use (implied into the DMC by s.34I of the Building Management Ordinance). The practical effect was that S would have to give up possession. The IO succeeded; S’s possessory title was subject to the implied covenant (section 41(3) of the Conveyancing and Property Ordinance and the general law on restrictive covenants as applied to possessory title in Re Nisbet and Potts’ Contract[1906] 1 Ch 386). The Limitation Ordinance did not apply since this was not an action to recover possession but an action to enforce the covenant. The Lands Tribunal’s jurisdiction to deal with matters of this nature was confirmed by the Court of Appeal.

Scope of CPO s.26

August 12, 2011

CPO s.26 only applies to land. It does not allow third parties (who are not a party to the contract) to enforce it.

In Beswick v Beswick ([1968] AC 58, HL) B had agreed to sell his business to N. N agreed that after B’s death he would pay B’s widow a weekly annuity of five pounds. B died but N did not make the payments. B’s widow was adminstratrix of B’s estate. In this capacity she was granted specific performance of the promise (enforcing the promise as part of B’s estate giving her personally the benefit of receiving the money). This shows that specific performance is available to compel the payment of money. She also tried to sue in her personal capacity relying on the English equivalent of CPO s.26. This failed because the section only applies to interests in land (not as obvious on the wording of the English legislation as it is in s.26) and because s.26 does not allow third parties to enforce contractual promises.

Solus agreement: does it touch and concern land?

November 22, 2010

In Caerns Motor Services Ltd v Texaco Ltd ([1994] 1 WLR 1249) a petrol supply company (Texaco) had granted leases of petrol stations. The tenants covenanted to sell ‘such brands and grades of motor fuel as shall be marketed by the landlord from time to time’. The tenants also covenanted not to sell motor fuel supplied by any other fuel supplier. Texaco sold its reversionary interest in the properties to Save (another petrol supply company). Could Save enforce these covenants? Judge Paul Baker held that the covenants did touch and concern the land. They affected the mode of use of the property and, on the facts of the case, they were not expressed or intended to be purely personal covenants. Thus, the benefit of the covenants passed to Save under the English equivalent of CPO, s. 31 (s. 141 of the Law of Property Act 1925).

White v Bijou Mansions: CPO s.26

November 19, 2010

White v Bijou Mansions Ltd ([1938] Ch 351) CA (Eng) concerned an estate in London that was to be developed as houses. Fellows (White’s predecessor in title) bought number 16 Palace Court. Nicholson bought number 18 Palace Court. Nicholson’s successor-in-title granted a 28 year lease of 18 Palace Court. Bijou Mansions took an assignment of this lease. The sale of number 18 to Nicholson had included a restrictive covenant only to use the property as a private residence. Bijou Mansions planned to convert it into a series of ‘flatlets’. White sought to enforce the restrictive covenant. Did White have the benefit of it? The primary argument was that the Shaftesbury House Estate was subject to a building scheme and that this scheme gave White the benefit of the covenant. The English Court of Appeal found that there was no evidence of a building scheme in this case. Could the English equivalent of CPO s.26 (s. 56 of the Law of Property Act 1925) give White the benefit of the covenant? It did not because the Court of Appeal found that  the covenant had not been made with the owner of 16 Palace Court. It is not enough to say that the benefit of the covenant would be useful to you. It must be possible to show that White is a person who falls within ‘the scope and benefit’ of the covenant according to the true construction of the document in question’ (per Sir Wilfred Greene MR at 365).

Austerberry confirmed

November 16, 2010

In Rhone v Stephens ([1994] 2 AC 310, HL) a house owner had covenanted with a neighbour who lived in the cottage next door to keep his own roof in repair. The roof fell into disrepair and the owner of the cottage sought to enforce the covenant. Ownership of the house and the cottage had changed hands since the covenant had been entered into. So the question was whether the burden of this positive covenant ran with the land and affected a successor-in-title of the original covenantor. The House of Lords followed the Austerberry decision and held that the burden of a positive covenant does not run with the land.

‘As between persons interested in land other than as landlord and tenant, the benefit of a covenant may run with the land at law but not the burden’. (per Lord Templeman at 317).

The position is the same in equity:

‘[E]quity supplements but does not contradict the common law … Equity does not contradict the common law by enforcing a restrictive covenant against a successor in title of the covenantor but prevents a successor from enforcing a right which he never acquired.’ (at 317)

‘Equity cannot compel an owner to comply with a positive covenant entered into by his successors in title without flatly contradicting the common law rule that a person cannot be made liable upon a contract unless he was a party to it. Enforcement of a positive covenant lies in contract; a positive covenant compels an owner to exercise his rights. Enforcement of a negative covenant lies in property; a negative covenant deprives the owner of a right over property.’ (at 318)

‘[Y]our Lordships were invited to overrule the decision of the Court of Appeal in the Austerberry case. To do so would destroy the distinction between law and equity.’ (at 321)