Archive for the ‘Restrictive covenants’ Category

Effect of acquisition of land without notice of a restrictive covenant

March 24, 2011

In equity the burden of a restrictive covenant runs with the land and binds successors unless they are bona fide purchasers for value without notice of the restrictive covenant (‘equity’s darling’). Once the estate has come into the hands of equity’s darling, the burden ceases to run even if the land later comes into the hands of someone with notice of the covenant.

In Wilkes v Spooner ([1911] 2 KB 473, CA (Eng)), S1 was tenant of two butchers shops in the same street but with different landlords. In number 137 he carried on business as a pork butcher. In 170, he carried on business as a general butcher. He sold the lease of  170 and the goodwill of the business carried on there to Wilkes. In the sale agreement S1 covenanted not to carry on at 137 lines of business that would compete with the business at 170. S1 surrendered the lease of 137 and the landlord granted a new lease to S2 (S1’s son). S2 carried on the business of a general butcher in breach of his father’s restrictive covenant. The landlord of 137 had no notice of the restrictive covenant. The Court of Appeal held that the restrictive covenant ceased to run with the land once it had come into the hands of the landlord who had no notice of it. The fact that a lease was then granted to S2, who did have notice, did not bring the restrictive covenant back to life.