Breach of covenant

With the price of land as it is these days one expects that having purchased a piece of the rock you should be able to do anything you want with it.

Much to the shock and amazement of some purchasers is the revelation that the user of the land can be limited by what are known as restrictive covenants which prevent certain acts or omissions in relation to the land they have bought or wish to buy.

Given that land can pass from owner to owner it is essential that the deed conveying the land in some way transmits to any subsequent owners the benefit and or burden of any covenant previously attaching to the land. The covenant must be entered into for the benefit of the land conveyed and not merely for some personal benefit of an owner.

In the case of Smith & Snipes Hall Farm Ltd. v River Douglas Catchment Board [1949] 2 K.B. 500, the court found that in order to conform to this requirement a covenant must affect the land either “as regards mode of occupation, or … it must [affect] the value of the land”.

Such covenants are usually recited in the deed or conveyance to the effect that the purchaser covenants on behalf of himself and any successor in title. The burden of a covenant cannot generally be transferred but the legal fraternity has managed to “get around” this by inserting in each subsequent conveyance of the property further covenants by the subsequent purchasers to indemnify the original covenantor.

What this means is that if the original covenantor is sued for a breach of the covenant committed by a subsequent purchaser then he will be entitled to compensation from the subsequent purchaser to the extent of any judgment obtained against him.

Where the owner of land is in breach of a restrictive covenant any person entitled to the benefit of that covenant may institute an action for an injunction restraining the breach of the covenant. The court in considering such matters applies equitable principles (fairness) and in the case of Tulk v Moxhay (1848) 41 ER 1143 stated that what was relevant was that a party should not be permitted to “use land in a manner inconsistent with the contract entered into by his vendor and with notice of which he purchased”. An individual who purchases without notice of the covenant (bona fide purchaser for value without notice) is not bound.

Even with fairness or conscience being the court’s guide in the administration of these matters there are still some requirements which must be satisfied in order for a covenant to be valid:

1) there must be some interest whether freehold (outright ownership) or leasehold (tenancy);

2) it must be obviously restrictive of the use of the land;

3) it must create a relationship between two separate parcels of land;

4) there must be some benefit to the land retained by the vendor;

4) there must be a clear intention that the covenant be transferable with the land.

All is not lost regardless of what may be agreed or included in the deed or conveyance. Section 196 of the Property Act, Cap. 236 provides that the court may on the application of the Chief Town Planner or “any person interested in the freehold land affected by any restriction … wholly or partially discharge or modify any such restriction”.

Such discharge or modification may be made subject to an order for compensation to any person who suffers loss as a result (for example, a diminution in the market value of the property). For such an order to be given it must be proven to the court that substantial changes in the character of the neighbourhood have occurred which render the restrictive covenant useless and that any person entitled to its benefit will not be injured by its removal.

The court must alternatively be satisfied that the continuation of the restrictive covenant as is would prejudice the “reasonable user of the land for public or private purposes without securing to any person practical benefits”.

There is nothing strange about any of this since even the Constitution recognises that our freedoms remain subject to the rights and freedoms of others and the wellbeing of the society as a whole.

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