Positive guidance on covenants -- Rhone v Stephens held that, in freehold land, the burden of a positive covenant does not generally run with the land

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Very occasionally, a case is reported which is remarkable for its re-affirmation of some long held rule rather than any startlingly new proposition of law.

The recent decision of the House of Lords in Rhone v Stephens [1994] 2 All ER 65 is just such a one.Lord Templeman (with whom the other four law lords agreed) re-affirmed the rule that, in freehold land, the burden of a positive covenant does not generally 'run' with the land.

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If I buy land from some vendor who gave a covenant -- or whose predecessor gave a covenant -- to do something on the land (ie to spend money) then, unless there is some clever device in the conveyance/transfer or unless some statutory exception applies which mitigates the rule, I will not be bound to abide by that covenant.Seasoned property lawyers will find this unsurprising although, until Rhone v Stephens, it had not been tested in a higher court for over a century.

However, what was new here was that his Lordship went on effectively to expunge, from this area of law at least, the so-called 'pure principle' of benefit and burden, once thought to provide a way round the rule.The facts of Rhone v Stephens were fairly straightforward.

In 1960, the freehold owner of Walford House, Combwich, Somerset, sold off part of the property -- which became known as Walford Cottage -- from Walford House.

The conveyance contained the following covenant:'3.

The vendor hereby covenants for himself and his successors in title owner or occupiers for the time being of the property known as Walford House aforesaid to maintain to the reasonable satisfaction of the purchasers and their successors in title such part of the roof of Walford House aforesaid as lies above the property conveyed in wind and water tight condition.'By cl 2, certain rights of eavesdrop and support were reserved to the vendor.

Since 1960, both properties had been sold again more than once.

Mr and Mrs Rhone, the plaintiff appellants, were the present owners of Walford Cottage.

The respondent defendant, Mrs Stephens, was the executrix of the late owner of Walford House.

By 1984, 'severe leaks' had developed in the roof and Mr and Mrs Rhone asserted that Mrs Stephens was under a duty to repair it.On each sale, the benefit of the covenant seems to have been validly expressly assigned -- had it not been, Rhone v Stephens might have been the scene of the reopening of the debate surrounding the once notorious Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 All ER 371.Although one of the issues was whether the Rhones or Mrs Stephens owned the roof, which might have given the Rhones a remedy in nuisance or negligence, the main one was whether the burden of this positive covenant had run.

Applying the traditional reasoning, as the Court of Appeal had done (see (1994) 67 P & CR 9), both the common law position and the equitable one must be considered.At common law, irrespective of whether a covenant is positive or restrictive, the burden does not generally run in freehold land (see Austerberry v Oldham Corporation (1885) 29 Ch 750).

(In Rhone v Stephens, the only relevant exception to the rule, the so-called 'pure principle of benefit and burden', was held not to apply by both the Court of Appeal and the House of Lords, which disapproved it.)Then the equitable rule should be considered -- the so-called 'doctrine of Tulk v Moxhay' ((1848) 2 Ph 774).

This applies only to make the burden of a restrictive covenant run and that, it seems, is the end of the story (see Haywood v Brunswick Permanent Benefit Building Society (1881) 8 QBD 403 and London and South Western Rly Co v Gomm (1881) 20 Ch 562).Well -- not quite, was the argument of counsel for Mr and Mrs Rhone.

Against a background of general dissatisfaction with the confinement of the doctrine of Tulk v Moxhay to restrictive covenants (see, eg, the Law Commission 'Report on positive and restrictive covenants' 1984 (Law Com 127)), counsel was able to point to two early cases (Morland v Cook (1868) LR 6 Eq 252 and Cooke v Chilcott (1876) 3 Ch 694) in which positive covenants had been enforced against successors in title of original covenantors.

Not only that, the reasoning of Lord Cottenham's famous judgment in Tulk v Moxhay looks as though it could be applied to positive and restrictive covenants equally.Lord Templeman rejected this argument by saying that the doctrine of Tulk v Moxhay is not simply a rule of notice.

Its effect is to attach the burden of the restrictive covenant as an equitable charge to the land (subject, post 1925, principally to registration).

In Tulk v Moxhay, the purchaser bought not Leicester Square but Leicester Square minus the right to build on it.

This was, said his Lordship, fundamentally different from the flat contradiction of the common law which would be involved in enforcing positive covenants against purchasers from the original covenantor.

His Lordship also rejected two arguments, one based on the so-called 'pure principle of benefit and burden' and the other on s.79 of the Law of Property Act 1925.But what other conclusion was possible? The covenant had been entered into in 1960.

To have ruled that the burden of this 1960 covenant and that of all entered into after 17 March 1994 should be capable of running with the land, on the same/similar terms as restrictive covenants, would have been an unparalleled example of judicial lawmaking.

Further, to rule that the limitation on Tulk v Moxhay was always misconceived and that the burden of positive covenants could have run since 1881 would have produced chaos.This is the rule in Rhone v Stephens and there is no completely satisfactory method of mitigating it.

The best, possibly, involves cranking up the bizarre engine of the estate rentcharge.

The others are either exceptions to the rule specifically provided for by statute or better than nothing at all.

Two arguments against the rule are scotched by Rhone v Stephens itself.

The first involved s.79 of the Law of Property Act 1925.

This was not so much a method of avoidance to be adopted by a conveyancer in advance as an argument for enforceability when all else failed.

It was simply that, since s.79 says that (subject to contrary intention) a covenantor is deemed to covenant on behalf of himself and his successors in title, etc, then the burden of all covenants, positive and restrictive, has been automatically annexed to the relevant land since 1 January 1926.No, says Lord Templeman, in effect.

Although s.78 seems to have that effect in relation to the benefit (see Federated Homes), s.79, the wording of which is different, is quite a different matter (see Sefton v Tophams Ltd [1967] AC 50).The other idea scotched in Rhone v Stephens was the so-called pure principle of benefit and burden which used to say that, although there is a general rule that the burden of a positive covenant does not run, there is a still more general principle about the construction of deeds which is that anyone who takes any benefit under a deed must accept any burden imposed by the same deed.

Counsel argued that this applied to the benefit conferred by cl 2.Lord Templeman makes it clear that, at least in this context, there is no such 'pure principle'.

However, there is a 'conditional benefits principle' under which you can make the exercise of a right subject to a condition which must be relevant to the exercise of the right.

This is apparently the true basis of Halsall v Brizell (1957) Ch 169.Obviously, this leaves the individual drafting in reliance on the principle in a very difficult position.

Lord Templeman gives very little general guidance on when the exercise of a right will be relevant to the observance of a condition.

Clearly, however, there are cases, such as Rhone v Stephens, where it does not apply, because the person intended to be subject to the burden is not free to choose whether to take the benefit.Of particular significance to the practitioner in this context was the fact that, in Rhone v Stephens, Lord Templeman was able to construe cl 2 of the 1960 conveyance as a provision independent of cl 3.

When added to the fact that the conditional benefits principle may bring perpetuities problems, the inevitable conclusion is that the practitioner would have to be able to draft with extraordinary skill in order to make even the conditional benefits principle 'stick'.

It may be of use as an ex post facto argument but there are good arguments for saying that, in drafting, the practitioner should look elsewhere.Outside the conditional benefits principle is a miscellaneous collection of techniques which are better than nothing but still not entirely satisfactory.

The first of these is the standard procedure of each purchaser covenanting with his or her vendor to perform the covenant and to keep the vendor indemnified against any liability for its non-performance.

The idea is to create a chain of indemnity but, since no chain is stronger than its weakest link, it will sooner or later become ineffective because of the death, disappearance or insolvency of one or more of the covenantors.Next is the possibility of leasing the land sought to be burdened rath er than selling it.

This is significant because the burden of a covenant which touches and concerns the land runs in a lease irrespective of whether the covenant is positive or negative (see Spencer's case (1583) 5 Co Rep 16a and ss.141 and 142 of the Law of Property Act 1925).The principal objection to this is, of course, the commercial one that a person wanting to buy the freehold would baulk at taking a lease merely so that his or her vendor can address this technical problem.

In at least one (unrelated) case, however, the nature of the burden may be of assistance in sidestepping the Rhone v Stephens rule by enabling the person drafting the conveyance to characterise what would otherwise have been a covenant as an easement.

This is in relation to an obligation to fence, with two cases (Jones v Price [1965] 2 QB 618 and Crow v Wood [1971] 1 QB 77) illustrating that it should be possible, in a rural context at least, to create such an easement of fencing.

The use of the estate rentcharge was mentioned as possibly the most effective method of avoiding the rule.

Estate rentcharges are an exception to the rule that no new rentcharges can be created (see ss.2(3)(c), (4) and (5) of the Rentcharges Act 1977).

What is involved is the reservation of a rentcharge over the land sold and the annexation to it of a right of entry which allows the rentcharge owner (the covenantor/vendor) to enter and make good any breach of covenant, charging the cost to the purchaser in possession.

Theoretically, a right of re-entry could have this effect without a rentcharge but it is important to be aware that this would be subject to the rule against perpetuities (see Shiloh Spinners v Harding [1973] AC 691).What of the statutory exceptions? These only apply in limited situations, the main ones being as follows.

First, if you are acting for a local authority, it may be possible to enforce positive covenants against successors in title of the original covenantor under, eg, ss.71-72 and 106 of the Town and Country Planning Act 1990, s.35 of the Highways Act 1980 and s.33 of the Local Government (Miscellaneous Provisions) Act 1982, as well as the provisions of various private Acts which may be relevant.Secondly, in relation to registered land, you could perhaps make use of s.58 of the Land Registration Act 1925 by imposing a covenant against sale of the relevant land without the consent of the developer.Thirdly, there are at least two cases where, on the enlargement of a long lease into a freehold under statutory provisions, positive covenants may (and it is vital to check the precise effect of the relevant provisions) remain enforceable (see, eg, s.153 of the Law of Property Act 1925 and s.8(3) of the Leasehold Reform Act 1967).

Mention should also be made of the Access to Neighbouring Land Act 1992, an order made under which would allow access to do works but which is of limited use because it does not enable the cost to be recovered from the neighbouring (ie 'servient' landowner)

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