Covenants - how do they work?

Biggles

When we sold our house, the buyer agreed to a deed of covenant (in connection with the possible future development of the land).

Shortly afterwards, he sold part of the property on. The new buyers asked whether they could be released from all or part of the covenant and I let it be known that this might be possible, as not much of the relevant land was involved.

Nothing has been heard but the sale was completed a few months ago.

I assumed that this meant they will have accepted the original covenant as it stood but my solicitor says that they still need to agree the terms of the covenant before they can register their transfer at the Land Registry.

Is this right? I bought a house subject to a covenant years ago and I didn't have to agree the terms with the person who it was agreed with a hundred years ago (or their successors!). I assumed a covenant was 'inherited' when you bought a house unless you were able to get an agreement to the contrary? Otherwise, every time the house is sold years in the future, I (or my children or my children's children?) will be asked to sign a new agreement?

Richard_Webster

I suspect this is a point about the difference between positive and restrictive covenants.

If a covenant is restrictive in nature, not to do something, or say only to use a property in a certain way (meaning you can't use it in other ways), then it will bind successive owners because it will be shown on the Land Registry entries for the title to the property. A person who has land which has the benefit of the covenants can enforce it - although in practice after many years it is often difficult to know who these people would be.

Positive covenants are to do something such as pay sums of money or maintain a fence or a building. However a positive covenant in relation to a freehold property is only enforceable against the person who originally entered into it. (This is why flats are generally leasehold as special rules apply between a Landlord/lessor and a Tenant/lessee in a lease.)

I am guessing that in OP's case there is a covenant that if development takes place the landowner will pay OP a proportion of the increase in value of the land in question. Obvious way of avoiding paying is to transfer the land to somebody else and they won't then be bound by the covenants. So to stop this, the solicitors put in wording preventing registration of such a transfer taking place unless the buyer has entered into a fresh deed of covenant with the original seller/OP. Sounds as if that is what has happened. OP should get his solicitors to explain it further.

Biggles

Richard_Webster wrote: »

I am guessing that in OP's case there is a covenant that if development takes place the landowner will pay OP a proportion of the increase in value of the land in question. Obvious way of avoiding paying is to transfer the land to somebody else and they won't then be bound by the covenants. So to stop this, the solicitors put in wording preventing registration of such a transfer taking place unless the buyer has entered into a fresh deed of covenant with the original seller/OP. Sounds as if that is what has happened. OP should get his solicitors to explain it further.

Yes, you're right about the nature of the covenant. My solicitors aren't good at explaining.....

So it is feasible for the sale to be completed, but for the LR registration to be waiting on the covenant? That was the bit that seemed odd to me.

Richard_Webster

So it is feasible for the sale to be completed, but for the LR registration to be waiting on the covenant?

Yes, it is feasible. Buyer's solicitors often fail to spot this kind of thing!