Positive covenants

A ‘positive covenant’ is a promise to do something or to spend money. Common examples include a covenant:

• to build and maintain a fence

• to contribute to the maintenance of a shared driveway, or

• to repair a shared roof

Unlike ‘negative’ or ‘restrictive’ covenants, the burden of a positive covenant does not ‘run with the land’ and so the promise cannot be enforced against subsequent owners or occupiers without structuring the transaction as a lease using one of the conveyancing ‘devices’ developed for that purpose.

The Law Commission has echoed the comment of the House of Lords in Rhone v Stephens [1994] 2 All ER 65 that those ‘devices’ are ‘complex and insufficiently comprehensive’. Unless and until the Law Commission’s recommendations result in a change of law, though, it remains necessary to use or to rely on the ‘devices’. Their final report and a draft bill are expected in June 2011.

The 'Conveyancing Devices'

The most commonly used ‘devices’ for making the burden of a positive covenant ‘run’ are:

• chain of covenants - on each sale of the land an indemnity covenant is obtained in favour of the seller. The new covenant is directly enforceable by the seller against its successor and so can be relied on if the person with the benefit of the covenant (the ‘Covenantee’) seeks to enforce against the original maker of the promise. This chain of personal covenants is easily broken. Even where the chain is complete, enforcement is indirect and (notionally at least) involves damages passing down the ‘chain’. More direct and useful remedies, such as specific performance, are not available

• compulsorily renewed covenants - a more effective method is to require the original maker of the promise to obtain on any sale or lease of its property a new covenant in favour of the Covenantee. This approach results in a new covenant directly enforceable by the Covenantee. The obligation to obtain a new covenant is usually protected by entering a restriction on title so that registration will not occur before the Covenantee is satisfied that the new covenant is in place. The principal drawback of this method is that, for larger schemes, it can be an administrative burden to keep track of the covenants, and frequent changes of ownership can produce a formidable paper trail

• estate rentcharge with a right of entry - this method is highly effective but draconian. If the positive covenant is not performed then the rentcharge owner may enter the land, carry out the works and recover the costs from the defaulting land owner or occupier. It is also open to the rentcharge owner to re-enter the land – in a process that is similar to forfeiting a lease. This mechanism is frowned on by lenders as it could result in the loss of valuable security following a relatively minor breach of covenant. For that reason, where estate rentcharges are used it is usually necessary to make express provision for notice to be given to lenders before enforcement steps are taken, and to give the lender the opportunity to remedy the breach, itself taking over the land by way of substituted security

As well as these devices, there are limited circumstances in which accepting the burden of a covenant is regarded as the ‘price’ of receiving the benefit of a right. This applies mainly to the cost of maintaining shared driveways and stems from the ruling in Halsall v Brizell [1957] 1 All ER 371 . However, judicial attempts to use this ruling as the basis for a more general doctrine of ‘benefit and burden’ were firmly rejected by the House of Lords in Rhone v Stephens [1994] 2 All ER 65.