Drafting
| Author | Christopher Jessel |
| Pages | 211-226 |
Chapter 17
Drafting
17.1 PRELIMINARY
Most positive covenants are, or are presumed to be, the subject of express agreement at the time they are imposed. In theory the original parties are free to negotiate the terms. This may be possible for neighbour covenants, which will often be designed for particular circumstances, such as dividing up a house or maintaining a feature in a garden.
By contrast estate covenants will be in a pre-determined form. A developer laying out and selling an estate will wish to be sure that all the units are sold, and contribute to costs, on the same terms. There will therefore need to be a set of standard documents, and the only amendments that can be accepted are those personal to a particular buyer, such as a declaration of trust. Buyers will be told they must take the documents as drawn. This may have the consequence that if the structure is too one-sided, the units will not sell. Developers need to be sure that the terms will be commercially acceptable and certain standard provisions are now in widespread use.
All rights and obligations must be clearly defined. In Arnold v Britton
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enforced by such an order, it is essential that the defendant must know exactly what is to be done and that should be defined in the original documents.
The various techniques to secure positive covenants can be combined. Thus a neighbour covenant may include a right of re-entry to do works and recover the cost and also be supported by a restriction on the register. Likewise the transfer of a unit on an estate may grant easements whose exercise is conditional on paying the service charge while also reserving an estate rentcharge supported by a right of re-entry on forfeiture.
Some matters relevant to the original sale, such as the price paid, the date, and the way the property is identified (as a plot number on a new estate before the roads are named) are of ephemeral importance. Others such as easements, covenants and service charge provisions are intended to be permanent. The temporary matters must be in the original transfer. There may be scope to put at least some of the continuing obligations into a separate deed of covenant, particularly where a manager has control over restrictions on the register and is responsible for services. Which method is used is a matter of choice. It may be considered that it is best for all the terms of the sale to be in one document or it may be preferred to keep the details of the original sale, which will cease to be of any interest after a few years, separate from the long-term provisions.
17.2 NEIGHBOUR COVENANTS
Where the obligation is to keep a wall or roof in good repair it may be sufficient for the covenant to say just that. The courts have long experience with repairing covenants in leases and can apply the same principles to freeholds.
If the covenantor is to make a new structure it should be defined. Thus the traditional fencing covenant ‘to erect and thereafter maintain a good and sufficient stockproof fence along the boundary’ is not enough. It should specify a time: ‘within 6 months’ or ‘before commencement of development’. It should make clear what fence is required; there is a difference between a post and rail boundary marker and a 6-foot high close boarded fence for privacy. The materials may be described – wood or stone or brick.
If the positive obligation is likely to involve substantial expense the covenantee may wish to ensure that where the burdened land changes hands the new occupier is credit-worthy. Because of the rule against restraints on alienation of fees simple
the sale will be void. In any case allowing a neighbour to control transfers is unlikely to be acceptable to a buyer or mortgagee. Where major works are to be carried out, such as building a house, the normal solution is to have an initial building agreement which can be assigned only if the original seller is satisfied that, if the land changes hands before completion of the works, the new party can afford to complete them. Once the works are finished there can then be a transfer of the freehold. If there are intended to be long-term obligations to do works, the original owner may prefer to retain the freehold and grant a lease as a virtual freehold. If the property is a house which is potentially enfranchisable, that will not work because on enfranchisement any positive covenants will cease to be enforceable but it can be used for commercial property. Normally the fact that the buyer can afford to pay for the servient land should be sufficient evidence of creditworthiness.
17.3 ESTATE COVENANT SCHEMES
There is now a considerable body of experience both with freehold estates and with leasehold blocks and many published precedents are available. Sometimes, as where half a dozen houses share a private roadway, the terms can be relatively simple but, as there is always scope for disputes, perhaps exacerbated by tensions between neighbours, it is worth including fall-back provisions. Although it is to be hoped that it will not be necessary to invoke them, the fact that they exist in the documents of title will encourage the parties to reach a settlement. The following remarks relate to the more complex structure used on development of a large estate which usually involves professional management but the principles can be applied to a simple one.
The normal scheme for an estate will involve:
ƒ a transfer of title to the unit by the original developer to the original buyer; ƒ easements both benefiting and burdening the unit;
ƒ restrictive covenants by the unit holder;
ƒ positive covenants by the unit holder;
ƒ positive covenants by the developer or manager;
ƒ procedures for the service charge;
ƒ a mechanism to secure positive covenants such as restriction on the register, estate rentcharge and/or a right of re-entry.
17.3.1 Easements and benefit and burden
The developer will grant easements over the common parts such as a right of way over the estate roads and rights to use services. If an easement, such as a drainage
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pipe, serves only the unit being sold there may be an express right to enter the land in which it runs (either another unit or the common parts) to maintain and repair the service media. Although such a right can be implied it is best not to rely on implications of law. There may need to be specific easements, both granted and reserved, as between neighbouring units for services and perhaps support or rights of light; if such units have already been sold the transfer will be together with and subject to existing rights. Care needs to be taken where several units are being sold at the same time that there is no registration gap.
If any common services run through the unit there will be a reservation of the right to the developer to use and maintain them. If the scheme provides for a manager and if some of the service media pass through the unit, and if the manager does not take an immediate legal estate in the common parts, then any right of the manager to use them and to enter to maintain them will be a right in gross and will not subsist as a legal easement as it will not be appurtenant to land. The simplest way to deal with this is for the right to be reserved to the developer and to be exercisable by any person authorised by the developer for the benefit of the common parts and for the developer to authorise the manager to exercise the rights on its behalf. If subsequently the common parts are transferred to the manager the easement will go with them. If that is not wanted then the original unit holder can grant a personal right in gross to the manager and covenant that any successor will grant a similar right, in much the same way as the successor gives a positive covenant. That will need to be in the deed of covenant on change of...
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