Restrictions on the Register
| Author | Christopher Jessel |
| Pages | 21-34 |
Chapter 3
Restrictions on the Register
3.1 PRELIMINARY
Restrictions on the register are a widely used method of imposing positive covenants. They work by providing that each successive buyer of property subject to the covenant given by the original covenantor will, on becoming owner of the servient land, give a fresh covenant to observe the terms of the original document. Until the new owner has given that covenant the Land Registry will not register the disposition in the buyer’s favour. Despite some technical reservations this method is generally thought to do what is required and is in widespread use but it involves a cumbersome and expensive procedure which makes extra work for conveyancers and for the Land Registry.
In Rhone v Stephens
This method can be used in the Rhone v Stephens neighbour situation of a building divided between different owners but in its most developed form it is part of the terms of sale of a unit on a housing or commercial estate served by private roads and services. In the original sale contract the first buyer (the original transferee) agrees to give a covenant to comply with specific obligations, such as to keep the property in repair or to pay a service charge. If the original transferor is a developer which will itself manage the estate, the covenant may be in the transfer; if not, and the estate will be run by a manager, then the original transferee may be
22 Positive Covenants and Freehold Land
required to enter into a separate deed of covenant with the manager. Sometimes the manager will be joined in the transfer and the covenant will be both with the developer/transferor and with the manager. The contract may also provide for administrative provisions as well as restrictive covenants, such as not obstructing a roadway or not changing the external appearance of a house, again with either the developer/transferor or the manager or both.
The transfer or deed containing the substantive positive covenants will also include two procedural covenants. One is that on any disposition, or a disposition of a certain type, such as a resale to a new buyer (the disponee), the original transferee will require the disponee to enter into a direct deed of covenant with the manager to perform the substantive positive covenants as well as this procedural one (to enter a further deed) if the disponee resells in the future.
The other is a covenant that the original transferee will apply to the Chief Land Registrar to enter on the title to the property a restriction that no disposition shall be registered without some formal step. The simplest form is a certificate by the disponee or a conveyancer that the terms of the transfer to the original transferor (requiring a direct deed of covenant) have been complied with.
A more widely adopted alternative is that consent to the registration of the disponee must be given by some person. That person may be specifically named or identified: in the case of estate covenants as the manager and in the case of a neighbour covenant as the owner of the dominant land. Alternatively the person may be identifiable as the proprietor of some specified title, which for estate covenants will be the common parts, and for a neighbour covenant will be the dominant land. In return the original transfer or deed will include a covenant by the specified person to consent to the registration if the disponee enters into a deed of covenant to perform the positive obligations in the original transfer.
Normally it will not be necessary to have a fresh restriction entered every time the servient land changes hands as the original restriction will remain on the title but sometimes it is removed or it may be spent on the first disposition so a further restriction may be necessary if the new owner makes a further disposition. In that case there may also need to be a covenant to have a new restriction entered.
When the original buyer wishes to transfer the property (or grant a registrable lease if the restriction extends to that) the disponee will give the new covenant (and if necessary apply for the new restriction). Either the disponee’s conveyancer will give a certificate that the terms of the original transfer or deed of covenant have been complied with or the manager or dominant owner will issue a form of consent which the disponee’s conveyancer can produce to the Land Registry in order for the disponee to be registered as proprietor.
Sometimes the new deed of covenant or consent to dispose will include a release of the disposing former proprietor of the servient title. In the absence of such a release each person who has given a covenant would remain potentially liable to perform it, even after selling the land. As what is generally required is a procedure binding owners for the time being, and it may be difficult to trace former owners, the covenantee will normally agree to this. Sometimes the restriction extends beyond a disposal of the freehold to the grant of a new registrable lease so that the lessee has to give a covenant. In that case the covenantee can have rights against both the freeholder of the servient land and the lessee.
3.2 EXPENSE AND DELAY
Quite apart from technical problems with this procedure considered below, the principal criticism is that it can take a long time, be uncertain in operation and incur expense. Although it is possible for the restriction to provide that the certificate is given by the disponee or a conveyancer for the disponee, in practice the covenantee will often wish to police the procedure to ensure that the new covenant has been given and will insist on giving an express consent. In the case of neighbour covenants, the covenantee may be living next door and be accessible but on estates it can be more difficult to get the matter dealt with. Either the seller or the buyer needing consent must approach the covenantee or its agents or lawyers. If the developer is still managing the estate, it may have other priorities than dealing with transfers of properties sold many years before. If the responsibility has been passed to a manager, it may still be owned by the developer and suffer the same problems or, if it is a residents’ controlled company, it may be run by someone living on the estate who may have little time or ability to deal with the formalities.
If the paperwork is handled by professional advisers they should be in a position to respond, assuming they can get the necessary instructions, but they will not wish to do work for free. The original sale documents often provide that the costs of professionals will be met by the buyer and these can be substantial. Quite apart from the deed of covenant itself (usually handled by lawyers), there may be a separate obligation to register the transfer with managing agents, and pay a further fee. Although the Landlord and Tenant Act 1927, s 19 imposes a (somewhat ineffective) requirement in relation to consents for assignment of leaseholds that fees must be reasonable, there is no equivalent for a transfer of a freehold.
The terms of the deed of covenant need to be settled. Often these will be set out in the original documents but there may need to be amendments to reflect the personal situation of the transferee, such as trustees or a foreign company. The...
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