Crest Nicholson Residential (South) Ltd v McAllister

Under section 78(1) of the Law of Property Act 1925, the benefit of a restrictive covenant is annexed only to land intended to be benefited. That land must be defined in the instrument so that it is easily ascertainable, although external evidence may identify land which the instrument sufficiently describes.

The covenant must be construed as a whole. Its terms may confine the benefited land to property retained by the original covenantee from time to time. Land later sold without an express assignment then falls outside the statutory annexation. A successor owning land which the instrument does not sufficiently identify as benefited cannot enforce the covenant.

A developer agreed conditionally to purchase former garden and residential land for a housing development. The respondent owned neighbouring land and claimed the benefit of user and building restrictions imposed by six earlier conveyances from the same estate.

Neuberger J, in [2002] EWHC 2776 (Ch), held on the parties’ concession that the respondent had the benefit of the covenants. He decided that the user restriction permitted only one private dwelling house on each conveyed plot and that the building restriction had become spent. The developer appealed on the user restriction, and the respondent cross-appealed on the building restriction.

The Court of Appeal permitted the developer to withdraw its concession on annexation. The decisive issue became whether section 78(1) of the Law of Property Act 1925 had annexed the benefit of the covenants to the land later acquired by the respondent.

1. Appeal allowed; no order on the cross-appeal. The benefit of the covenants in the first six conveyances was not annexed to the respondent’s land. The judge’s order was varied to declare that she could not enforce those covenants as owner of Newlyn. Arden and Auld LJJ agreed with Chadwick LJ.

2. Section 78(1) of the Law of Property Act 1925 effects statutory annexation to the land intended to be benefited. The instrument must define that land so that it is easily ascertainable. External evidence may identify land sufficiently described in the instrument, but cannot supply the absence of any sufficient description or indication of the benefited land.

3. The covenant must be construed as a whole. Section 78(1) does not prevent the parties from confining the land intended to be benefited. The phrase “land of the covenantee intended to be benefited” gives effect to a clearly expressed intention that the benefit should attach only to retained land, or should not pass with land subsequently sold without an express assignment.

4. The express annexation in the Humphreys conveyances and the later Roberts conveyance benefited property belonging to the company, or the part “for the time being remaining unsold”. In context, that meant land remaining unsold from time to time. It excluded land which the company later sold under the Wing conveyance. The respondent’s land therefore had no benefit.

5. The earlier Roberts conveyance did not identify any land intended to be benefited. The Arthur conveyances likewise gave no sufficient indication that the covenants benefited the whole Fee Farm Estate or its unsold parts. Any adjoining company land shown by the later Arthur plan did not extend to the respondent’s land. Section 78(1) accordingly did not assist her.

6. The questions concerning the meaning of the user restriction and whether the building restriction had become spent were academic. Chadwick LJ nevertheless agreed, by way of completeness, with Neuberger J’s conclusions and reasons: the user restriction limited each plot to one private dwelling house or professional purposes, and the building restriction had become spent.

1. Court of Appeal (Civil Division): Allowed the developer’s appeal on annexation, made no order on the cross-appeal, and varied the order below by declaring that the covenants in the first six conveyances were not enforceable by the respondent as owner of Newlyn: [2004] EWCA Civ 410.
2. High Court, Chancery Division: Neuberger J held that the user restriction precluded more than one private dwelling house on each conveyed plot and that the building restriction had become spent: [2002] EWHC 2776 (Ch); [2003] 1 All ER 46.