Sugarman v Porter & Ors

Where a restrictive covenant benefits land described as remaining unsold, clear words may displace the statutory annexation ordinarily arising under section 78 of the Law of Property Act 1925. The benefit remains annexed only while the relevant land is unsold. On sale, it passes to the purchaser only by express assignment. Sections 62 and 63 cannot be used to defeat that contrary intention or to pass a benefit which has ceased to be an interest in land. A fencing obligation does not, without more, create an easement or establish general annexation of other covenants. The same construction applies where the covenant gives the original vendor continuing control over approvals and relaxation.

The claimant, the freehold owner of Ruston, sought declarations that neighbouring owners and a tenant could not enforce restrictive and other covenants contained in a 1953 conveyance. The covenants benefited the vendor’s adjoining property and any part remaining unsold, with provision for express assignment. The neighbouring properties had been sold subsequently without express assignments of the covenant benefit. The defendants argued that the benefit had passed under sections 62 or 63 of the Law of Property Act 1925, and that a fencing covenant indicated general annexation. The central issue was whether the wording of the 1953 conveyance displaced statutory annexation and confined enforcement to the vendor’s unsold land or an express assignee.

1. The court followed and applied the reasoning in Crest Nicholson Ltd v McAllister [2004] 1 WLR 2409. Wording benefiting land remaining unsold was capable of expressly annexing the covenants to that land only while it remained unsold. Once the land was sold, the benefit ceased to be annexed unless expressly assigned.

2. The conveyance showed a contrary intention for the purposes of section 78 of the Law of Property Act 1925. The vendor retained exclusive control of the covenants while she owned unsold land, including control over approval of building plans and relaxation of restrictions. The covenant’s wording did not support automatic transmission of the benefit to later purchasers.

3. Section 63 did not assist the defendants. The section operated subject to the terms of the conveyance and could not override its express limitation. At the time of the later sales, the benefit was no longer an interest in land capable of passing under section 63. The court accepted the analysis of section 63 in Harbour Estates Ltd v HSBC Bank plc [2005] Ch 194, while applying the annexation reasoning discussed in Kumar v Dunning [1989] 1 QB 193.

4. The fencing covenant did not create an easement or establish general annexation of the other covenants. Its positive obligation remained a covenant, and the argument that the approval requirement should fall away on a later sale would radically alter the covenant and make its relaxation mechanism ineffective.

5. As all Mrs Hart’s retained land had been sold and no express assignment had been made, the claimant was entitled to the declaration sought.

First-instance decision. No prior appellate decision is stated in the judgment.