Covenants are created by words in a grant or devise that stipulate how land can or cannot be used. A covenant looks like a condition subsequent or a determining event. It is important to look to who the grantor is. If the grantor is the Crown, and the words look like a condition subsequent or a determining event, then it is probably not a covenant. If the grantor is a person other than Her Majesty, the words that look like a condition subsequent or determining event may be a covenant.
A covenant is an agreement between two persons concerning how a specified piece of land is to be used. Consider the following grant made by X:
---> Grant To A in fee so long as the land is used as a farm.
Assume that X holds an estate in land adjacent to the land in which A holds an estate. Assume also that “used as a farm” is sufficiently clear that the attempt to create a covenant doesn’t fail. As a result of this grant, A holds an estate in fee simple. So long as A continues to hold the estate in land there is a contractual obligation between X and A. If A were to stop using the land as a farm, X would have an action for breach of contract. In this situation the rules of contract would suffice to settle the situation. The plaintiff, X, would either prove a breach of contract, or not, according to the rules of contract law; no different rules concerning property in land are required.
Subsequent to the grant there are several things that may happen that would make the contractual remedy unavailable. Suppose that A were to transfer the estate in land to B; or that X transfers his estate in land to Y. Could X bring an action against B to enforce the covenant? Could Y bring an action against A? Could Y bring an action against B to enforce the covenant?(1)
The answers to these questions depend on whether the covenant can be proven to run with the land. If the covenant runs with the land, a subsequent holder of a form of property in that land would be bound by the terms of the covenant. Covenants can run with the land at common law or in equity. But, as you are no doubt suspecting at this point, the rules are different. Further, there have been statutory modifications to the rules.
Assume the previous grant. Assume further that A has transferred his estate in land to B. What facts must X prove to establish that the burden of the covenant runs with the land? X must prove that;
i) the covenantor intended that his successors be bound by the covenant;
Look to the language of the written terms of the covenant. Do these words indicate that the covenantee intended that his successors would be bound by the terms of the covenant? Successors would include both heirs and assigns of the covenantee.
ii) covenant must touch and concern the land;
This requirement simply means that the covenant must either affect the mode of occupation of the land or affect the value of the form of property held in the land.
iii) there must be privity of estate between the covenantors.
Privity of estate only exists between lessors and lessees (Landlords and Tenants). Consequently, there is no privity of estate between X and A in the previous example. If X had granted to A a leasehold form of property there would have been privity of estate between X and A.(3) If A had subsequently assigned(4) the leasehold estate to B privity of estate between X and B would be provable.
Assume a situation where X has transferred his estate in land to Y. Can Y enforce the covenant against A? In order to do so Y must prove that the benefit of the covenant runs with the land. C must prove that:
i) the covenant touches and concerns the land, and
ii) the parties(6) intended that the benefit should run with the land.
Nothing new here. You already know what these requirements mean. If they are proved, the benefit runs with the land and Y can enforce the terms of the covenant against A.
Finally, what if X had transferred the estate in land to Y, and A had transferred the estate in land to B? In this case neither person was a party to the covenant. What facts would Y have to prove to enforce the covenant against B? Y must prove that;
i) X would have succeeded.
Y can be in no better a position that would have X. Therefore it follows that Y can only succeed if X would have succeeded against B. Y must prove that the burden runs with the land at common law. In the previous grant X could not prove privity of estate so the claim that the burden runs with the land failed. Y fails for the same reason.
ii) the benefit runs with the land.
Y must also prove that the covenant touches and concerns the land and that the parties intended that the benefit should run with the land. Same game as before.
There are different rules concerning covenants running with the land in equity. To prove that the burden of a covenant runs with the land in equity the plaintiff must prove that;
i) the burden is negative.
A common example of a negative covenant is a covenant not to use land in a particular way. For example, a covenant that land is not to be used as a rendering plant would be an example of a negative covenant. Any covenant that requires a positive action on the part of the covenantee will not run with the land in equity.
ii) the plaintiff holds a form of property in a dominant tenement
The plaintiff must prove that the covenant was given for the benefit of land in which the plaintiff holds a form of property.
iii) the covenant touches and concerns the land.
This means the same as it does at common law.
Assume that X transferred his estate in land to Y. Could Y enforce the covenant against A in equity? The benefit of a covenant will run with the land in equity if the plaintiff proves that.
i) the covenant is negative,
ii) he holds a form of property in land benefited by the covenant,
iii) the dominant land(7) is identifiable in the deed which created the covenant,
iv) the covenant touches and concerns the land.
The burden of a covenant will not run with the land in equity where a bona fide purchaser for value of the property in land at common law had no notice that the plaintiff had a claim in equity.
Conveyancing and Law of Property Act R.S.O 1990, c. C-34
24.(1) A covenant relating to land of inheritance or land held for the life of another shall be deemed to be made with the covenantee's heirs and assigns, and has the effect as if the heirs and assigns were expressed.
(2) A covenant relating to land not of inheritance or land not held for the life of another shall be deemed to be made with covenantee, and the covenantee's executors, administrators and assigns, and has the effect as if executors, administrators and assigns were expressed.
Section 24 (1) and (2) do away with the necessity of proving that the benefit(8) of a covenant runs with the land at common law or in equity. A person attempting to enforce a covenant would only need to prove two elements: first, that the statute applies to the covenant in question; second, that the plaintiff is either an heir or assign of the original covenantee. If these elements are proved the covenant is deemed to be made with that person. The plaintiff may bring an action in contract to enforce the covenant against the original covenantor.
It is important to note that this section does not apply to the burden of a covenant. This could have implications where both the original covenantee and covenantor have transferred their estates in land. Assume that X (covenantee) transfers his estate in land to Y, and A (covenantor) transfers his estate in land to B. Y now wishes to enforce the covenant against B. Assume further that s. 24(1) of the Conveyancing and Law of Property Act applies. This being the case, s. 24(1) deems the covenant as being made with Y, but is silent as to the position of B. This section of the Act only relieves Y of the need to prove that the benefit runs with the land. Y must still prove, either at common law or in equity, that the burden runs with the land to enforce the covenant against B.
As a final note, section 61(1) of the Conveyancing and Law of Property Act may be relevant after coming to a conclusion that a covenant runs with the land.
61(1) Where there is annexed to land a condition or covenant that the land or a specified part of it is not to be used in a particular manner, or any other condition or covenant running with or capable of being legally annexed to land, any such condition may be modified or discharged by order of the Ontario Court (General Division) [now the Ontario Court of Justice (General Division)]
1. The rules of contract would not assist these parties as there is no privity between the parties. X did not make the covenant with B, and C neither made the covenant with A or B.
2. The burden of a covenant is the liability to be sued for breach of the covenant. The burden may either be restrictive [not to use the land in a specific manner] or positive. [must use the land in a specific manner]. This may be a somewhat an ambiguous distinction. Is the present example a restrictive covenant -ie.-do not use this land for anything but farming, or a positive covenant-ie-you must farm this land?
3. Although, keep in mind that privity of estate is not required where privity of contract exists.
4. It is important to note that if B had, subsequent to a grant of a leasehold form of property, granted another a leasehold form of property in that land there would be no privity of estate between X and the subsequent grantee. For example, if A held a 99 year lease, and granted to B a 10 year lease there would be privity of estate between A and B but none between X and A.
5. The benefit of a covenant refers to the ability to enforce the covenant against another.
6. Refers to the original parties to the covenant.
7. Refers to the property in land that benefits from the covenant.
8. The statute only applies to the benefit of a covenant. One must still prove, either at common law or in equity, that the burden of the covenant runs with the land.