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What Does A ‘ Covenant ’ On The Title Of Land Mean?

The Torrens Title system of land registration, the Registered Proprietor of a parcel of land is the absolute owner of that land. His or her title is indefeasible, and is protected absolutely against claims or other interests which are not registered on the title to that land. The system developed as a means of overcoming the many faults associated with Old System Title, which depended upon a chain of title evidenced by Deeds.

Registration also affords certainty as to the location and dimensions of parcels of land, providing a central repository of approved Plans, from which Certificates of Title in respect of every Lot created on registration of a Plan are generated.

However, often bare ownership of a registered Lot is insufficient to enable all aspects of the intended use of land to be realised, and it becomes necessary for qualifications and restrictions to be created or imposed when a new title is created. These are known as Covenants and Easements and while they have features in common, this article will focus on the modern law relating to Covenants.

Historically, going right back to Biblical times, the word “covenant” meant that a serious promise had been made. It was something of greater solemnity than an agreement or contract, and in old English Law was required to be in writing, and made under the seal of the person making the promise, or creating the covenant, as a Deed.

Covenants may be expressed in the affirmative or the negative, just as a person can promise to do, or not to do, something. The word has come to have special meanings when used in connection with land. The subject matter of a Covenant may vary widely, and may relate to the particular use of land, or create an obligation to do something on the land. Covenants were used in the past to exclude certain social or ethnic groups from particular areas of land, but in modern times such socially unacceptable practices have been outlawed by Governments and the Courts.

A covenant that is tied to the use of the land is said to “run with the land” and applies to successive ownership of the land, as a qualification or restriction on the absolute rights of the owner, until it is released, varied or modified by the parties who share the benefit and the burden of the Covenant and have the power to do so.  A Covenant that creates an obligation to do an act once, such as to build a fence, or is personal to the current owner and does not run with the land. Historically, positive covenants did not run with the land, but Statutory provisions such as sections 88D and 88E of the NSW Conveyancing Act, 1919, have changed the old law in that regard.

For a Covenant to be said to run with the land, it must not be personal and must benefit the land rather than a person. It is said that it must ‘touch and concern’ the land, and it must identify the other land which will enjoy the benefit of the Covenant.

Certain Covenants were implied when parties entered into a transaction at Common Law, and these are now confirmed by Statute. For instance, the Vendor covenants that he or she has a good title, and therefore the right to convey the land and give the Purchaser what he or she expects to receive as a result of the transaction. The implied covenants also include:

–    that there are no encumbrances on the title
–    that the Vendor has done nothing that may encumber the property
–    that the Purchaser shall have quiet enjoyment and possession of the property, and;
–    that the Vendor will execute such further assurances of the land as may be necessary to complete the transaction as agreed

In NSW it is common when new Lots are created by subdivision of an existing Lot to create Restrictive Covenants, or Restrictions as to User, under section 88B of the Conveyancing Act, 1919. These can be affirmative or negative in form, and may cover many and varied topics relating to the use of the land, the provision of services and a water supply, and the appearance and characteristics of any improvements to be erected on the land. They are used to enforce an acceptable standard of building, such as a “brick Covenant”, and may also prohibit actions regarding the land, or impose conditions on development and use of the land, often in conformity with Local Government requirements and Zoning and Planning Laws.

Owners of existing, connected or adjoining, parcels of land may also create Covenants. The law requires that they be in writing, and, if the land is under the NSW Real Property Act 1900, the Covenant must be registered on the titles to their lands to be effective, thus ensuring that they will remain on the titles until they are released, varied or modified.

Public Authorities are able to impose Public Positive Covenants on land, pursuant to section 88F of the NSW Conveyancing Act, 1919, in order to reinforce compliance with requirements by attaching the obligations to the land.

Because of their adverse effect on the title to land, Covenants are interpreted narrowly by the Courts as a general rule. Words are given their ordinary meaning and if there is any ambiguity, lack of clarity of ordinary meaning, or doubt as to the proper interpretation of the Covenant, a Court will favour the interpretation that frees the land of the restriction created by the Covenant.

It is also possible for a Court to order the removal of a Covenant from a title where its original purpose is spent, and its existence represents an unnecessary restriction on the use of the land. There are many titles on the NSW Land Titles Registry which remain affected by Covenants that have run their course, particularly ones that are described as “the usual fencing Covenant”, and Covenants that relate to maintenance of improvements which have long since been abandoned. They remain usually until there is further subdivision of the land, because they are irrelevant, and process of removal is expensive.

The law found in decided cases concerning Covenants affecting land is complex, and there are principles of law and equity which impact on one another, often creating uncertainty as to how a Court may interpret a Covenant in particular circumstances. Therefore, a Purchaser of land is well advised to seek detailed advice regarding the meaning and effect of any Covenant on the title to a Lot he or she is looking to purchase.