Land Covenants

1
Land Covenants
2
Covenants an introduction

• As with most agreements concerning property, a
  covenant is an agreement or an undertaking under
  seal
• That is, the obligation is set out in a clause of
  a deed which is signed in the presence of a third
  party
• Two types of covenant
• A positive covenant requires a person to do some
  action specified in the covenant
• A negative or restrictive covenant requires a
  person not to do some action specified in the
  covenant. A land covenant is a restrictive
  covenant the subject of which touches and
  concerns land

3
Transfer of Land Act

• Section 88(1) of the Transfer of Land Act
  provides that the burden of a restrictive
  covenant may be recorded on the Certificate of
  Title which is subject to the restriction
• The Registrar shall have power and shall be
  deemed always to have had power to on the folio
  of the Register for land subject to the burden of
  a restrictive covenant make a recording of such
  covenant and of any instrument purporting to
  create or affect the operation of such covenant,
  and when such covenant is released varied or
  modified by agreement of all interested parties
  or by order of a competent court to delete or
  amend that recording.
• Note that recording an interest is not the same
  as registering it, and this seems to be confirmed
  by s 88(3), which provides
• Apart from the operation of Part III a recording
  in the Register of any such restrictive covenant
  charge easement or right shall not give it any
  greater operation than it has under the
  instrument or Act creating it.

4
What is the difference?

• If a covenant is not recorded on the certificate
  of title then a person acquiring the land,
  certainly if they have no other notice of the
  covenant, takes free of it
• But it is not as simple as the legislation
  provides
• Even if a covenant is registered, it is necessary
  to evaluate the validity of a covenant according
  to the complicated rules of common law and equity

5
To illustrate by example

• Andrew owns land on which a gigantic tree
  stands. One day he is about to chop it down.
  His neighbour, Bianca, runs into his yard
  imploring him to stop. Andrew explains that he
  loves the tree but needs firewood. So Bianca
  pays Andrew half the value of the firewood in the
  tree and they enter a land covenant which
  purports to bind anyone who acquires Andrews
  land to preserve the tree for the benefit of
  Biancas land. The covenant is recorded on the
  certificate of title. Beatrice sells her land to
  Christopher and Andrew sells his land to Dolores.

6
Questions raised in this example

• At common law it is clear that the original
  agreement and the covenants are legally
  enforceable between the original parties to a
  deed (here Bianca and Andrew)
• However, when the subject of the covenant
  (preservation of the tree) concerns land, is the
  covenant also enforceable against a person who
  acquires the land from the person who entered the
  original covenant (Dolores)?
• The further question arises of whether a person
  acquiring the benefited land (Christopher) also
  acquires the benefit of covenants
• Put simply, does the covenant run with the land?

7
Making the Burden Run with the Land

• At common law, the burden of a covenant does not
  run with the land
• There are conveyancing devices to overcome this,
  such as requiring the parties to the covenant to
  make fresh covenants every time the land is
  transferred

8
Making the Burden Run with the Land

• In Equity, the burden of the covenant can run
  with the land if the following conditions are
  met
• the covenant must be for the benefit of the
  dominant land
• it must be a restrictive that is, a negative
  covenant
• the covenantee must hold the benefited land at
  the time the covenant is created
• there must have been intention to bind successors
  in title
• a purchaser of the land must have notice of the
  burden of the covenant when acquiring the land -
  with respect to registered title, that means
  recording the burden on the certificate of title,
  and
• the covenant must touch and concern the land by
  directly affecting the enjoyment, quality or
  nature of the land

9
Making the Benefit Run with the Land

• There are three arguments for the benefit of a
  covenant to run with the land.
• Statutory Annexation Section 78 of the Property
  Law Act provides that the benefit of a covenant
  is deemed to have passed with conveyance of the
  dominant land to the successor in title (there is
  some dispute about the meaning of this section)

10
Making the Benefit Run with the Land

• Note the benefit of a covenant can be expressly
  assigned to a purchaser of the land
• It can be argued that the benefit of the covenant
  runs with the land at common law. You can argue
  that the benefit has become annexed to the
  dominant tenement at common law. The following
  must be met
• the benefit must have been annexed in the sense
  of becoming a feature of the land, perhaps by
  enhancing its value - it must "touch and concern"
  the land
• it must have been intended that the benefit would
  run with the land
• the dominant land must be identified in the
  document creating the covenant, and
• the covenantee must have a legal estate in the
  dominant land and the successor in title must
  obtain the same interest. An equitable interest
  in the land is not sufficient

11
Making the Benefit Run with the Land

• It can be argued that the benefit runs with the
  land at Equity Equity permits annexation of the
  benefit of the covenant to the dominant land so
  that express assignment is not necessary, when
• the covenant must "touch and concern" the land,
  perhaps by preserving its character or amenity,
• there must have been intention to annex the
  benefit of the covenant to the land, and
• it must be possible to identify the dominant land
• In Equity it is also possible to make an express
  assignment of the benefit of a covenant at the
  same time as one transfers the land itself to a
  purchaser

12
Doctrine of Building Schemes

• When subdivision of land became popular the
  Courts of Equity also adopted a doctrine called
  the Doctrine of Building Schemes to deal with
  this
• Under this doctrine any land owner within a
  subdivision could enforce the subdivision's
  covenants concerning land use against any other
  land owner in the subdivision
• Five elements are referred to for guidance
• the land owners had to be able to trace their
  titles back to a common vendor
• a common plan of development must have been laid
  out for the subdivision
• the plan must have been intended to benefit all
  subdivided lots
• purchasers must have bought their lots on the
  basis that the development plan was for their
  benefit
• it must be possible to identify the land

13
Subdivision Act

• A far simpler method of creating a land covenant
  is provided by the Subdivision Act 1988
• Under this method a planning scheme featuring the
  land covenant is submitted for approval by the
  local council
• When approved it becomes part of the local
  planning scheme and binds successors in title
• While this simplification seems very desirable,
  there have been criticisms of it from the view of
  land owners, as opposed to public administrators
  (lack of flexibility in individual circumstances)

14
Discharging a Covenant

• A land covenant can be discharged by agreement of
  the parties to it
• Also, the benefit of the land covenant might
  lapse through acquiescence to activities in
  breach of it
• The covenant might also discharge if title to the
  dominant land and the servient land is ever
  acquired by the same person (like easements)
• Section 84 of the Property Law Act empowers the
  Supreme Court to discharge or modify a
  restriction if has become obsolete through change
  in the character of the properties or the
  neighbourhood

15
Discharge Planning Schemes

• The planning system also provides for the
  discharge of private land covenants You can
• seek amendment of the Planning Scheme affecting
  the land, or
• apply for a planning permit
• Generally this will involve the Planning
  Department of the local municipal council
• Of course, one would have to support these
  initiatives with material showing why the
  covenant should be discharged
• The statutory scheme establishing these
  procedures is complicated, relying partly on the
  Planning and Environment Act 1987 and partly on
  the Subdivision Act 1988 (provisions are set out
  in your notes)

16
Profit à Prendre
17
What is a profit à prendre?

• A profit à prendre is a property interest known
  as a usufruct
• A profit à prendre is a right to take part of the
  soil or part of the produce of the soil from the
  land of another
• examples of profits à prendre
• a right to take gravel from a gravel pit
• a right to depasture cattle on the servient land
• a right to harvest fruit from an orchard

18
Rules governing profits à prendre

• The rules governing profits are basically the
  same as those governing easements except in two
  important respects
• although a profit is often appurtenant to
  dominant land this is not essential. The law
  recognises profits in gross as valid property
  rights
• as property rights, the benefits and burdens of
  easements and profits would usually pass to the
  successors in title. Profits need to be
  registered a purchaser who becomes registered
  as proprietor will not be subject to an
  unregistered profit that existed prior to
  obtaining registration of the transfer of the fee
  simple estate
• In contrast, section 42(2)(d) preserves an
  easement as a paramount interest, but there is no
  equivalent provision in relation to profits.

19
Profit à Prendre vs licence

• A profit is likely to resemble a mere contractual
  licence (see discussion on licences in previous
  lectures)
• Eg, a grazing licence confers no proprietary
  interest in the land
• This resembles an informal profit
• But it is a mere contractual licence (difficult
  to distinguish)
• Important distinguishing factor between profit
  and licence A profit is a full legal proprietary
  interest in land a profit à prendre can be
  mortgaged
• A profit à prendre can be dealt with
  independently of the fee simple estate

20
Mortgages
21
Two types of Mortgage in Vic

• Generally, a mortgage is an arrangement designed
  to give a lender the highest degree of certainty
  of being repaid money due on the debt by
  providing security over land owned by the
  borrower
• In the Victorian legal system there are two legal
  conceptions of a mortgage
• General Law Mortgage
• Mortgage over General Law land
• It remains the model common law conception of a
  mortgage
• Most legal principles concerning mortgages have
  been developed from it
• As always, these principles often fit uneasily
  with the structure of the Torrens mortgage over
  land
• Torrens mortgage
• Considerably simpler than the general law
  mortgage
• This is the most common mortgage of land in
  Victoria

22
The General Law Mortgage

• A general law mortgage takes is a legal
  conveyance by the land owner/borrower to the
  mortgagee/lender
• Importantly, the borrower is then no longer the
  owner of the fee simple estate
• Rather, the borrower is a mortgagor who is
  entitled to have the fee simple reconveyed when
  all money has been repaid
• The mortgagor retains an interest in the land
  (known as an equity to redeem the legal estate)
  until the date on which payment is due
• After that date, if repayment has not been made,
  the mortgagor's interest is known as an equity of
  redemption
• Although the due date has passed the mortgagor
  can still pay what is due and require a
  reconveyance, until the mortgagee has validly
  obtained possession and exercised its power of
  sale
• It should be noted that it is possible to make a
  general law mortgage of any estate or interest in
  land

23
The General Law Mortgage

• The general law deed of conveyance usually
  includes the following
• a covenant by the mortgagor to pay the principal
  sum lent and interest on a fixed date, usually
  six months after the date of the mortgage
• a proviso under which the mortgagee covenants to
  reconvey the fee simple estate to the mortgagor
  if the mortgagor pays the money due under the
  terms of the mortgagor's covenants, and
• a clause under which the mortgagee, as legal
  proprietor of the fee simple estate, permits the
  mortgagor to retain possession of the land in a
  relationship of landlord and tenant (an
  "attornment clause")

24
Equitable Protection for the Mortgagor

• So, the mortgagor under this system requires some
  protection in equity
• Under the general law mortgage, mortgagor only
  has a right to a reconveyance if repayment is
  made by the due date (the Common Law position)
• Courts of Equity however recognised that the
  mortgage was intended to operate as security for
  the repayment and for this reason the mortgagor
  has an equity of redemption enforceable in
  equity after the due date
• The following rules in Equity have been
  developed
• A provision increasing the rate of interest in
  the event of late payment was void
• There must be a genuine right to redeem the land

25
Mortgages under the Transfer of Land Act

• A mortgage under the Transfer of Land Act is
  created by registration of an instrument (in a
  prescribed form) by the Act
• It operates as a security (not transfer of fee
  simple estate) s 74(2)
• So, the mortgagor remains the legal owner of the
  land
• But the mortgagee has certain powers, such as
• the power to enter and inspect s 75(c)
• a power of sale upon default s 77
• Much simpler your notes will reveal how complex
  the general law system is, but we are not going
  to get into it today

26
Remedies Available to the Mortgagee

• If the lender does not have the same extent of
  ownership of a property, what remedies are
  available under a Torrens mortgage?
• A mortgagee under a Torrens mortgage has the
  following powers in relation to a mortgagor in
  default
• The mortgagor must pay principal and interest,
  keep the premises in repair, keep them insured
  and permit the mortgagee to inspect
• to sell and transfer a good title to the
  purchaser once certain conditions are satisfied
  ss 76 and 77.
• to be able to enter into possession upon default
  in payment of principal or interest s 78.
• to foreclose s 79
• The power to appoint a receiver s 101(c) and s109
  (Property Law Act)
• The express powers of leasing conferred on a
  mortgagor or a mortgagee in possession of general
  law land under a general law mortgage by s 99 of
  the Property Law Act are not conferred in
  relation to land under the Transfer of Land Act

27
Popularity of Mortgages

• Popular with lenders The law provides so many
  mechanisms to ensure that a lender's interests in
  recovering interest and capital are protected the
  arrangement is popular with lenders.
• Popular with borrowers A mortgagor under a
  Torrens mortgage who honours mortgage obligations
  enjoys continued occupation of the property and
  remains registered proprietor of the legal estate
  
• Popular with both lenders and borrowers The law
  permits the arrangement to be fine-tuned to suit
  the precise interests of the parties, and in
  unique or extraordinary transactions this is done

28
Adverse Possession
29
Introduction

• Adverse possession is the idea that if one
  obtains possession of land and holds it for long
  enough one might eventually become the owner of
  it
• It is less well known that even before the time
  arrives to obtain full title, or tolls, the
  adverse possessor enjoys a strong position in
  relation to all other people, apart from the true
  owner of the land entitled to it by paper title
• The mere act of possession gives this strong
  position to exclude all others
• An interesting concept

30
How adverse possession begins

• With respect to general law land, except against
  the true owner by virtue of paper title, the
  general law simply regarded a person in
  possession of land as the owner of the fee simple
  estate
• A person in adverse possession therefore starts
  to acquire the title against even the true owner
  from the time when their possession
• Until the time arrives when a right equivalent to
  full ownership is obtained (15y) the adverse
  possessor has an inchoate title - that is, one
  which is growing
• When adverse possessors themselves suffer adverse
  possession by a newcomer, this inchoate title is
  generally strong enough to obtain a court order
  to recover the land from the newcomer.

31
Surprising set of Rules

• Surprisingly, the law also regards a person in
  possession as holding very strong status
• Section 42(2)(b) makes the rights of an adverse
  possessor a paramount interest (like easements
  etc)
• Further, a person acquiring a new registered
  estate or interest in the land acquires it
  subject to the adverse possessor's rights,
  whether the acquirer knew about them or not.
• If the period has not already expired the new
  acquirer can expel the adverse possessor
• If the adverse possessor is not expelled, s
  42(2)(b) has the effect that periods of time
  accumulated against an earlier owner of the land
  are still good, and can be added to new periods,
  against the acquirer.
• If the period had already expired when the new
  acquirer came along, s 42(2)(b) has the effect
  that the new acquirer has bought only a faint
  hope that the adverse possessor will move off of
  his or her own accord, without selling the title
  obtained by possession.

32
An Example

• Most people think adverse possession happens out
  in the bush where the true owner would not often
  go
• In fact, most adverse possession occurs on
  boundaries when fences or building walls and
  foundations encroach on to the neighbour's land
• This is why it is of particular relevance to
  surveyors

33
S272 Property Law Act

• A limitation in the circumstances of boundary
  encroachment is section 272 of the Property Law
  Act
• From and after the first day of August One
  thousand eight hundred and ninety the dimensions
  of the boundaries of any parcel of land as stated
  in any document of title now made or hereafter to
  be made relating to such land, or as represented
  on any plan drawn on or referred to in any such
  document of title shall unless such construction
  is expressly negatived or modified by such
  document of title or contract be construed as
  though the phrase "a little more or less"
  immediately followed and referred to the
  dimensions so stated or represented and such
  phrase shall in all cases whether so implied or
  expressed be deemed to cover any difference
  between the actual dimensions of such boundaries
  as found by admeasurement on the ground, when
  such difference does not exceed the following
  limits, that is to say, a limit of 50 millimetres
  for any one boundary line irrespective of its
  length where the length does not exceed 40.30
  metres, but where it exceeds 40.30 metres a limit
  equivalent to one in five hundred computed upon
  the total length of such boundary line. No action
  shall be brought by reason or in respect of such
  difference (whether of excess or deficit) where
  it does not exceed the aforesaid limits and in
  any case where such difference does exceed such
  limits an action for damages or compensation in
  respect thereof shall lie in respect of such
  excess only.

34
Basis of Adverse Possession

• Limitation of Actions Act 1958
• The basis of the law of adverse possession is
  trespass
• Section 8 of the Limitation of Actions Act 1958
  provides that -
• No action shall be brought by any person to
  recover any land after the expiration of 15 years
  from the date on which the right of action
  accrued to him or, if it first accrued to some
  person through whom he claims, to that person
• Provided that if the right of action first
  accrued to the Crown the action may be brought at
  any time before the expiration of fifteen years
  from the date on which the right of action
  accrued to some person other than the Crown.

35
Adverse Possession - Trespass

• A title acquired by adverse possession is
  essentially a title acquired by trespass
• When even the true owner can no longer take legal
  action to recover the land the trespasser's title
  is good against all the world
• At general law the trespasser has obtained legal
  title and the former owner's title has been
  extinguished
• An act of trespass cannot occur by someone simply
  wandering onto land by mistake and wandering off
  again. Rather than being a mere physical
  penetration of the boundaries
• At law trespass is a deliberate act by which the
  trespasser assumes rights in relation to the land
  generally incident to ownership.
• The positive intention to do this is called
  animus possidendi

36
Exceptions etc

• If the act is done with the permission of the
  owner it is not trespass
• Some interesting cases have arisen where the
  owner has been content to leave the land waste
  and totally unproductive in anticipation of some
  development (eg a highway being built, or the
  outskirts of the city expanding)
• It has been argued in these cases that the
  trespass against the owner does not commence
  until the owner would wish to use the land
• This argument has been contemplated seriously in
  English cases but not in Victoria.

37
When does time start to run?

• Time does not start until someone takes
  possession adversely, and time will cease to run
  if the land ceases to be held in adverse
  possession before the owner's right to commence
  court action is barred
• Section 14(3) and (4) provide two instances where
  adverse possession is deemed to exist
• wrongful receipt of rent under a lease, and
• possession or receipt of more than the due share
  of land, or receipts from the land, by a coowner.

38
Special Circumstances

• Crown Land The Crown is never barred, and time
  only starts to run in favour of the adverse
  possessor when the land is included in a Crown
  Grant
• Future interests time starts to run when the
  future interest becomes an interest in
  possession. Eg, an interest taking effect after
  a life estate, time starts to run when the life
  tenant dies. This provision has no effect if the
  land is already in adverse possession when the
  future interest is created
• Forfeiture and breach of condition Time runs
  from the time of the forfeiture or breach. But
  the right to recover for forfeiture or breach by
  virtue of the future interest will not be
  affected.

39
Tenancies

• Tenancies Tenancy at will Time will start to run
  when the tenancy is determined, and it will be
  deemed to be determined one year after its
  creation if it is not determined earlier
• Periodic tenancies Time runs from the end of the
  first period of the tenancy, but if rent is
  subsequently received it will run from the date
  of the last receipt
• Leases in writing at a rent above 2 per year
  Possession by a tenant under a lease for a term
  absolute is never adverse to the landlord. But
  time will run against the landlord and in favour
  of another person who claims to be entitled to
  the land subject to the lease if rent is paid to
  that person and not to the landlord

40
Extension of the Limitation Period

• Disability
• Acknowledgement
• Concealed Fraud

41
Disability

• The definition of disability is in s 3(2) and (3)
  of the Limitation of Actions act and includes a
  person
• who is under age, or
• who is subject to a guardianship arrangement for
  intellectual disability
• s 23(1) provides for the case where the owner was
  under a disability when the right of action first
  accrued
• The period may be extended for 6 years from the
  date when the owner ceases to be under a
  disability
• If the owner was a minor when the right to
  commence legal action to recover the land
  accrued, he or she will not cease to be under a
  disability if he or she becomes subject to a
  different disability, such as unsoundness of
  mind, before reaching full age
• In these cases, the 6 years will only begin to
  run from the date when the true owner recovers
  from the disability or dies

42
Disability

• But there is an overall limit of thirty years on
  the period
• So, for example, if the relevant disabilities
  extend for 28 years from the date of first
  adverse possession the section operates to extend
  the right for only 2 years, not for 6 years
• It was Land Titles Office practice for many years
  not to accept an application for registration
  based on adverse possession until 30 years had
  elapsed unless it could be proved positively that
  the true owner had not suffered a disability

43
Acknowledgement

• What if the adverse possessor acknowledges (in
  writing and signed by the adverse possessor or an
  agent) the title of the true owner?
• A new period of limitation commences
• Such an acknowledgment binds everyone in
  possession during the ensuing period

44
Concealed Fraud

• Where a right of action is concealed by the fraud
  of the defendant or an agent, or some person
  through whom the claim is made, time begins to
  run when the plaintiff discovers the fraud or
  when the plaintiff could with reasonable
  diligence have discovered it
• The legislation also protects an honest purchaser
  against fraudulent concealment

45
Stopping Time Running

• Time will cease to run if the owner succeeds in
  ejecting the adverse possessor
• A new period of limitation will start to run from
  the time when the adverse possessor resumes
  possession
• Note that time does not cease to run when the
  owner merely makes a formal entry on the land or
  when he or she merely makes a verbal or written
  claim to ownership
• When a writ to recover the land is issued time
  has ceased to run as at the date of issue of the
  writ

46
Equitable Estates

• No period of limitation applies to an action by a
  beneficiary under a trust to recover from the
  trustee trust property, or the proceeds of trust
  property
• In general, the owner of an equitable estate is
  subject to the same rules as if his or her estate
  were a legal estate

47
Effect of Adverse Possession on Title

• With some exceptions, the rule is that when any
  person's right of action is barred then his or
  her title to the land is extinguished
• When the maximum period applicable has expired
  the Land Titles Office will register the adverse
  possessor as the proprietor of the estate
  acquired
• The important exceptions are
• the estate of a tenant for life, or of statutory
  owner under the Settled Land Act, is preserved so
  long as any person entitled to a beneficial
  interest in the land is not barred
• the estate held by a trustee is preserved until
  every person entitled to a beneficial interest is
  barred