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30 May 2013

Wilkinson & Others v Kerdene Limited

Michael Fahy considers the recent case of Wilkinson & Others v Kerdene Limited [2013] EWCA CIV 44 in which the Court gave a reminder that, in certain circumstances, positive covenants continue to bind successors in title.

Background

There is a general rule that positive covenants, for example: to pay a maintenance charge, do not bind successors in title.  Parties often work around this rule by using chains of indemnity or granting a lease rather than selling the freehold title.  On some occasions such devices may not be available or appropriate but it may still be possible to enforce a positive covenant against successors in title by relying on the Benefit and Burden principle established in Halsall v Brizell [1957].  The recent case of Kerdene has reinforced this longstanding principle which was thought by many to have been eroded.

Benefit and Burden Principle

Halsall and the more recent House of Lords case of Rhone v Stephens [1994] set out the principle.  In Halsall the purchasers of plots on a building estate were granted the right to use private roads (the benefit) and each purchaser covenanted to contribute to the cost of maintaining them (the burden).  Although not explicitly linked, the Courts treated the obligation to pay as a condition of using the road.

In Rhone the principle narrowed with the need for a closer link between the covenant to pay and grant of rights emphasised.

I am not prepared to recognise the “pure principle” that any party deriving any benefit from a conveyance must accept any burden in the same conveyance. – Lord Templeman

In other words, simply attaching a right to a condition for payment will not make it enforceable and binding on successors in title.  Critical to making the burden enforceable is the requirement for it to be relevant to the benefit.  Even so, it is not a requirement for the benefit to be expressly related to the corresponding burden and can, as in Halsall, be related by implication.

The Facts

In Kerdene, the Appellants were mostly successors in title to bungalows in a holiday village in Cornwall in which the estate owner had retained common parts, including a leisure complex, the drains and sewers, and the roads and footpaths.  The bungalow owners were granted rights to use the facilities and paid a fixed annual maintenance charge for the cost of maintaining them.

Kerdene began legal proceedings to recover the maintenance charge when many bungalow owners refused to pay it.  The bungalow owners argued that the Benefit and Burden principle did not apply on the grounds that the charge was linked to Kerdene’s repairing obligation rather than their rights to use the facilities, and also that they were not obliged to pay to the extent that they did not use the facilities.

The Court of Appeal found in favour of Kerdene and reinforced the Benefit and Burden principle.  Considerable weight was given to Lord Templeman’s earlier judgment, where he emphasised that a successor in title will only incur a liability to perform a positive covenant if it has some real relation to a right granted in his favour and that right is exercised.

On the facts, the Court concluded that the maintenance charge was intended to allow the bungalow owners to use the facilities and the common parts and they had continued to exercise their right to do so.  In addition, the owners’ argument that they should only pay for facilities to the extent they actually used them was also dismissed.  Payment of a fixed annual amount rather than the actual cost incurred meant that it was not possible to apportion in this case.

Comment

Kerdene demonstrates that the Benefit and Burden principle established in Halsall continues to make positive covenants enforceable against successors in title in certain circumstances.  It also shows that the Court will always consider the facts specific to each and every case when making a ruling.  Buyers and their legal advisors must remain alert to historic conveyances containing ongoing obligations to perform positive covenants and the attendant costs those covenants may bring.