• In the case of Federated Homes v Mill Lodge 1980 1 all er 371, The Law of Property Act 1925 s.78 had the effect of annexing the benefit of a covenant to the land it benefits.

Facts of the Case

  • X Co owned a site containing three parcels of land the red, green and the blue.
  • To erect a specific number of dwellings, they obtained planning permission to develop the site.
  • X Co sold the blue land to D Co whilst imposing a restrictive covenant that D Co should not build more than 300 dwellings on it, so as not to reduce the number of dwellings X Co could build under the planning consent on the retained land.
  • The retained land was described as “any adjoining or adjacent property” returned by X Co and included both red and green land.
  • P Co ultimately became owners of both red and green land after several intermediate purchasers.
  • The green land carried an unbroken chain of express assignments of the benefit of the covenant; the red land did not.
  • D Co obtained planning permission to develop the blue land to a higher density than 300 dwellings.
  • P Co sought to restrict them form this.
  • The judge held that the green land claimed benefit of the covenant but that the red land did not.  

Issues in Federated Homes v Mill Lodge 1980 1 all er 371

  • Did the covenant restrict D Co from developing more dwellings?

Held by Court of Appeal

  • Injunction ordered as both lands have the benefit of the covenants.

Brightman LJ

  • Held that since the covenant was for the benefit of the retained land and the land was sufficiently described in the conveyance for the purpose of annexation, the covenant related to, or touched and concerned the land.
  • The Law of Property Act 1925 s.78(1) annexed the benefit of the covenant to every part of the land.
  • “If, as the language of section 78 implies, a covenant relating to land which is restrictive of the user thereof is enforceable at the suit of (1) a successor in title of the covenantee, (2) a person deriving title under the covenantee or under his successors in title, and (3) the owner or occupier of the land intended to be benefited by the covenant, it must, in my view, follow that the covenant runs with the land, because ex hypothesi every successor in title to the land, every derivative proprietor of the land and every other owner and occupier has a right by statute to the covenant. In other words, if the condition precedent of section 78 is satisfied—that is to say, there exists a covenant which touches and concerns the land of the covenantee—that covenant runs with the land for the benefit of his successors in title, persons deriving title under him or them and other owners and occupiers.” Pg 605

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