Positive and Negative Freehold Covenants: Complicated Case History, Current Criticisms, & Suggested Reforms

By Heidi Young

Introduction

The modern Canadian law of positive and negative covenants has had its fair share of criticism and has even been described as an area of law in which “rigid categories, silly distinctions and unreconciled conflicts over basic values have often led to unhappy results for landowners”.¹ A great deal of the confusion and conflict in the law of covenants arises from the nature of case law itself – the fact that case law is built on inductive reasoning and policy decisions by a number of judges across history, which are themselves built upon the persuasive (and sometimes binding) previous decisions of other judges.² It is therefore useful to briefly explore the development of the law of covenants in Canada before proceeding to a discussion of the criticisms levied against it, and possible reforms. In this paper, I will first provide a case history including brief summaries and extracted rules from a number of important English and Canadian cases which inform current Canadian law. Next, I will provide a summary of current Canadian law regarding covenants, as can be extracted from the cases. Finally, I will discuss some popular criticisms and suggested reforms which bear consideration in light of the sometimes vexatious applications of the current law. Please note that this paper will focus on positive and negative covenants on freehold land and will exclude other servitudes, including easements and profits. I will also avoid any discussion at length of leasehold covenants, in recognition of the limited scope of this paper.

Case History: Positive and Negative Covenants

Keppell v Bailey (1834)

This is considered the leading case on the rule that “the burden of a covenant cannot pass on a conveyance of freehold land at law”.³ The case concerns a covenant by proprietors of certain “iron furnaces” to procure all the limestone they needed from Trevil Quarry and transport it along a specific railroad, paying a prescribed fee.⁴ The plaintiffs sought to enforce the covenant against the assignee of the original covenantors. Lord Brougham held that the covenant was not enforceable on the assignees because the burden of a covenant could not run with the land at law.⁵ There was no privity of contract between the parties, so the agreement could not be enforced through contract law, and since this was a freehold covenant and not leasehold there was “no reversionary interest now in the covenantees to which the right claimed against the assignees of the covenantors may be annexed”.⁶

Lord Brougham explained: “[I]t must not … be supposed that incidents of a novel kind can be devised and attached to property at the fancy or caprice of any owner. … [G]reat detriment would arise and much confusion of rights if parties were allowed to invent new modes of holding and enjoying real property, and to impress upon their lands and tenements a peculiar character, which should follow them into all hands, however remote … and it would hardly be possible to know what right the acquisition of any parcel conferred, or what obligations it imposed.”⁷ This was supposedly in contrast to the right of way applying to the same land in the same case, which was “of a public as well as of a simple nature”, and visibly obvious to anyone who viewed the property – and so could run with the land without causing the types of mischief he had identified in relation to covenants.⁸ Lord Brougham also distinguished this case from cases involving leasehold covenants, which could run with the land without issue while the lease term lasted.⁹

Tulk v Moxhay (1848)

This “landmark decision” is conventionally taken as the starting point for the law of covenants in relation to freehold land, and stands for the principle that certain freehold covenants are enforceable against assignees of the covenantor in equity.¹⁰ The claimant sold one of several properties, extracting a covenant from the purchaser that the purchaser, his heirs, executors and assigns would maintain the garden uncovered by any buildings and allow the residents of the other properties to use it.¹¹ A successor in title to the garden proposed to develop it. The original covenantee, still holding several adjacent properties, brought proceedings for an injunction. The successor in title was aware of the covenant at the time of purchase, but argued that it was unenforceable against him because there was no privity of contract between him and the covenantee.¹² Lord Cottenham granted the injunction, stressing that the covenant which was intended to run with the land could be enforced against a successor in title to the land with constructive or actual knowledge of the covenant.¹³ It is from Lord Cottenham’s statements in this case that the two theories of enforcement of covenants – enforcement in contract and enforcement in equity – developed in the case law.¹⁴

Note that this case did not require a dominant tenement benefitting from the covenant, as subsequent cases would. Also note that the covenant which in this case was held to run with the land in equity may seem positive in form, requiring maintenance of the garden uncovered by buildings, but it is negative in substance because it restricts development of the land.¹⁵ Of course, the positive/negative distinction was not addressed in this case. Finally, the relevance of the actual or constructive notice requirement is diminished under current Ontario law because of modern legislation rendering covenants a registrable interest.¹⁶

Austerberry v Corporation of Oldham (1885)

This case is related to the rule in Keppell that the burden of a freehold covenant does not run with the land at law.¹⁷ Austerberry introduced the principle that the burden of a positive covenant also does not run with the land in equity.¹⁸ In this case, the grantees of some land had covenanted for themselves, their heirs and assigns to maintain and repair a road. The court held that this covenant did not run with the land because it sought to compel, rather than restrict, behaviour.¹⁹ Per Cotton L.J., “Undoubtedly, where there is a restrictive covenant … courts of equity restrain anyone who takes the property with notice of that covenant from using it in a way inconsistent with the covenant. But here the covenant which is attempted to be insisted upon on this appeal is a covenant to lay out money in doing certain work upon this land; and … that is not a covenant which a court of equity will enforce.”²⁰

Note that in this case Lindley L.J. acknowledged one possible method of avoiding the rule: the use of a rentcharge.²¹ A rentcharge is a periodic payment charged on land, which can be used to annex a right of entry or impose a positive covenant. Such covenants are enforceable against successors in title to the servient tenement in perpetuity.²²

Rogers v Hosegood (1900)

In this case, the owners of two adjacent plots of land had sold one plot to the defendant, extracting a restrictive covenant for the benefit of the owners and successors in title to the second plot, which the owners retained.²³ The second plot was subsequently sold to the plaintiff, who sought to enforce the covenant against the defendant.²⁴ In holding that the plaintiff could enforce the covenant against the defendant, the court established that in order for the burden of a negative covenant to run with the land, the covenantee must retain land for the benefit of which the covenant was given, and the covenant must touch and concern that benefiting land.²⁵ Once the benefit is thus annexed to the benefiting land, “it passes by assignment of that land, and may be said to run with it … without proof of special bargain or representation on the assignment.”²⁶ Per Farwell J., for the covenant to touch and concern the land “[it] must either affect the land as regards mode of occupation, or it must be such as per se, and not merely from collateral circumstances, affects the benefit of the land.”²⁷ This was an adoption of a requirement from an earlier English case, Mayor of Congleton v Pattison,²⁸ which applied to leasehold covenants.

Powell v Hemsley (1909)

This case concerned a covenant to submit plans to the covenantee before building on certain land, which would seem to be a positive covenant because it seeks to compel the behaviour of providing plans.²⁹ However, the court said that it was, in substance, a restrictive covenant not to build before submitting plans.³⁰ The court held that, since the positive obligation to submit plans was a condition of the negative covenant not to build, it could run with the land.³¹ This case is included for the principle that, where a positive obligation is actually a condition attached to a negative covenant, it may be enforced against successors in title to the servient tenement.³²

London County Council v Allen (1914)

This is a leading English case on the rule that there must be a dominant tenement capable of enjoying the benefit in order to create a restrictive covenant that will run with the land.³³ In this case, the London County Council had extracted a covenant from Morris, on behalf of himself, his heirs and assigns, not to build on parts of his land which were designated for roads.³⁴ Subsequently, the council sued for an order to tear down houses and a wall which were built on the land, seeking to enforce the covenant against successors in title to Morris’ land, who had taken with notice of the restriction.³⁵ The plaintiff council had the power to construct roads, but did not own them in fee simple, so it did not own land benefitting from the covenant.³⁶ The court held that the covenant could not run with the land of the covenantor since it was not created for the benefit of land owned by the covenantee. Buckley L.J. wrote in his judgment: “[T]he doctrine in Tulk v Moxhay does not extend to the case in which the covenantee has no land capable of enjoying, as against the land of the covenantor, the benefit of the restrictive covenant. … Where the covenantee has no land, the derivative owner claiming under the covenantor is bound neither in contract nor by the equitable doctrine…”³⁷

Re Hunt and Bell (1915)

This is one of the early cases importing the English requirement of a dominant tenement into Canadian law. The land in question in this case was conveyed with a deed containing a restrictive covenant which restricted the erection of buildings within 30 feet of the street-line, among other things.”³⁸ The land was subsequently sold for taxes, and a house was erected on it which did not comply with the covenant.³⁹ An action was brought to enforce the covenant.

While the trial judge and appeal court majority both held that the tax sale extinguished the restrictive covenant under the Assessment Act because a tax sale “must defeat every claim, privilege, lien; or incumbrance of every person except the Crown,” the requirement of a dominant tenement was also discussed. Per Garrow J.A., “[I]t is clear that, if there is a dominant tenement, the owner, and he alone, can claim the benefit of the covenant. If there is not such a tenement, the claim upon the covenant as against subsequent assignees or purchasers entirely ceases, although the personal claim between the original covenantor and covenantee may still exist.”⁴⁰ Thus, in the absence of a dominant tenement which benefits from a covenant, the burden of the covenant cannot run with the land to bind successors in title, and instead the covenant is personal in nature. The requirement of a dominant tenement (and other related requirements) became more entrenched in Canadian law in subsequent cases.

Cowan v Ferguson (1919)

In this case, the covenant at issue was 70 years old and functioned to prohibit the operation of a foundry on certain land.⁴¹ It was originally intended to prevent competition in relation to a restricted source of waterpower. However, steam and electrical power had since replaced waterpower, so that the covenant no longer served its original purpose.⁴² For this reason, the court refused to enforce the covenant.⁴³ This case demonstrates that a covenant can become obsolete, and equitable remedies may be denied, where the general nature of the neighbourhood has changed so substantially since a covenant’s creation that it has become pointless.⁴⁴

Page v Campbell (1921)

This is a Canadian case at the Supreme Court level following the rule in London County Council that for a restrictive covenant to run with the land in equity, the covenantee must own land capable of enjoying the benefit of the restrictive covenant.⁴⁵ This case also stands for the principle that only a person with a property interest in the dominant tenement can enforce a covenant, and that said person must retain part of the dominant tenement to maintain an action once commenced.⁴⁶ In this case, a syndicate transferred land to one of its members, Page, in trust for subdivision and sale. Page subdivided the land and sold lots in one of the subdivisions, extracting a covenant by the purchasers to develop only residential buildings on the land.⁴⁷ Those purchasers subsequently sold the land to a church corporation, which proceeded to build a church on the land, contrary to the covenant. Page sued in his personal capacity for an injunction and for demolition of the church.⁴⁸ The question raised at the eventual Supreme Court appeal was whether Page could maintain an action against the successors in title to the covenantors, considering that Page had since sold the remaining lots.⁴⁹

The Supreme Court majority held that Page was not able to maintain an action to enforce the restrictive covenant because he no longer owned any land capable of benefitting from it (and neither did the syndicate, so if the trust subsisted that would not assist).⁵⁰ Per Anglin J., “That as owners deriving title under the covenantor the defendants are not bound to the plaintiff covenantee if he does not retain any land for the benefit of which the restrictive covenant sued upon was entered into is clearly established by London County Council v Allen, and Formby v Barker, decisions of the English Court of Appeal.”⁵¹

Besinnett v White (1925)

In this Ontario case, the covenantee’s property interest in the dominant tenement, which was formed by an oral agreement, was sufficient to allow the burden of the covenant to run with the servient tenement so long as the plaintiff subsequently acquired the land.⁵² This softens the principle in London County Council that a restrictive covenant can only run with the land of the covenantor if the covenantee owns the dominant tenement at the time the covenant is entered into.⁵³

The facts of this case are somewhat complicated. Besinnett had conveyed a vacant lot to Brown, extracting from him a negative covenant “not to erect on the said premises a store or workshop and to use the said lands as a residence only.”⁵⁴ This negative covenant was taken for the benefit of an adjacent residence lot, which was still registered in the name of Besinnett’s sister but had been verbally promised to Besinnett.⁵⁵ The sister later transferred the residence lot in trust to her son, who transferred it to Besinnett more than a year after her transfer of the vacant lot to Brown.⁵⁶ Some 4 years later, the defendant purchased the vacant lot from Brown with full knowledge of the negative covenant, and almost immediately used the lot for a commercial purpose, in contravention of the covenant.⁵⁷ Besinnett brought an action to enforce the covenant against him.

A central issue in this case was whether Besinnett had a sufficient interest in the dominant tenement at the time of the covenant to bring the case within the Tulk v Moxhay principle so that the burden would run with the servient tenement.⁵⁸ Noting that “[t]he rule here invoked is purely equitable, a creature of the Courts, and does not depend on any arbitrary legal principle as its foundation”, and referring to statements made in the earlier English case Formby v Barker⁵⁹, the court held that “an equitable interest in the land to be benefited is sufficient.”⁶⁰ “Here there [was] no question that the plaintiff at the time the covenant was taken had a real and actual interest in the land … and the covenant was taken unquestionably for the protection of that interest, and not as a collateral and personal covenant”.⁶¹ That was sufficient for the burden of the negative covenant to run with the land.

Canadian Construction Co Ltd v Beaver Lumber Ltd (1955)

This Canadian Supreme Court case dealt with a covenant by a purchaser not to use a parcel of land for any dealings in lumber and building materials, for a prescribed period of time.⁶² The vendor had a related business on a second, nearby parcel of land, which could presumably benefit from such a covenant, but no reference was made to it or any other property capable of benefitting. The owner of this second plot later sued to enforce the covenant against a successor in title to the first plot.⁶³ The trial judge was of the opinion that the covenant was merely personal in nature, because there was no mention of a dominant tenement in the agreement. In the course of judgment, the trial judge said that for a negative covenant to run with the land “[it] must ‘touch and concern’ the dominant estate of the covenantee in such manner as to affect its mode of occupation or be such a covenant as per se … affects its value.”⁶⁴ A unanimous Appeal Court disagreed with the trial judge’s holding but not with that point, and that point was not questioned when the Supreme Court restored the trial court decision.⁶⁵ This case stands for the principle that if a covenant is imposed without mention of a dominant tenement, it will be held to be purely personal and not annexed to the land.⁶⁶ It also provides a description of what it means for a covenant to “touch and concern” the dominant tenement.

Halsall v Brizell (1957)

Halsall is an English case based on the old rule that a person who claims the benefit of a deed must also take subject to its burdens.⁶⁷ It establishes the benefit-burden doctrine in the English law of covenants, which creates an exception to the usual rule that the burden of a positive covenant does not run with the land in equity. In this case, the purchasers of lots in a subdivision covenanted to pay a portion of the cost of shared amenities.⁶⁸ Brizell, a successor in title to one of the lots, enjoyed the benefit of the shared amenities but claimed that he was not bound by the covenant to pay a share of the costs.⁶⁹ Upjohn J. held that Brizell could not claim the benefit under the deed without also accepting its burden, so he was liable to pay the costs.⁷⁰ Thus, through the limited application of the benefit-burden doctrine, English courts may allow an exception to the usual rule that the burden of a positive covenant does not run with the land.

Galbraith v Madawaska Club Ltd (1961)

This Canadian Supreme Court case outlines three requirements in order for a restrictive covenant to be enforced upon a successor in title to the servient tenement. In this case, the plaintiff acquired land which had been conveyed by Madawaska Club to a different party who covenanted not to transfer the land except to members of the club.⁷¹ In an action by the plaintiff to determine the validity of the covenant, the trial court held that it was not enforceable against the plaintiff because the deed contained no reference to a dominant tenement.⁷² This judgment was restored by the Supreme Court after it was overturned on appeal. Per Judson J., writing for the majority: “The requirements are that this covenant must touch and concern the dominant land, that the Club as covenantee must retain land capable of being benefited by the covenant and that there must be express annexation of the covenant to the dominant land. In my opinion all three requirements are lacking in this case.”⁷³ The minimum requirement to demonstrate express annexation was that “the deed [itself] must so define the land to be benefitted as to make it easily ascertainable.”⁷⁴ Thus, in the absence of express annexation of the benefit to a dominant tenement, a covenant is personal and collateral in nature.⁷⁵

Canadian Petrofina Ltd v Rogers (1962)

This Ontario case involved a covenant in a mortgage of land on which a gas station carried out business. The covenant provided that the mortgagor would only handle petroleum products purchased from the mortgagee, both in connection with that gas station and with any other gas station within 10 miles of it in which she had an interest.⁷⁶ A company owned by the defendant (who was not a party to the mortgage but who occupied the land while it was subject to the mortgage) began selling other petroleum products at another location only about half a mile away.⁷⁷ The court held that the covenant in the mortgage ran with the land and bound the defendant.⁷⁸ In his reasoning, Donnelly J. explained that “[t]he covenant in the agreement is affirmative in form but restrictive in substance.”⁷⁹ It was, in substance, a negative covenant not to purchase petroleum products from those other than the covenantee. This case stands for the principle that for the burden of a covenant to run with the land in equity, the covenant must be negative insubstance rather than in form. It also demonstrates that a mortgagee’s interest in the dominant tenement is sufficient to permit its enforcement of a restrictive covenant.⁸⁰

Westbank Holdings Ltd v Westgate Shopping Centre Ltd (2001)

This case is included for the court’s acceptance of the necessary conditions required to create a negative covenant which will run with the land as set out in DeCastri’s text Registration of Title to Land:

(a) The covenant must be negative in substance and constitute a burden on the covenantor’s land analogous to an easement. No personal or affirmative covenant, requiring the expenditure of money or the doing of some act, can, apart from statute, be made to run with the land.
(b) The covenant must be one that touches and concerns the land; i.e., it must be imposed for the benefit or to enhance the value of the benefited land. Further that land must be capable of being benefited by the covenant at the time it is imposed.
(c) The benefited as well as the burdened land must be defined with precision in the instrument creating the restrictive covenant.
(d) The conveyance or agreement should state the covenant is imposed on the covenantor’s land for the protection of specified land of the covenantee.
(e) Unless the contrary is authorized by statute, the titles to both the benefited land and the burdened land are required to be registered.
(f) Apart from statute the covenantee must be a person other than the covenantor.⁸¹

Kelley J.A. articulated a more limited version of these requirements in White v Lauder Developments,⁸² and the court in Canada Safeway Ltd v Thompson⁸³ also referred to the DeCastri version. I selected this case because in the course of her judgment Ryan J.A. stated firmly that “[t]he necessary conditions of covenants which run with the land are set out by DeCastri in his text”.⁸⁴

In this case, Westbank had entered into an agreement with Westgate for the development (by Westgate) and purchase (by Westbank) of a shopping centre.⁸⁵ The agreement contained a covenant that the purchaser of the shopping centre (Westgate) would take on certain obligations, and would require any subsequent purchaser to assume them if the project was sold before a specified date.⁸⁶ Westgate entered into an agreement to sell the centre to Sun Life within that period but did not require it to assume the obligations, so Westbank sued both parties. The lower court dismissed the action against Sun Life, and Westbank appealed.⁸⁷ The BC Court of Appeal dismissed the appeal because “the appellant could establish only one of the criteria … i.e., that the covenant and the covenantee be separate persons.”⁸⁸ Since the other requirements were not satisfied, the covenant was not a valid restrictive covenant which would run with the land and bind successors in title.⁸⁹

Amberwood Investments Ltd v Durham Condominium Corp No 123 (2002)

In this case, the original owners of two adjoining parcels of land – on which two residential condominium buildings were in development – had entered into a reciprocal easement and cost sharing agreement which was registered on title to both parcels.⁹⁰ The agreement required, among other things, that the original covenanter pay certain interim expenses until the second condominium was completed. When Amberwood Investments took ownership of the covenantor’s parcel, it refused to pay the interim expenses under the agreement.⁹¹

The issue in this case was whether the covenant could be enforced on Amberwood Investments.⁹² The trial court held that it could not because a covenant to pay interim expenses is an affirmative obligation, and positive covenants do not run with the land.⁹³ On appeal, the Appeal Court majority held that the trial judge had not erred, because “the rule that positive covenants do not run with the land has been a settled principle of the English common law for well over a century and it is undisputed that it has clearly been adopted in Canada.”⁹⁴

Charron J.A., writing for the majority, acknowledged that there are a number of applications of the rule that may lead to inconvenience or unfairness, but said that any meaningful reform would need to be achieved through legislation.⁹⁵ Charon J.A. considered the English doctrine of benefit and burden in Halsall but said that adoption of that doctrine in Ontario “would have complex, far-reaching and uncertain ramifications,” so that decision should be left to the legislature.⁹⁶ A conditional grant exception did not apply because the question of whether a conveyance is a conditional grant turns on the construction of the instrument, and she did not see a link between the easements conferred and the covenant to pay interim expenses.⁹⁷ In any case, Charon J.A. felt that any meaningful reform or adoption of exceptions should be left to the legislature.

MacPherson J.A., dissenting, agreed that it was not the court’s place to judicially abolish the rule in Austerberry, but disagreed regarding adoption of the exceptions discussed.⁹⁸ MacPherson J.A. argued that both exceptions should be adopted in Ontario, because the historical rationales for the rule in Austerberry were no longer as relevant and because “the rule in Austerberry is simply too harsh if it is applied in all cases”.⁹⁹ Since the rule against positive covenants running with the land is a common law rule itself, he saw no reason why the courts should not assess its application and allow for the development of exceptions on a case-by-case basis.¹⁰⁰ Unfortunately, the majority position in this case is still good law, and in Canada the rule that the burden of a positive covenant does not run with the land is still rigidly applied.

Qureshi v Gooch (2005)

The parties in this case were neighbours engaged in an ongoing dispute regarding a retaining wall on Qureshi’s property.¹⁰¹ As part of the settlement of an earlier lawsuit between them, Qureshi had agreed to rebuild the retaining wall if it moved or tilted to a specified extent, until a built-in expiry date.¹⁰² When Qureshi accepted a purchase offer on his property, Gooch registered a certificate of pending litigation against the property, claiming that the Agreement of Purchase and Sale breached the retaining wall agreement.¹⁰³

One of the main issues at trial was whether the obligation to rebuild the retaining wall would run with the land.¹⁰⁴ Gerow J. held that a term that the obligation would run with the land should not be implied because if that was the intent of the parties then “the Agreement should have set that out in clear and unambiguous terms”.¹⁰⁵ Since the agreement did not make any reference to the creation of an interest in either property, or to either property being encumbered, the covenant was merely personal in nature. Also, the obligation to repair was positive in nature because is required Qureshi to spend money or to perform an act (repair the wall), so it was in any case not a negative covenant.¹⁰⁶

Per Gerow J., in the course of his judgment, “Clear language … is required in order to create a restrictive covenant. If it is not entirely clear from the agreement that the parties intended to create a burden on the land, the restrictive covenant will be treated merely as a personal covenant between the parties who made it. … If there is any ambiguity about whether a restrictive covenant should apply to certain lands the ambiguity is to be resolved in favour of the free use of the land.”¹⁰⁷ Therefore, to create a negative covenant that will run with the land rather than a personal covenant, the intent that the covenant should run with the land must be clearly expressed in the language of the agreement.

Dundee Realty Corp v Hazard Developments Inc (2011)

In this case, Dundee Realty applied under the Land Titles Act for an order directing the discharge of registered restrictive covenants which it argued were actually personal in nature. Hazard Developments disagreed, maintaining that they were valid restrictive covenants.¹⁰⁸ The covenants in question were contained in an agreement between Dundee Realty and Hazard Developments facilitating the development of lands owned by both parties, and required that Dundee Realty refrain from marketing, offering for sale, or selling any retail commercial sites on the development lands for a specified period of time.¹⁰⁹

One issue was whether a valid restrictive covenant could be made out where “there is evidence … that the covenantee has land to be benefited and that such land is ascertainable, but it is ascertainable from evidence outside the instrument that created the covenant and not from the instrument itself.”¹¹⁰ McMurtry J. held that the agreement in question was a personal covenant, not a valid restrictive covenant intended to run with the land.¹¹¹ Extrinsic evidence could not make out a valid restrictive covenant where the dominant tenement benefiting from the covenant was not clearly identified in the agreement itself, because absence of the language usually employed to create a restrictive covenant “[could not] be treated as a mere oversight”.¹¹²

Andrews v Rago (2019)

This is a case applying s 119(9) of the Land Titles Act, which states that where a covenant “has been registered … and no period or date was fixed for its expiry, the … covenant is deemed to have expired forty years after the condition, restriction or covenant was registered, and may be deleted from the register”.¹¹³ The dispute in this case concerns a strip of land between two neighbouring residential properties, which was transferred from the respondents’ predecessors in title to the applicant’s predecessors in title with the burden of restrictive covenants benefitting the transferor’s land.¹¹⁴ The deed contained language clearly creating restrictive covenants and was a grant to the “Grantee, it heirs and assigns to and for its sole and only use forever”.¹¹⁵ Many years later, the successors in title to the dominant tenement built a concrete curb and laneway on the strip of land and performed other actions which frustrated the owner of the servient tenement. The owner of the servient tenement applied successfully to the land registrar to delete the restrictive covenants from the register pursuant to s 119(9) of the Land Titles Act, and then applied for an order requiring the respondents to remove the curb and laneway. The respondents argued that the provision did not apply because a period of time was specified: “forever”.

Stinson J. found that the covenants in dispute did not have a period or date fixed for their expiry because “[t]he use of [the word “forever”] in the deed suggests that the rights granted were intended to be perpetual. In turn, this would suggest that the covenants were not intended to be for a specified period of time or to a specified end date.”¹¹⁶ Therefore, they had no period or date fixed for their expiry and were thus caught by the plain language of the Act and deemed to have expired in 2006 (40 years after their initial registration).¹¹⁷ The right of way over the same land was not so affected.¹¹⁸ The result of this decision is that a restrictive covenant which is not drafted with a specific expiry date, even if it drafted to last “forever”, will be deemed under the Land Titles Act to expire 40 years after its initial registration.

Summary of Current Law of Covenants

According to the ordinary contract principle of privity of contract, only the parties to a contract can enforce contractual obligations – which means that at law, covenants can be enforced by the covenantee against the covenantor, but not against successors in title. However, certain remedies may be available in equity. Leasehold covenants are undertakings made in contracts related to a lease of property. For leasehold covenants, both the burden and the benefit of both positive and negative covenants run with the land. Freehold covenants – the focus of this paper – are undertakings made concerning freehold land. For freehold covenants, both the burden and benefit of negative covenants but only the benefit of positive covenants runs with the land.

In equity, positive covenants can be enforced by successors in title to the dominant tenement but can only be enforced against the person who made the promise. Therefore, in the case of freehold covenants, the positive/negative distinction determines whether the burden of the covenant will run with the land. Based on the ratio in Keppell, it seems that the policy reasons behind this distinction are that that the burdens of positive covenants could render land inalienable or could cause difficulty for persons attempting to discern the existence of such burdens in future dealings with the land (since they frequently lack physical manifestation).¹¹⁹

The rule regarding positive freehold covenants can be circumvented through a number of methods. One method is to maintain privity of contract through a chain of personal covenants, with each successive vendor of the subject land extracting a personal covenant from the purchaser, so that the chain of covenants is enforceable at law.¹²⁰ However, the chain “can be broken by death, insolvency, or disappearance of one of the parties, or failure of one of them to take a covenant from his assignee”, and this method also limits the available remedy to damages.¹²¹ Another method is to employ a rentcharge to render covenants enforceable in perpetuity, as recognized by Lindley L.J. in Austerberry.¹²² In addition, there are special rules permitting the enforcement of positive covenants for condominiums under the Condominium Act.¹²³ However, the general rule that the burden of a positive covenant does not run with the land is applied fairly rigidly by Canadian courts.¹²⁴

There are four main requirements for the burden of a covenant to run with the land in equity. First, the covenant must be negative in substance, operating to restrict rather than to compel actions in relation to the land.¹²⁵ Second, the covenant must be intended to run with the land, not to be personally binding.¹²⁶ Third, in order to be effective, appropriate notice of the negative covenant must be given to purchasers.¹²⁷ Fourth, there must be property that is intended to benefit from the negative covenant (the dominant tenement) – and that property must actually be capable of so benefitting.¹²⁸ There appear to be just two requirements for the benefit of a negative covenant to run with the land in equity: “(1) the covenant must touch and concern the dominant tenement; and (2) the assignee must demonstrate entitlement to the benefit”.¹²⁹ Entitlement to the benefit can be demonstrated by establishing annexation of the covenant to the land, or express assignment of the covenant to the assignee.¹³⁰

The owner of the dominant tenement is the one with the power to enforce a negative covenant or choose to waive it. Of course, when covenants are enforced in equity, only equitable remedies are available – and equitable remedies are discretionary. Equitable relief can be denied for a number of reasons, and there are a number of ways in which a covenant may be terminated. For example, a covenant may become obsolete, and equitable remedies may be denied, where the general nature of the neighbourhood has changed so substantially since entry into the covenant that it has become pointless.¹³¹

Going Forward: Criticisms and Suggested Reforms

I. Criticisms of Current Law

While covenants can be a useful tool for planning, their use is not without controversy. One controversy associated with the use of restrictive covenants in general is their historical association with racial and religious discrimination. For example, in some communities “one might find registered on dozens of titles a covenant prohibiting the sale or occupation of a property by persons of specified racial, national or religious affiliation.”¹³² While these covenants are no longer valid, they have had a lasting effect, and the history of covenants used for discriminatory purposes has not been forgotten. Another general controversy concerns the nature of covenants as tools which allow former owners to control land use for decades – sometimes long past the death of said former owner.¹³³ This is in essence an extremely durable form of dead hand control, something generally viewed as problematic because it allows the wishes of the dead to supersede those of the living.¹³⁴ Negative covenants are sometimes used to suppress retail competition in a particular area, for example by placing a covenant on land before sale which is intended to prohibit a competing business from operating on those lands in the future.¹³⁵ This comes at an obvious cost to the community. Sometimes private covenants can even frustrate public policy initiatives, precluding uses of land which align with policy goals and are otherwise permissible under a zoning ordinance.¹³⁶ Finally, when covenants are used as a type of private zoning, there is a serious issue relating to a lack of public disclosure. While municipalities are required to publish zoning by-laws and make the precise boundaries of the zones discernible, there is no such requirement for covenants.¹³⁷ Usually, knowledge of their presence is only available to the public through individual title searches, which are potentially costly and time-demanding.

Aside from the general controversy around the use of covenants, more specific criticisms of current Canadian law are routine in the literature.¹³⁸ For example, the current distinction between positive and negative covenants causes significant confusion and mischief. As a result of a distinction that at times amounts to a difference in wording or judicial interpretation, positive covenants not only fail to bind successors in title to land, but can continue to bind the original owners, rendering them liable for contraventions of the obligation even once they have disposed of the land.¹³⁹ In this way, positive covenants can result in a troubling situation in which “not only is the obligation not enforceable against someone who should be liable, but it is enforceable against someone who should not [be].”¹⁴⁰ Other anomalous situations reveal further problems with the current law. For example, as a result of the rule that the owner of the dominant tenement shall enforce the covenant, “where a landowner agrees with a homeowner’s association that neither she nor her successors in title will use her property for a particular purpose, the homeowner’s association will be unable to enforce the agreement against a subsequent owner of the property, unless the association owns a parcel of land that can be regarded as being benefitted by the covenant”.¹⁴¹ In light of a variety of frustrating situations which can arise from the current law, the Ontario Law Reform Commission in its Report said of the current law regarding positive and negative covenants: “In our view, it is unnecessarily complex and occasionally illogical, but, perhaps most importantly, it has failed to accommodate the legitimate expectations of the parties.”¹⁴²

II. Suggested Reforms

The law pertaining to positive and negative covenants has certainly “received its fair share of criticism”.¹⁴³ It has been described as an area of law in which “rigid categories, silly distinctions and unreconciled conflicts over basic values have often led to unhappy results for landowners”.¹⁴⁴ This is not a novel realization, buts has been the subject of numerous studies by law reformers.¹⁴⁵ While there is some enduring value to the use of covenants in land planning, even the Ontario Law Reform Commission in its Report rejected incremental adjustment in favour of a complete overhaul.¹⁴⁶

The Ontario Law Reform Commission claimed that “the main problem is the illogical nature of a rule that prohibits the running of the burden of positive covenants in freehold land, while permitting not only the running of the benefit of positive covenants in freehold land, but also the running of both the benefit and the burden of restrictive covenants in freehold land, as well as both the benefit and the burden of positive and restrictive covenants contained in leases”.¹⁴⁷ Another major problem was the complexity of the equitable rules.¹⁴⁸ These problems – the arbitrariness of excluding the burden of positive covenants from running with the land, and the complexity of the equitable rules allowing the burden of negative covenants and the benefit of positive and negative covenants to run with the land – are at the heart of some of the anomalous and frustrating scenarios previously discussed.

One recommendation is that exceptions could be introduced to allow courts more flexibility in applying the equitable principles regarding covenants. This suggestion was expressed in the minority opinion of the court in Amberwood. MacPherson J.A., dissenting, argued that both the English benefit-burden doctrine and conditional grant exceptions should be adopted in Canadian law.¹⁴⁹ He argued that the historical justifications for the rule that the burden of a positive covenant does not run with the land have faded in relevance, and that “the rule … is simply too harsh if it is applied in all cases.”¹⁵⁰ However, the adoption of exceptions which could apply on a case-by-case basis would increase complexity (and thus confusion) even further, and in any event it is unlikely that the courts will adopt such exceptions because the majority decision in Amberwood to practice judicial restraint ultimately remains good law.¹⁵¹

Another recommendation is that the equitable principles allowing the burden and benefit of negative covenants and the benefit of positive covenants to run with the land should be extended to apply to the burden of positive covenants.¹⁵² This would avoid the issues caused by the positive/negative covenant distinction and reduce the complexity of the rules involved. However, there are several practical problems with allowing positive covenants to run with the land. These include a perceived absence of adequate remedies; “the imposition of significant positive obligations on persons holding limited interests in land”; and the issue of “whether a landowner should be saddled with an entire unitary positive burden accruing due, in part, before he acquired his interest in land, and, if so, whether there should be a right of indemnity”.¹⁵³

Finally, there is the suggestion that reform could involve an intervention and total transformation of the law of covenants. For example, the Ontario Law Reform Commission in its Report proposed the introduction of an entirely new system of positive and negative “land obligations” in law or in equity.¹⁵⁴ An exploration of the proposal is beyond the scope of this paper. Suffice to say that total reform could address many of the criticisms regarding the current treatment of covenants but would risk introducing its own problems. There is also the issue of whether such a reform would be applied retrospectively. Since it likely would not be, the current system would remain relevant in cases involving aging covenants.

Conclusion

The possible reforms suggested bear consideration in light of the sometimes vexatious applications of the current Canadian law of positive and negative covenants. As demonstrated through a brief case history and summary of the current law, the rules which have emerged through judicial consideration are unnecessarily complex and unnecessarily rigid in their application. As such, the current law of covenants is frequently subject to criticism, and it has also been the subject of numerous studies by law reformers. While criticisms concerning the operation of covenants in general are difficult to address in light of their continued utility in land planning, some of the criticisms particular to the current law are more accessible. Possible reforms include the adoption of exceptions to the general rule regarding positive covenants, the expansion of equitable principles to permit the burden of positive covenants to run with the land in equity, or a total reform of the system such as the one proposed by the Ontario Law Reform Commission in its Report. Whatever the solution will be, it appears that it will need to originate from a place other than our courts, which have recently practiced great (and hugely inconvenient) judicial restraint in their insistence that meaningful reform should be left to the legislature.¹⁵⁵

Endnotes