The Law Commission Consultation Paper No 186 EASEMENTS, COVENANTS AND PROFITS À PRENDRE A Consultation Paper The Law Commission was set up by section 1 of the Law Commissions Act 1965 for the purpose of promoting the reform of the law. The Law Commissioners are: The Honourable Mr Justice Etherton, Chairman Mr Stuart Bridge Mr David Hertzell Professor Jeremy Horder Kenneth Parker QC Professor Martin Partington CBE is Special Consultant to the Law Commission responsible for housing law reform. The Chief Executive of the Law Commission is William Arnold and its offices are at Conquest House, 37-38 John Street, Theobalds Road, London WC1N 2BQ. This consultation paper, completed on 19 February 2008, is circulated for comment and criticism only. It does not represent the final views of the Law Commission. The Law Commission would be grateful for comments on its proposals before 30 June 2008. Comments may be sent either – By post to: Paul Davies Law Commission Conquest House 37-38 John Street Theobalds Road London WC1N 2BQ Tel: 020-7453-1224 Fax: 020-7453-1297 By email to: [email protected] It would be helpful if, where possible, comments sent by post could also be sent on disk, or by email to the above address, in any commonly used format. We will treat all responses as public documents in accordance with the Freedom of Information Act and we may attribute comments and include a list of all respondents' names in any final report we publish. Those who wish to submit a confidential response should contact the Commission before sending the response. We will disregard automatic confidentiality disclaimers generated by an IT system. This consultation paper is available free of charge on our website at: http://www.lawcom.gov.uk/easements.htm THE LAW COMMISSION EASEMENTS, COVENANTS AND PROFITS À PRENDRE A CONSULTATION PAPER CONTENTS Page PART 1: INTRODUCTION 1 About the project 2 Definition of the rights 2 Terminology 3 Background to the project 3 Scope of the project 6 Human rights 7 Assessment of the impact of reform 7 Main proposals and structure of this report 8 Acknowledgements 8 PART 2: GENERAL AIMS AND APPROACH 10 Why we are dealing with easements, profits and covenants together 10 Ways in which the rights are similar 10 Ways in which the rights are distinct 11 Our provisional approach to reform 12 Land registration 13 PART 3: CHARACTERISTICS OF EASEMENTS 15 Introduction 15 There must be a dominant and a servient tenement 15 The easement must accommodate the dominant land and be capable of forming the subject matter of a grant 18 The easement must “accommodate and serve” 18 iii Page The easement must be capable of forming the subject matter of a grant 20 Too wide and vague 21 Recreation and amusement 21 Easements and exclusive use 22 The dominant and servient tenements must be owned by different persons 28 PART 4: CREATION OF EASEMENTS 31 Introduction 31 Express creation of easements 34 Issues 34 Express reservation 34 Short-form easements 37 Implied acquisition of easements 39 What is an implied easement? 39 Grant or reservation? 40 Current methods of implication 42 The rule in Wheeldon v Burrows 43 Section 62 of the Law of Property Act 1925 46 Easements of necessity 49 Easements of intended use 51 Non-derogation from grant 53 The case for reform 54 Registration requirements 54 Objectives of reform 55 Section 62 of the Law of Property Act 1925 56 Non-derogation from grant 56 iv Page Options for reform 57 An intention-based rule 57 Presumption-based approach to intention: implication of terms 58 A contractual approach to the implication of terms 60 Individualised implied terms 61 Obvious intentions of the parties 61 Business efficacy 62 Standardised implied terms 62 A rule of necessity 63 A de minimis rule 63 A “reasonable use” rule 64 Modification and codification of the current law 65 Summary 65 Acquisition of easements by prescription 66 The current law and its defects 67 Prescription at common law 67 Prescription by lost modern grant 67 Prescription Act 1832 68 Short prescription 69 Long prescription 70 Rights to light 70 The defects of the current law 71 Options for reform 72 Outright abolition 72 The function of prescriptive acquisition 73 Prescription and negative easements 74 v Page Proprietary estoppel 75 A new statutory scheme for prescriptive acquisition 76 Prescription and proprietary interests 77 Qualifying use 78 By force 79 By stealth 79 By consent 79 The effect of use being contrary to law 80 Prescription period 80 Duration 80 Timing 80 Continuity of use 81 Registration 82 Other issues 85 The nature of the right prescribed 85 The effect of qualifying use prior to application being made 85 Use by or against those who are not freehold owners 86 Prescription and land acquired through adverse possession 87 The effect of incapacity 87 Application of prescriptive scheme to unregistered land 88 PART 5: EXTINGUISHMENT OF EASEMENTS 90 Introduction 90 Statutory powers 90 Implied release 93 Abandonment 93 The case for reform 95 vi Page Physical alteration, change of use and excessive use 97 Determining if use exceeds the scope of the easement 98 The first principle (intensity of use) 99 The second principle (excessive user) 99 The third principle 99 The fourth principle (the “McAdams Homes test”) 100 Radical change in character or change in identity 101 Substantial increase or alteration 101 Extraordinary user 102 The remedy 103 Extinguishment 103 Suspension 104 Severance 104 Damages 104 Self-help 104 No one remedy will be entirely appropriate in all cases 105 The rule in Harris v Flower 105 The effect on an easement of termination of the estate to which it is attached 107 PART 6: PROFITS \ PRENDRE 111 Introduction 111 Types of profit 111 Several or in common 111 Profits appurtenant 112 Profits appendant 112 Profits pur cause de vicinage 113 Profits in gross 113 vii Page Scope 113 Characteristics 114 Creation 115 Current law 115 Express creation 115 Express words of grant 115 Statute 116 Creation by implication 116 Section 62 116 Intended use, necessity and the rule in Wheeldon v Burrows 116 Implied reservation 117 Prescription 117 Proposals for reform 117 Extinguishment 118 Current law 118 Extent of release 119 Express release 119 Implied release (abandonment) 119 Intention 120 Period of non-use 120 Exhaustion 121 Unity of ownership and possession 121 Profits appurtenant 121 Profits in gross 122 Termination of the dominant and servient estate 122 Statute 122 Provisional proposals for reform 123 viii Page PART 7: COVENANTS: THE CASE FOR REFORM 124 The historical background for reform 124 Current law 126 Landlord and tenant covenants 126 Other covenants that “run with” the land 126 Three distinctions 127 Burden and benefit 127 Law and equity 127 Positive and restrictive 128 At law 128 Running of the benefit 128 The intervention of equity 129 Running of the burden 130 Running of the benefit 130 The case for reform 131 Restrictive covenants 131 The desirability of restrictive covenants 131 Defects in the law of restrictive covenants 133 Identifying who holds the benefit 133 Running of the benefit and burden 134 Liability between the original parties 134 Positive covenants 134 Defects in the law of positive covenants 134 Running of the benefit and burden 134 Circumvention 136 Chains of indemnity covenants 136 ix Page Right of entry annexed to an estate rentcharge 137 Right of re-entry 138 Enlargement of long leases 139 Benefit and burden principle 139 Commonhold 140 Is there a still a need for reform of the law of covenants? 140 The case for Land Obligations 141 PART 8: LAND OBLIGATIONS: CHARACTERISTICS AND CREATION 146 Introduction 146 The 1984 scheme 146 The 1984 scheme: two classes of land obligation 146 A single class of Land Obligation 147 Land Obligation characteristics 149 Nature and types of Land Obligation 150 Express labelling as a “Land Obligation” 153 Creation 154 Express creation 154 Registered title 154 Prescribed information 156 Legal or equitable interests in land 156 General framework of real property 156 Land Obligations capable of subsisting at law: registration requirements 157 Equitable Land Obligations 158 A Land Obligation should have a dominant and a servient tenement 160 Attachment to the respective dominant and servient estates in the land 160 x Page A Land Obligation must “relate to” or be for the benefit of dominant land 161 Requiring a connection to the land 161 The approach adopted for leasehold covenants 162 Satisfactory definition 164 Separate title numbers for the benefited and burdened estates 165 Cause of action and remedies 168 Elements of liability 168 Remedies 168 Prohibition of the creation of new covenants running with the land over registered land 169 First exception: covenants entered into between landlord and tenant 170 Second exception: covenants entered into under statutory powers 171 Third exception: covenants entered into where the benefited or burdened estate is leasehold and the lease is unregistrable 173 Estate rentcharges 173 The rule against perpetuities 175 PART 9: LAND OBLIGATIONS: ENFORCEABILITY 176 Introduction 176 The running of the benefit and who can enforce 176 Land Obligations: the easement analogy 176 The running of the burden and who should be bound 178 Positive and reciprocal payment obligations 178 Restrictive obligations 181 Exceptions 181 Priority 181 Contrary provision 182 xi Page The position of an adverse possessor 182 Who should be liable? 184 Restrictive obligations 184 Positive and reciprocal payment obligations 184 Continuing