The Court of Appeal has held that a purchaser who obtains part of a property, which has the benefit of a right of way, must assume the burden of contribution to that right of way, appropriate to the part of the property that he has acquired.
Dobson Park Properties Limited ("DPPL") owned an estate, which consisted of a number of industrial units bordering a private road, known as Roadway 4 and a number of other private roads.
In September 1986, DPPL sold all of the private roads and some additional land to Mr Elwood, but reserved a right for DPPL and its successors to use them. Mr Elwood agreed to maintain all of the roads and in return DPPL agreed that it and its successors would pay the maintenance costs incurred by Mr Elwood in relation to Roadway 4 (the "September Transfer").
DPPL subsequently sold the freehold of one of the industrial units to Mr Goodman. As part of the transfer, Mr Goodman agreed that he would pay a reasonable proportion of the expenses incurred by DPPL and its successors in title, in maintaining Roadway 4.
However Mr Goodwin subsequently asserted that the burden of DPPL's positive covenant, as contained in the September Transfer, was not enforceable against him.
The Court reiterated the three conditions for the burden of a positive covenant to be enforceable against the covenantor's successor in title:
- the benefit and burden must be conferred in or by the same transaction
- the benefit must be reciprocal to/conditional on the burden
- the successor in title must have had the opportunity of rejecting or disclaiming the benefit
The Court noted that there was a mismatch, in the September Transfer, between the right reserved by DPPL and the scope of the burden. Furthermore, that the positive covenant in the September Transfer was drafted on the assumption that DPPL, or its successor in title, continued to own all of the industrial units e.g. there was no machinery for sub-division of title.
However the Court held that the principles of equity imposed the liability on Mr Goodwin to contribute a sum, towards the expenses in maintaining Roadway 4, to be directly proportionate to the legal estate that he had acquired.
What does this mean?
The enforceability of positive covenants to pay for the maintenance of roads and common areas, is often an issue for both residential and commercial developers. The common solution is to oblige purchasers of part to obtain a direct covenant between any subsequent purchaser of their interest and the developer.
However this case indicates that, even when no such direct covenant has been obtained, in certain circumstances it may still be possible to force the purchaser of part's successor to contribute.
Goodman & Ors -v- Elwood  EWCA Civ 1103