A covenant is a promise or agreement contained in a deed relating to land, by which one party (covenantor) undertakes to do or refrain from doing something with respect to the property. In property law, the critical question is whether a covenant binds only the original parties (personal covenant) or also binds subsequent owners of the land (covenant running with the land). S.40 of the TPA governs obligations annexed to ownership of property.
Legal Framework
| Provision | Subject |
|---|---|
| S.40, TPA | Obligation annexed to ownership of property binds transferee |
| S.11, TPA | Condition restraining enjoyment (when attached to a transfer) |
| S.2(h), ICA | Contract defined (applicable to personal covenants) |
| English equity | Tulk v Moxhay (1848) restrictive covenants bind successors in equity |
Types of Covenants
| Type | Nature | Binds Successors? | Example |
|---|---|---|---|
| Positive covenant | Promise TO DO something | Generally NO (personal only) | "I will maintain the boundary wall" |
| Restrictive (negative) covenant | Promise NOT TO DO something | YES (runs with land under S.40) | "I will not build above 2 floors" |
| Personal covenant | Between original parties only | No (privity of contract) | "I will pay Rs. 5,000 per month for garden maintenance" |
| Covenant running with land | Annexed to the property itself | Yes (binds all subsequent owners) | "No commercial activity on this plot" |
S.40: Obligations Annexed to Ownership
S.40: Where a third person is entitled to the benefit of an obligation arising out of contract and annexed to the ownership of immoveable property, the obligation can be enforced against a transferee with notice thereof (actual or constructive).
Requirements for S.40 to Apply
| Requirement | Explanation |
|---|---|
| Obligation must arise from contract | Not merely from custom or verbal agreement |
| Must be annexed to ownership of property | Relates to the USE of the property, not merely personal obligations |
| Third party must be entitled to benefit | Beneficiary must have an interest in the dominant land |
| Transferee must have notice | Actual notice OR constructive notice (from registration/possession) |
| Obligation must be negative/restrictive | Positive obligations generally do not run |
Why: S.40 adopts the English equitable principle from Tulk v Moxhay: if you buy land knowing it carries a restriction, you cannot take benefit of a lower price (which reflects the restriction) and then ignore the restriction. Notice + restriction + benefit to another's land = binding.
Illustrations
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Restrictive covenant runs: A and B own adjoining plots in Jubilee Hills, Hyderabad. A sells his plot to B with a registered covenant: "No commercial establishment shall be run on Plot A." B builds a house. B later sells Plot A to C. The sale deed to C does not mention the restriction, but the covenant is in A's original deed (registered, hence constructive notice). C opens a restaurant. A can enforce the covenant against C under S.40: the obligation is (a) contractual, (b) annexed to ownership (relates to use of land), (c) A is entitled to the benefit, (d) C has constructive notice (covenant in registered deed). C must close the restaurant.
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Positive covenant does NOT run: A sells a plot to B with a promise: "B will maintain the shared boundary wall at B's expense." B sells to C. Can A enforce the wall-maintenance obligation against C? Generally NO positive covenants (requiring expenditure/action) do not run with the land in Indian law. A can only sue B (original covenantor) for breach of contract. C has no obligation to maintain the wall.
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Notice requirement: A sells a flat in a gated community. The community's registered bye-laws contain a covenant: "No flat shall be used as a commercial office." Buyer D purchases the flat. Even if D did not read the bye-laws, they are registered (constructive notice under Registration Act). D cannot use the flat as an office. If the bye-laws were UNREGISTERED and D had no actual knowledge, D might not be bound (no notice = no enforcement under S.40).
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No benefit to another's land (covenant fails): A sells land to B with a covenant: "B shall not paint the house in any colour other than white." This is merely an aesthetic preference of A. A retains no adjoining land that benefits from this restriction. Without a benefited dominant tenement, the covenant is personal (between A and B only) and does not run with the land to C.
Recall Check
- What is the distinction between a positive and a restrictive covenant?
- Under S.40, what conditions must be met for a covenant to bind a subsequent transferee?
- Why do positive covenants generally not run with the land?
Key Cases
Tulk v. Moxhay (1848) Tulk-v-Moxhay-1848 Issue: Whether a restrictive covenant on land can bind a subsequent purchaser who had notice of it. Rule: A restrictive covenant, if the purchaser has notice, is enforceable in equity against the successor even without privity of contract. Held: The purchaser (Moxhay) was bound by the restrictive covenant (to maintain Leicester Square as a garden) because he had notice. This principle was adopted in Indian law through S.40 TPA.
Tej Bhan Madan v. II Additional District Judge (1988) Tej-Bhan-Madan-v-II-Additional-District-Judge-1988 Issue: Whether a covenant restricting use of property to residential purposes is enforceable against a successor-in-title under S.40. Rule: S.40 allows enforcement of obligations annexed to ownership against transferees with notice, where a third party is entitled to the benefit. Held: The restrictive covenant (residential use only) was enforceable against the subsequent purchaser. The covenant was annexed to the ownership of the property, the neighbouring owner was entitled to its benefit, and the purchaser had constructive notice through registration.
Distinctions
| Basis | Restrictive Covenant | Easement |
|---|---|---|
| Source | Contract (agreement between parties) | Grant, prescription, or statute |
| Nature | Negative obligation (refrain from doing) | Right to USE another's land (affirmative) |
| Creation | Deed containing the covenant | Express grant, implied grant, or 20-year use |
| Registration | Required for constructive notice | Not mandatory for prescriptive easements |
| Remedy | Injunction + damages | Declaration + injunction |
| Extinguishment | Release by benefited owner; merger | Unity of ownership; non-user for 20 years |
| Governing law | S.40 TPA (covenants) | Indian Easements Act, 1882 |
| Basis | Covenant Running with Land | Personal Covenant |
|---|---|---|
| Binds successors | Yes (transferees with notice) | No (original parties only) |
| Nature | Negative/restrictive | Positive or negative |
| Annexed to | Land/property | Person |
| Benefit | Must benefit dominant land | May not benefit any land |
| Notice | Required for successor to be bound | Irrelevant (contract between parties) |
| Duration | Until released or property merged | Duration of contract |
| Example | "No commercial use" | "I will paint your house annually" |
Flashcards
Q: What is a covenant in property law? A: A promise contained in a deed relating to land, by which one party undertakes to do or refrain from doing something with respect to the property.
Q: What does S.40 TPA provide? A: An obligation arising from contract and annexed to ownership of immoveable property can be enforced against a transferee with notice, where a third party is entitled to the benefit.
Q: Do positive covenants run with the land in India? A: Generally no. Only negative/restrictive covenants run with land under S.40. Positive obligations remain personal to the original covenantor.
Q: What is the "notice" requirement in S.40? A: The transferee must have actual notice (told about the covenant) OR constructive notice (covenant is in a registered deed, hence deemed known).
Q: What principle from Tulk v Moxhay (1848) is adopted in Indian law? A: A restrictive covenant binds a subsequent purchaser with notice, even without privity of contract. Equity enforces the restriction because the buyer took with knowledge of the burden.
Q: What happens if there is no dominant tenement benefiting from the covenant? A: The covenant is personal only and does not run with the land. S.40 requires a third person "entitled to the benefit" usually the owner of neighbouring land.
Exam Scenario
A and B own adjacent plots in a residential colony. A sells his plot to B with a registered covenant: "No structure above ground floor shall be built on Plot A." B constructs a single-storey house. B sells Plot A to C, who proposes to construct a 3-storey apartment building. A objects. C argues he is not bound because he was not a party to the original covenant. Advise.
Approach: (1) S.40 TPA: obligation arising from contract (the covenant) is annexed to ownership of Plot A (relates to construction/use). (2) A (third person/neighbour) is entitled to the benefit (his adjoining plot benefits from the height restriction light, air, view). (3) C has constructive notice: the covenant is in B's registered purchase deed. Under S.3 TPA, registration = constructive notice to all subsequent purchasers. (4) Apply Tej Bhan Madan (1988): restrictive covenants on land use are enforceable against successors with notice. (5) C is bound by the single-storey restriction. A can seek injunction restraining C from building above ground floor. C's argument (no privity) fails because S.40 specifically binds transferees with notice. (6) C's remedy, if any: sue B for breach of warranty (if B's sale deed to C warranted no encumbrances). But against A, C must comply.