Restrictive Covenants and Qualified Interests

Week 13

Find these slides online: https://webslides.baxterlab.ca/slides/property2025-26/13/
Category: Property 2025-26

Agenda

Recap: Constructive Takings & Acquired Rights
Weekly problem
Covenants running with the land
Reasons for invalidity
Qualified interests

Recap

Constructive takings
Acquired rights

Expropriation Act, RSNS 1989, c 156

3(1)(c) “expropriate” means the taking of land without the consent of the owner by an expropriating authority in the exercise of its statutory powers;

[…]

24 Where land is expropriated, the statutory authority shall pay the owner compensation as is determined in accordance with this Act.

Annapolis Group Inc. v HRM, 2022 SCC 36

Advantage flowing to the state
Removal of all reasonable uses of the property

Saint-Romuald (City) v Olivier

Scope of acquired rights:

Intensity of use
Remoteness
Neighbourhood effects

Keppell v Bailey, [1834] EWHC Ch J77

Two reasons why Lord Chancellor Brougham refuses to enforce the covenant against the owners of the Beaufort Ironworks in this case:

Privity of contract
Property rights can’t be “customized”

Tulk v Moxhay (1848), 41 ER 1143 (Ch)

Austerberry v Corp. of Oldham, [1885] 29 ChD 750

Negative, not “positive”, obligations (running of burdens)
Covenant must provide specific benefit to dominant lands (running of benefits)

Constructing a “test” for covenants running with the land

	Servient Land	Dominant Land
Notice	Purchaser must have notice of covenant (Keppell;Tulk).	?
Restrictive	Covenant must be restrictive in nature (Austerberry)	?
Benefit	?	Covenant must evidence a specific benefit to the dominant land (Austerberry)

Why is the restrictive covenant in Noble et al v Alley struck down by the court?

Kerwin (concurring): it would be an “unwarrantable” extension of Tulk v Moxhay to hold that “the covenant here in question has any reference to the use, or abstention from use, of land”.

What does Kerwin mean? He seems to say that the covenant isn’t about land use at all – thereby implying that it is more in the nature of a promise between two parties rather than a covenant running with the land (re annexation requirement)

Rand J (majority): “essence of such an incident is that it should touch and concern the land as contradistinguished from a collateral effect”

Not only fails “touch and concern” but also “fails in annexation to the land”

NB: finding that it does not meet the requirements for a restrictive covenant, Rand J says it is more accurately characterized as a “restraint on alienation”.

Appears not to render it invalid as a unacceptable restraint on alienation (per Blackburn), but to find that it is too uncertain (next topic)

Burdens running with the land

Negative: covenant must be negative in substance (Austerberry).
Annexation: must include an intention for the burden to run with the servient land (Noble v Alley).
Benefit: covenant must benefit the dominant lands (Noble v Alley).
Notice: purchaser of the servient lands must have notice of the covenant (Tulk v Moxhay) .

Negative: capable of compliance by doing nothing

Some question (Ziff) as to whether the follow is negative or positive in substance: “not to use the land for anything other than a golf course”

Annexation: i.e., promise given must not be intended only as a promise to the particular covenantee (i.e. original parties intended for the covenant to run with the land)

Implies a requirement for the servient land to be sufficiently identified in the covenant

Benefit “Touch and concern”: covenant must benefit the dominant land

Implies a requirement for dominant land to be sufficiently identified and for there to be TWO pieces of land (no covenants “in gross”)
Covenant “touches and concerns” dominant land “when it affects the mode of occupation of the land, or directly, and not merely from collateral circumstances, affects the value of the land” (see context of Noble v Alley)

Notice: from Tulk v Moxhay

Benefits running with the land

Annexation: must include an intention for the benefit to run with the dominant land
Benefit: covenant must benefit the dominant lands (Austerberry).

NB: the benefits of a positive covenant can run with the dominant lands without notice.

What arguments might the City of Austin make about whether the 3000 Funston Street covenant “runs with the land”?

3000 Funston Street

Facts:

undeveloped lot in affluent, upper-middle class neighbourhood of Austin (Brykerwoods)
City purchased lot in 1970s as part of highway development, but never developed
City has new affordable housing strategy that aims for a more equitable distribution of affordable housing across the city = subsidized housing in affluent neighbourhoods like Brykerwoods
When city tried to build new housing on the land in 2019, local residents challenged this in court by trying to enforce restrictive covenant on the land that has existed since well before city purchased lot in 1970s.

ASK: on what basis are the neighbours challenging the city’s plans?

MIN LOT SIZE: Clause 3: No residential structure shall be erected or placed on any building plot, which lot has an area of less than 5750 square ft. or a width of less than 50 ft. at the front building setback line as shown on the recorded plat.
MIN RESIDENCE SIZE: Clause 7: The ground floor area on the main residence structure erected on any building plot shall not be less than 750 square feet for Lots 1 to 16 inclusive, and not less than 850 square feed for Lots 17 to 21, inclusive each being exclusion of one stray open porches and garage.

KEY POINT: these minimum lot/housing sizes create inherent bias against smaller, more affordable housing units. But look “neutral” on their face.

LEGAL ISSUE: how could the city challenge the covenant? to what extent will courts enforce so-called “neutral” restrictions like those on 3000 funston that impede public policy goals and have discriminatory effects?

TWO ways to get at this question:

(1) Valid restrictive covenant on its terms?

Negative: possible to comply without doing anything

Annexation: Clause 8: “covenants are to run with the land”

Touch and concern:

Clearly racially restrictive covenant wouldn’t satisfy (per Noble v Alley); could same argument be extended to the minimum lot size and building size provisions (i.e. that these only ‘collaterally’ affect the value…problem is that they also appear to relate directly to land use)?

Notice: assuming that city had notice

(2) Against public policy or invalid for any other reason?

“Public” Values and “Private” Freedom

To the extent that restrictive covenants are “private” planning devices, when should “public” values limit owners’ freedom to shape property rights as they choose?

To what extent are the public policy considerations in these cases really about the inherent limits of proprietary freedom?

Grounds for invalidity:

Restraints on alienation
Uncertainty
Against public policy

Drummond Wren, Noble et al v Alley

Qualified interests

Qualifications or conditions placed on the vesting or divesting of estates in land (e.g. Blackburn v McCallum)

Stuartburn (Municipality) v Kiansky

What interest in land does Mr. Kiansky hold? Why does the court say that this interest counts as “ownership” of land?

Vested interests (Stuartburn):

To A for life, then to K and their heirs

Contingent interests (vs vested)

To A for life, then to B when they turn 25 years of age.

Addressing “gaps” in seisen

To T in trust for A for life, then in trust for B when they turn 25.

Divesting conditions

To A, but if they ever become a lawyer, then to B.

Recap:

“Vested in possession” vs “vested in interest”
Vested vs contingent
Vesting vs divesting conditions

Qualified Interests Against Public Policy

Canada Trust Co v Ontario
McCorkill v McCorkill

What are the legal requirements for invalidity on the basis of public policy?

“To T in trust, to be distributed as scholarships tenable at any Canadian university to any member of the public who is white, male and Protestant.” (Canada Trust Co)
“To the National Alliance [a well-known Neo-Nazi organization based in the United States].” (McCorkill)
“To T in trust for my youngest child when they divorce and cease to cohabitate with their spouse.” (Weekly problem: Funston St)

Grounds for invalidity:

Restraints on alienation
Uncertainty
Against public policy

Uncertainty: vesting conditions

“A condition precedent will not be void for uncertainty if it is possible to say with certainty that any proposed beneficiary is or is not a member of the class. The condition will not fail for uncertainty unless it is clearly impossible for anyone to qualify”

Per Tarnopolsky JA, Canada Trust Co

Uncertainty: divesting conditions

“[It] must be such that the Court can see from the beginning, precisely and distinctly, upon the happening of what event it was that the preceding estate was to determine”.

Per Rand J, Noble et al v Alley, quoting Clavering v Ellison

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