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Flying Freeholds (2)
Contracts (Rights of Third Parties) Act 1999
A flying freehold exists where a part of one property extends physically in, over, or under a neighbouring property. The two buildings then depend upon each other for support. Where each property is held as a freehold, the flying element becomes a flying freehold.
The real source of difficulties with flying freeholds has been that although two neighbours may covenant to repair their own properties, once one of the neighbours leaves and sells on, an incoming purchaser cannot take advantage of the benefit and burden of the covenants agreed between the two previous owners, and is not bound by the obligations assumed by the former owner. Once the neighbour leaves it becomes almost impossible to oblige te incomer to repair his property and therefore support yours.
Questions in this area have always been a source of innocent amusement for law lecturers, of painful puzzlement for law students, of additional income for lawyers, and universal unhappiness for house owners. The issue that matters is whether a buyer of a house who might have to spend money to maintain his house in order to protect the neighbours house, takes on that additional obligation when he buys a house but does not covenant directly with the property owner next door.
We are talking now only about obligations which require positive expenditure of funds, in this case the obligation to repair, and we are talking about the burden of that covenant, the person who takes on the obligation, not the person who receives the benefit of the obligation assumed by his neighbour.
At its simplest, the burden of the covenant does not pass when the house is sold. The buyer of the house therefore takes free of the covenant unless he enters into a direct contract with the person he buys from to observe the covenant and agrees to indemnify him in respect of any losses arising from the failure to comply with the covenant. Thus if B buys from A, and A is the original person who covenants, then A always remains responsible for the promise he made. He can therefore be sued even if it is B who does not comply with the covenant. Where A sells to B he seeks from B a promise to pay to A anything A has to pay out as a result of Bís failure to comply.
The issue has always been a third party contract issue. At English law you canít take a benefit under a contract unless you are party to it. The new Act however says that where a contract is created which clearly identities some third person has being a potential beneficiary, that person has the right to enforce the covenant.
There has been discussion about whether in these circumstances even if the burden of the covenant itself does not pass with the land, the buyer of the adjoining property can take the benefit of the indemnity covenant entered into by B with A.
A further limitation on the Act is that it only applies to contracts entered into after six months of the passing of the Act, namely after May 2000. Therefore the situation remains that until rights are granted direct between owners from time to time the burden of the covenant still does not pass and therefore there is no way of imposing on a neighbour obligations to maintain property.
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