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If you consider the rules relating the enforcement of a FreeholdCovenant, you should see that a problem arises in relation to building schemes. A `building scheme' in this context is a scheme in which land is bought with the intention of being built on and then sold off in plots until none is retained by the original purchaser. The problem is this: how can the purchasers of each plot be bound to a covenant for the benefit of all the surrounding plots? In a residential development, for example, the developers may wish to sell only to people who are prepared to covenant not to use the land for commercial purposes. Covenants need to be made between identifiable individuals, which in a building development usually means the builder and each purchaser of a plot. Eventually the builder will have sold the last plot, and have no further interest in the land. If the covenants are to be enforced, they must be enforced by the residents of the building scheme, none of whom will be named on any covenant, and many of whom will not even have owned land at the time earlier covenants were made.
Of course, if the covenants are carefully worded, then the unnamed residents may be able to enforce against each other under the ordinary principles of covenants. Suppose, for example, that resident A bought his plot before resident B. A's covenant may be enforceable by B on the basis of s.56(1) of the LPA1925. This subsection says that parties not named on a conveyance can take advantage of rights arising under it, provided it is identifiably for their benefit. If the covenant is properly worded, then B, who did not own his plot at the time of A's covenant, can nevertheless claim that he is an identifiable beneficiary under it.
A can enforce B's covenant against him on the same basis, but if A sells his plot before B buys his, then A's successor can't enforce against B on the basis of s.56(1). However, A's successor may be able to enforce on the basis that the benefit of B's covenant has run to him, under ordinary common law principles. Similarly, if B sells, A may be able to enforce B's covenant against B's successor under the rule in TulkVMoxhay1848. The problem is not in the legal principles, it is in the administrative complexity. It will be very difficult to keep track of who can sue whom for what.
Consequently, special rules have been developed for `building scheme covenants'. The leading case is EllistonVReacher1908, which says that a building scheme must have the following characteristics:
If these conditions are met, then covenants will be enforceable against plot owners by their neighbours, even after the original developer has left the schene.
More recently the courts have decided that the Elliston criteria need not be applied rigidly -- what is important is the intention of the developer and the purchasers to create a `local law' by means of the covenants. For example, in ReDolphinsConveyance1970, a building scheme was assumed by the court even though the purchaser did not buy from a common vendor.
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