deed of covenant vs deed of assignment

Legal Updates

Get in touch today

Call 01435 897297 Email [email protected]

Deeds of Covenant - Why are they needed and what happens if one is not completed?

7th October 2022

In this Legal Update we consider an all too common scenario concerning freehold properties on managed estates that often sell without the incoming owner entering into a Deed of Covenant that is generally required under the terms of the Transfer governing the use of the property and, importantly, the payment of estate or service charges.

The consequence of the above to an estate management company tasked with managing a development of freehold properties, can mean that they are unable to recover estate management charges from the new owners that would ordinarily be payable under the terms of the Transfer.

In order to consider the options available to an estate management company in these circumstances, it is important to consider the applicable position in law.

Positive -v- Negative covenants

Similar to residential long leases, the Transfer deed that governs freehold properties contain a number of covenants, both positive and negative, that the owner of the property must abide by.

As the names suggest, a positive covenant places an obligation on the owner to do something, such as paying an estate maintenance charge, whereas a negative covenant, requires the owner to refrain from undertaking an action such as not to use the property for a specified purpose.

So far so good. However, how both covenants are treated in law is significantly different.

In its simplest form, a covenant is a form of contract. Generally, the rights and liabilities created by a contract can only be enforced by the parties to it but in the case of covenants relating to land, such covenants may be enforced by and/or against those who may not be an original party.

Negative covenants

In English property law, negative restrictive covenants “ run with the land ” and as such, can be enforced by those other than the original parties i.e. successors in title. Here, it does not matter whether or not a Deed of Covenant has been entered into.

Positive covenants   

In terms of positive covenants, and in complete contrast to negative ones, they do not “ run with the land ” and crucially, do not bind any successor in title. However, please note that the position is different where the management charges are payable as an estate rentcharge (see here ).

The Deed of Covenant

In most Transfer deeds for residential freehold properties, there will often be a requirement that the outgoing owner, upon an assignment, must procure that the incoming owner enters into a Deed of Covenant that is usually in a form annexed to the original Transfer.

The “procuring” of the entering into the Deed of Covenant is dealt with by the conveyancers acting on behalf of the parties upon a sale. A competent conveyancer will seek to ensure that the requirements for the Deed of Covenant are dealt with.

The purpose of the Deed of Covenant is a method used to compel a successor in title (the purchaser in a sale) to enter into a deed of covenant directly with the party who has the benefit of the positive covenant (often the management company with the obligation to manage the estate and, importantly, collect charges from the owners to facilitate that). The deed will contain a covenant in the same form as the original positive covenant. Each subsequent sale requires an obligation for the next successor in title to enter into the deed and so on.

More often than not, in order to compel compliance with the Deed of Covenant, the title to the property will usually have a restriction applied to it. The restriction will generally prevent a new owner from registering their interest unless a certificate is supplied to the Land Registry confirming that the requirements for the Deed of Covenant have been complied with. The form of restriction varies from property to property. Some will require a certificate signed by the management company confirming compliance whereas others are left to the conveyancer or a solicitor, usually of the purchaser, to certify that the Deed of Covenant has been entered into.

However, experience suggests that even in spite of the presence of a restriction, new owners frequently manage to register their interest without a Deed of Covenant having been entered into. When this happens, the chain of positive covenants is broken and it can be difficult to enforce the obligation due under a positive covenant.

So, when faced with such a scenario, what can be done to ensure that the estate management charges are paid:

Estate Rentcharges

First and foremost, it would be wise to consider how the maintenance charges are reserved under the terms of the Transfer. If they are reserved as an estate rentcharge, a Deed of Covenant may not necessarily be required as the obligation to pay in these circumstances attaches to the property and not the individual.

Provided that the Transfer obliges the estate management company to undertake a positive covenant to provide services, payment of the estate rentcharge may be enforced under the provision of Section 121 of the Law of Property Act 1925. See our legal update her e  

The previous owner

When the chain of covenants breaks, the last party to give the positive covenant will likely remain ‘on the hook’ to comply with the positive covenant to make payments. It would be most unusual for the chain of covenants to be broken on consecutive occasions so tracing the previous owner, whilst burdensome, is far from impossible.

Pursuing the previous owner will likely be a significant frustration for them when they are being asked to contribute towards charges for a property that they no longer own. Such a scenario will then likely compel the previous owner to at least seek to remedy the position concerning the Deed of Covenant or in the absence of doing so, a money claim could be made seeking a Judgment that could then be enforced against them.

The benefit and burden principle

Under common law, the “benefit and burden” principle provides that if a deed contains a positive covenant and a benefit, then it may be possible to enforce the burden of the positive covenant against a party who enjoys the benefit of it. For example, a new owner may have to contribute towards the maintenance of the estate roads because they enjoy a right of way over them, despite not having not entered into a Deed of Covenant to pay.  

However, the scope to pursue this is limited because:

  the benefit and burden have to be conferred in or by the same transaction;

there must be a reciprocal relationship between the benefit and the burden of the covenant;

a new owner must have the choice to enjoy the benefit and take on the burden of the covenant.

The requirement to enter into a Deed of Covenant upon the sale of a freehold property is very important, albeit it is largely out of the hands of the estate management company and the managing agents that act on their behalf.

Managing agents would be well advised to be fully aware of the transfer/assignment formalities for all of the units that they manage and ensure when responding to pre-sale enquires that they highlight the requirement to enter into a Deed of Covenant, if applicable, and to advise where the same should be sent.   We can assist with clarifying what is and is not required across each development should you/your managers require assistance - see here .

Should the estate management company or their managing agent become aware of a sale having completed and a Deed of Covenant has not been received, immediate enquiries should be undertaken immediately to ascertain the position whilst the transaction is still “fresh” and the parties can be prompted to deal with the formalities.

However, in circumstances where a Deed of Covenant has been missed, all is not lost. The estate management company has the option to either:

Pursue the previous owner under their covenant; or

Seek to establish the “benefit and burden” principle.

Should you have any queries in relation to this week’s Legal Update, please feel free to contact a member of the team on 01435 897297 or [email protected] .

This legal update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole. 

If you have received this update in error or wish to unsubscribe from future updates then please email us at [email protected] .

Latest Block & Estate Management Updates

20th March 2024

Urgency is a reason, but not a pre-condition, for…

7th March 2024

Groundhog day - Can the FTT be asked to revisit…

28th February 2024

Does seeking a CCJ waive the landlord’s right to…

Latest tenancy updates.

12th January 2024

Higher fines for landlords who breach Right to…

9th October 2023

Be careful what you do if your Tenant dies

3rd October 2023

New 'How to Rent Guide' released on 2 October 2023

Sign up to receive FREE regular Legal Updates by email

We use cookies to give you the best possible experience on our web site. Please refer to our Privacy Policy for more information.

What Is the Difference Between the Deed of Absolute Sale and the Deed of Assignment?

Deeds are generally used to prove a transfer of real estate.

Jupiterimages/Comstock/Getty Images

More Articles

•   1. Certificate of Title Vs. Deed
•   2. Assignment of Deed of Trust Vs. Deed or Grant Deed
•   3. What Is a Quitclaim Assignment?

The deed of absolute sale, which is used in most real estate purchases, transfers property without any conditions beyond satisfaction of the purchase price. A deed of assignment, by contrast, can be used any time one party wants to transfer contractual rights to another. Deeds of assignment are common between mortgage lenders.

The difference between a deed of sale and a deed of assignment is that the deed of sale is used once and has no conditions other than the purchase price of the property, while the deed of assignment can be used anytime to transfer contractual rights from one party to another.

Absolute Sale Deeds

The deed of absolute sale is used in many real estate sales. A deed is a document that states that one party is transferring his real estate property rights to another. The deed proves the transfer, but, if properly recorded with the county recorder, it serves to give other prospective purchasers notice that all of the seller's rights in the property have now passed on to another party. An "absolute sale" deed is defined by having no conditions attached to the sale except the buyer's payment of the purchase price. When the seller signs and delivers the absolute sale deed, this is generally recognized by law as the moment of sale.

Deed Requirements

To be valid, an absolute sale deed must clearly describe the property being transferred, either by address or other distinguishing information. The deed must also clearly identify the seller and purchaser, the date on which the transfer becomes legally effective and pertinent information such as the purchase price. In modern real estate transactions, the parties often get around trying to cram all of this information into the deed by having an ancillary real estate sales contract. However, the deed must reference the information contained in the contract.

Understanding Assignment

Assignment is slightly different from an outright transfer. An assignment occurs when two parties are in a contractual relationship and one party wants to give all of his contractual rights to a third party and entirely remove himself from the contract. The new party, known as the "assignee," effectively replaces the old contracting party, taking on not only his rights under the contract but his obligations as well. Typically, unless the original contract states otherwise, both parties to the original contract must approve an assignment before it can take place.

Deed of Assignment

The deed of assignment is the document used to transfer the contracting party's rights. The parties may also choose to accomplish assignment via an assignment contract. In real estate, the deed of assignment often shows up in mortgage transactions. Mortgage lenders hold certain rights to property, notably the right to foreclose if the borrower fails to make payments. Lenders frequently wish to sell or purchase rights in a mortgaged property. The deed of assignment transfers or "assigns" the seller's rights in the property to another lender.

• U.S. Legal: Absolute Sale Law and Legal Definition
• U.S. Legal: Assignments
• NOLO: What's the Difference Between a Mortgage Assignment and an Endorsement (Transfer) of the Note?
• The Free Dictionary: Absolute Deed
• Reference: What Is a Deed of Assignment?

Erika Johansen is a lifelong writer with a Master of Fine Arts from the Iowa Writers' Workshop and editorial experience in scholastic publication. She has written articles for various websites.

Related Articles

Certificate of title vs. deed, assignment of deed of trust vs. deed or grant deed, what is a quitclaim assignment, warranty deed vs. deed of trust, what are instruments of conveyance & transfer, what is the redemption period in tennessee, is it necessary to have an attorney at closing in florida, what is an assignment of trust deed, what is an authorization to release from a short sale, the seller's rights in a land contract mortgage, foreclosure right of redemption & tenant's rights in maryland, what does the 45 days mean on the short sale addendum.

Zacks Research is Reported On:

Zacks Investment Research

is an A+ Rated BBB

Accredited Business.

Copyright © 2024 Zacks Investment Research

At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1986 it has nearly tripled the S&P 500 with an average gain of +26% per year. These returns cover a period from 1986-2011 and were examined and attested by Baker Tilly, an independent accounting firm.

Visit performance for information about the performance numbers displayed above.

NYSE and AMEX data is at least 20 minutes delayed. NASDAQ data is at least 15 minutes delayed.

Primary tabs

A covenant is a formal  agreement  or  promise , usually included in a  contract  or  deed , to do or not do a particular act. Covenants are particularly relevant in the fields of contract law and property law.

• An example of a contractual covenant is a non-compete agreement .
• Examples of common covenants in property law include agreements not to build a fence or agreements to maintain a shared driveway. 

Covenants in contract law are governed by standard contract rules and exclusively apply to the parties of the contract. Covenants related to property , however, are subject to their own unique set of common law / statutory rules. Property covenants can sometimes be applied against later owners of the relevant property. 

Under the common law, covenants in property are separated between real covenants and equitable servitudes.

Real covenants are covenants that run with the land . A covenant that runs with the land is a covenant that is enforceable against and/or by future owners of that land. For example, if X creates a real covenant that states “X and his assigns will not build a fence taller than 4 feet” and proceeds to sell his property to Y, Y cannot create a fence taller than 4 feet. 

A real covenant is only enforceable if it was created intentionally, it relates to the property in question, and two kinds of privity are established. Additionally, a real covenant must be in writing. The party capable of enforcing the covenant depends on whether the burden or the benefit runs with the land. In other words, only the party who the covenant is designed to help can enforce it. In the aforementioned example, the burden runs with the land because the agreement not to build a large fence presumably benefits X’s neighbor. Therefore, only the neighbor can sue for breach of the real covenant. The remedy for a breach of a real covenant is monetary damages . 

Equitable servitudes have similar requirements as real covenants; however, they do not require privity. Instead of privity, an equitable servitude requires notice to be enforceable against future property owners. This notice can either be actual notice or constructive notice . Equitable servitudes also differ from real covenants in that they are enforceable through equity measures. As a result, if monetary damages are inadequate, a party suing for breach of an equitable servitude may be granted specific performance . 

[Last updated in July of 2022 by the Wex Definitions Team ]

• commercial activities
• business law
• land use & zoning law
• landlord & tenant
• neighbors & neighborhoods
• property & real estate law
• business sectors
• commercial transactions
• employment law
• legal education and practice
• property law
• wex definitions

Assignment of Deed

Table of contents, assignment of deed of trust.

An assignment of deed is used to show the deed of a property changing from one party to another, such as when a sale is made. It is used as the written proof to show who has rightful ownership of the property. When someone is purchasing property and decides to sell it before they have paid it off, an assignment of deed form would be used to transfer the rights and everything associated with the property over to the new owner.

When a debtor transfers real estate to a creditor, the  Assignment of Deed  is the legal document used to record this transfer. This happens when a lawsuit is filed on a property owner for a default in payment and the court’s rule in favor of the creditor; this is one example of when the deed of assignment would be put in to use. It’s used to show that the property is being transferred from the ownership of the defendant and given to the plaintiff that won the case and awarded the property.

It’s important to understand what these documents mean as they pertain to public property records as well as  personal background checks  into an individual. This could be exactly the type of information you need to help you gain a better understanding on someone or his or her history. It could also be in your own public background information if someone knows where to look for it.

Public records will always contain the history of who owns real property and the details on that property as it exchanges hands or ownership is passed. Anyone who knows how can access basic information about a deed or its assignments.

When a property owner uses an assignment of deed of trust, they are assigning ownership of the property to someone else and this is a very important document that should be kept in a safe and secure place. There are also public records kept on these types of documents and you should be able to request a copy – sometimes at a fee – should you need one.

The  Assignment of Deed  will also specify the rights the other person will receive along with the deed. As property transfers ownership like this, a recital is usually included as well which shows how many people and the identities of who has owned the property before. This allows you to see how many times the property has transferred hands over the course of its history.

Now that you know more about this particular property document, you will understand it when you use it. Whether you need it for your property or you are searching the  property records  of someone else for some reason, this information will be very beneficial to you.

We know that these types of legal matters can be confusing to the average person and that’s why we strive to make it easier to understand by giving you the basics here. Assignment of deed of trust documents do not have to confuse you anymore.