Define: Covenant Of Good Right To Convey

Covenant Of Good Right To Convey
Covenant Of Good Right To Convey
Quick Summary of Covenant Of Good Right To Convey

A covenant is a formal agreement or promise that is made in a contract or deed. It can be either absolute or conditional, and it may require a party to either do something or refrain from doing something. In the realm of real estate, a covenant can be a commitment to use the property in a specific manner or a guarantee that the property is free from any encumbrances. Additionally, a covenant can be implied by law or deduced from the behaviour of the involved parties. An affirmative covenant necessitates that the property owner perform certain actions on the property, such as maintaining a fence or landscaping. On the other hand, a covenant of seisin is a promise made in a warranty deed, assuring that the grantor has the right to transfer the property and that it is unencumbered. Furthermore, a noncompetition covenant is a pledge, typically found in a sale-of-business or employment contract, to refrain from engaging in the same type of business within the same market as the buyer, partner, or employer for a specific duration of time. These examples demonstrate the various applications of a covenant in different contexts, as well as the diverse types of actions or abstentions it may require. They also highlight how a covenant can be established in different types of contracts or deeds and how it can be implied or deduced from the circumstances.

What is the dictionary definition of Covenant Of Good Right To Convey?
Dictionary Definition of Covenant Of Good Right To Convey

A covenant is a formal agreement or promise between two parties, typically found in a contract. It can be either an absolute covenant, which has no limitations, or a conditional covenant, which is dependent on a condition. There are various types of covenants, including affirmative covenants that require a party to take action, negative covenants that prohibit a party from taking certain actions, and covenants specifically related to land. Covenants can be explicitly stated in a deed or implied by law, and they can either be attached to the land or personal to the parties involved.

Full Definition Of Covenant Of Good Right To Convey

The Covenant of Good Right to Convey is a fundamental aspect of property law, particularly in conveyancing, the legal process of transferring property from one owner to another. This covenant ensures that the seller (grantor) of the property has the legal right to transfer ownership to the buyer (grantee). This overview will delve into the historical context, legal framework, implications, and practical aspects of this covenant within the British legal system.

Historical Context

The Covenant of Good Rights to Convey has its roots in common-law traditions that date back centuries. Originally, land ownership and transfer were governed by feudal principles, where the right to convey property was often intertwined with obligations to a feudal lord. Over time, as property rights became more individualised and less tied to feudal obligations, the need for clear, enforceable covenants in property transactions grew.

The development of the covenant system in property law aimed to provide certainty and protection for both buyers and sellers. Among these covenants, the Covenant of Good Right to Convey became crucial as it directly addresses the seller’s legal capacity to transfer property, thus ensuring that buyers receive clear and undisputed title.

Legal Framework

In the British legal system, the Covenant of Good Right to Convey is typically implied in most conveyancing transactions, unless explicitly excluded. This covenant is often included in both freehold and leasehold transactions, albeit with some variations in its application.

Statutory Provisions

The Law of Property Act 1925 is a key piece of legislation that governs the conveyancing process in England and Wales. Section 76 of this Act implies certain covenants for title, including the Covenant of Good Right to Convey, in conveyances of freehold land. The Act ensures that, unless otherwise stated, a seller is presumed to have the right to convey the property.

In Scotland, the conveyancing process is governed by the Land Registration, etc. (Scotland) Act 2012 and related legislation. While the legal principles are broadly similar, Scottish property law has distinct features, particularly in terms of land registration and the role of public registers.

Common Law Principles

Common law principles also play a significant role in shaping the Covenant of Good Right to Convey. Courts have historically interpreted this covenant as an assurance that the seller possesses the necessary legal title and capacity to transfer the property. This interpretation provides a legal remedy for buyers if it later emerges that the seller did not have the right to convey the property.

Implications for Sellers and Buyers

The Covenant of Good Right to Convey carries significant implications for both sellers and buyers in a property transaction.

For Sellers

For sellers, this covenant imposes a legal obligation to ensure they have the appropriate title to the property and the legal authority to transfer it. Failure to comply with this covenant can result in legal action from the buyer, including claims for damages. Sellers must, therefore, undertake thorough due diligence to confirm their right to convey the property before entering into a transaction.

For Buyers

For buyers, the Covenant of Good Rights to Convey provides critical protection. It assures them that they are acquiring a valid title to the property without undisclosed encumbrances or defects in title. If it transpires that the seller did not have the right to convey the property, the buyer can seek legal recourse, including rescission of the contract or compensation for any losses incurred.

Practical Aspects of the Covenant

The practical implementation of the Covenant of Good Right to Convey involves several key steps in the conveyancing process.

Title Investigation

One of the primary steps is the investigation of title. This involves a thorough examination of the property’s title deeds and any other relevant documents to ensure the seller’s right to convey. Solicitors or conveyancers typically carry out this investigation on behalf of the buyer. They will check for any potential issues, such as mortgages, liens, easements, or other encumbrances, that might affect the seller’s ability to convey the property.

Warranties and Indemnities

In some cases, sellers might provide warranties or indemnities to further assure buyers of their right to convey the property. These warranties can cover various aspects, including the seller’s title to the property, the absence of undisclosed encumbrances, and compliance with relevant planning and building regulations.

Contractual Provisions

The Covenant of Good Right to Convey is often explicitly included in the sale contract. This inclusion provides a clear legal basis for the buyer to rely on the covenant and seek remedies if the covenant is breached. Standard form contracts used in conveyancing transactions usually incorporate this covenant, either directly or by reference to statutory provisions.

Breach of the Covenant

A breach of the Covenant of Good Right to Convey can have serious legal consequences. If it is discovered post-completion that the seller did not have the right to convey the property, the buyer can pursue several remedies.

Rescission

The buyer may seek rescission of the contract, effectively reversing the transaction. This remedy is particularly relevant if the defect in the seller’s title is fundamental and cannot be rectified. Rescission restores both parties to their pre-contractual positions and may involve the return of the purchase price and any associated costs.

Damages

Alternatively, the buyer may claim damages for any losses suffered due to the breach. This can include compensation for the difference in property value, costs incurred in rectifying title defects, and other consequential losses. The measure of damages will depend on the specific circumstances of the breach and the extent of the buyer’s losses.

Specific Performance

In some cases, the buyer might seek specific performance, compelling the seller to rectify the title defect or otherwise fulfil their obligations under the covenant. This remedy is more complex and typically requires court intervention.

Case Law

Case law provides valuable insights into how the Covenant of Good Right to Convey is interpreted and enforced by the courts. A few notable cases illustrate the application of this covenant in different contexts.

Brewster v Kitchin (1870)

In this landmark case, the court held that a seller who conveyed property without having the legal title was in breach of the Covenant of Good Right to Convey. The buyer was awarded damages for the breach, highlighting the covenant’s role in protecting buyers against defective titles.

Re King’s Trusts (1880)

This case involved a seller who conveyed property while under a legal disability, rendering the conveyance void. The court reinforced the principle that the seller must have the legal capacity to transfer the property, and any failure to do so constitutes a breach of the covenant.

Smith v Morgan (1957)

In this more recent case, the court considered the scope of the Covenant of Good Right to Convey in the context of leasehold property. The court held that the covenant extended to ensuring the seller had the right to assign the lease, including obtaining any necessary consents from the landlord. The seller’s failure to secure such consent resulted in a breach of the covenant.

Differences in Jurisdictions

While the principles underlying the Covenant of Good Right to Convey are broadly consistent across the United Kingdom, there are some differences in how the covenant is applied in different jurisdictions.

England and Wales

In England and Wales, the Law of Property Act 1925 provides a comprehensive framework for conveyancing, including implied covenants for title. The Covenant of Good Right to Convey is generally implied in most transactions, providing a high level of protection for buyers.

Scotland

In Scotland, the conveyancing process is governed by distinct legislation, including the Land Registration, etc. (Scotland) Act 2012. The concept of implied covenants is less prevalent, with a greater emphasis on the role of the public land register in providing title assurance. However, contractual provisions and warranties often include similar protections to those found in the Covenant of Good Rights to Convey.

Northern Ireland

In Northern Ireland, the principles are similar to those in England and Wales, with the Law of Property (Northern Ireland) Order 1978 providing the statutory framework for conveyancing. Implied covenants for title, including the Covenant of Good Right to Convey, are generally recognised and enforced.

Conclusion

The Covenant of Good Right to Convey remains a cornerstone of property law in the United Kingdom, providing essential protection for buyers and imposing critical obligations on sellers. Its historical development, rooted in common law traditions, has evolved to adapt to modern conveyancing practices, ensuring that property transactions are conducted with transparency and legal certainty.

By understanding the legal framework, implications, and practical aspects of this covenant, both buyers and sellers can navigate the conveyancing process more effectively. Legal professionals play a crucial role in ensuring compliance with this covenant, conducting thorough due diligence, and providing the necessary assurances to facilitate smooth and legally sound property transactions.

As property law continues to evolve, the Covenant of Good Right to Convey will remain a fundamental element, upholding the integrity and reliability of property transactions in the British legal system.

Covenant Of Good Right To Convey FAQ'S

A covenant of good right to convey is a legal promise made by a seller to a buyer that they have the legal authority and right to transfer ownership of the property being sold.

This covenant is important because it ensures that the buyer will receive clear and marketable title to the property, free from any claims or encumbrances that could affect their ownership rights.

If a seller breaches this covenant, the buyer may have legal remedies available, such as rescinding the contract, seeking damages, or specific performance to compel the seller to fulfil their promise.

Yes, parties to a real estate transaction can agree to exclude or modify this covenant through a written agreement. However, it is generally advisable for buyers to insist on this covenant to protect their interests.

Buyers can conduct a title search or hire a title company to examine the property’s title history and ensure that the seller has the legal authority to transfer ownership. Additionally, title insurance can provide protection against any unforeseen issues.

Certain situations, such as foreclosure sales or sales by court order, may have exceptions to this covenant. It is important to consult with a legal professional to understand the specific circumstances and any potential exceptions.

If a seller fails to disclose known liens or encumbrances on the property, they may be held liable for breaching the covenant of good right to convey. Buyers may have legal recourse to seek remedies for any damages incurred.

While buyers generally have the right to insist on this covenant, they can choose to waive it if they are willing to accept the risks associated with potential title issues or encumbrances.

No, this covenant is typically specific to the buyer-seller relationship in a particular transaction and does not automatically transfer to subsequent buyers. Each buyer should ensure they have their own covenant in place.

If you suspect a breach, it is advisable to consult with a real estate attorney who can assess the situation, review the relevant documents, and advise you on the appropriate legal action to take.

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Disclaimer

This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 7th June 2024.

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