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Real Property - Covenants. Owners, Strata Plan LMS 3905 v. Crystal Square Parking Corp.
In Owners, Strata Plan LMS 3905 v. Crystal Square Parking Corp. (SCC, 2020) the Supreme Court of Canada comments on the historical distinction between property law and contract law:[19] Strata Co. argues that there is no difference between enforcing a post-incorporation contract against it and enforcing the burden of a positive covenant against it as if it ran with the land: A.F., at para. 71. But this submission disregards the important distinction between contract law and property law: Design Services Ltd. v. Canada, 2008 SCC 22, [2008] 1 S.C.R. 737, at para. 39; J. Beatson, A. Burrows and J. Cartwright, Anson’s Law of Contract (30th ed. 2016), at pp. 27-28. Landowners may use real covenants to create rights enforceable by one owner against another, even in the absence of privity of contract: B. Ziff, Principles of Property Law (7th ed. 2018), at p. 448. The resulting interests are distinct from contractual rights, as a restrictive covenant binds subsequent purchasers in equity, whereas the right to contractual performance is a legal interest that is personal to the contracting parties. Another distinction between real covenants and contractual rights in this instance lies in the timing of the creation of the right. When equity is used to enforce a restrictive real covenant against a subsequent purchaser who purchased the land with notice of the covenant, the right being enforced is a pre-existing equitable right which persisted through the transfer from the predecessor in title: Rhone, at p. 317. Contractual rights, on the other hand, are created at the time of contract formation. In the case of a post-incorporation contract, they are created after the corporation comes into existence when the parties objectively manifest an intention to be bound by a new agreement on the same terms as those of the pre-incorporation contract. Thus, real covenants and contracts create juridically distinct forms of rights and obligations, which should not be confused with one another.
[20] Further, the historical reluctance of common law courts to impose the burden of either a positive or a restrictive real covenant on a subsequent purchaser was founded on the principle that “a person cannot be made liable upon a contract unless he was a party to it”: Rhone, at p. 316; see also p. 318. Thus, to enforce a positive covenant against a subsequent purchaser of land “would be to enforce a personal obligation against a person who has not covenanted”: Rhone, at p. 321. To enforce a positive covenant against a party to a contract, however, would be to enforce a personal obligation against a person who has in fact covenanted to perform that obligation. The imperative which militates against enforcing a covenant against a successor in title does not exist when the successor in title has assumed the covenant by way of a contract (i.e. the covenant will survive only if there is a chain of contracts between subsequent successors in title). The enforcement of a contractual right against a party to the contract is therefore not to be equated with the enforcement of a real covenant against a subsequent purchaser.
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