Re Nisbet and Potts Contract [1906] 1 Ch. 386
ADVERSE POSSESSION – CONSTRUCTIVE NOTICE – LIMITATIONS – RESTRICTIVE COVENANTS – TRESPASS
Facts
N entered into a contract to sell a parcel of land to P. N’s title was possessory, the paper title having being defeated by a successful period of adverse possession several conveyances prior to the transaction in question. The contract required P to accept the possessory nature of the title. Unfortunately, N had not undertaken to investigate the title for the 40 years then required by conveyancing practice, and failed to discover N’s possessory title was subject to a restrictive covenant controlling building activities on the land. P was a builder and wished to take free of the covenant. P refused to complete the contract and the question arose whether the covenant was actually binding upon N; if so then P would be entitled to renege.
Issues
Whether a restrictive covenant affecting land, title to which had passed to a squatter under the doctrine of adverse possession, would bind that person; whether the effect of the s.34 of the Real Property Limitation Act 1833 (as amended) had the effect of extinguishing equitable rights, as well as the legal title of the paper owner; whether a purchaser of a squatter’s possessory title, in the absence of title guarantees, is fixed with constructive notice of equitable rights affecting the land in question.
Decision/Outcome
The Court of Appeal held that a restrictive covenant, as an equitable proprietary interest, is binding on all but a good faith purchaser for value without notice; it would not be defeated merely because the paper title had been extinguished. N was not such a purchaser. He had not investigated the title for the full forty year period and so had constructive notice of any interests that he would have discovered had he done so, including the restrictive covenant. N’s title was thus encumbered by the covenant and P was entitled to resile from the contract.
Updated 21 March 2026
This case summary accurately describes the decision in Re Nisbet and Potts’ Contract [1906] 1 Ch 386 and the legal principles it established. The core equitable rule — that a restrictive covenant binds all except a bona fide purchaser for value without notice — remains good law for unregistered land.
However, readers should be aware of several important developments. First, the doctrine of constructive notice as applied to restrictive covenants in unregistered land has been substantially overtaken by the Land Charges Act 1972, which requires post-1925 restrictive covenants to be registered as Class D(ii) land charges; failure to register renders them void against a purchaser for money or money’s worth under s.4(6). The notice doctrine discussed in this case therefore primarily retains practical relevance for pre-1926 restrictive covenants in unregistered land. Second, for registered land, the Land Registration Act 2002 governs the position entirely: restrictive covenants must be protected by a notice on the register under s.32 and the doctrine of notice does not apply. Third, the law on adverse possession itself has changed significantly. The Land Registration Act 2002 replaced the old limitation-based regime for registered land with a new application-based scheme under Schedule 6, meaning the automatic extinguishment of title after a period of adverse possession no longer applies to registered land. The limitation period rules under the Limitation Act 1980 continue to apply to unregistered land. The 40-year investigation of title period referred to in the article is also historically obsolete; the period was reduced by subsequent legislation and is no longer of direct practical significance. Students should treat this case as an important illustration of equitable principles in the context of unregistered land and the pre-2002 legal landscape.
