The terms of a deed of mutual covenant usually empower the manager and/or incorporated owners to register a charge on an owner's property by way of a memorandum of charge when an owner defaults in payment of management fees and other charges payable under the deed of mutual covenant. After registration of such a memorandum of charge at the Land Registry, a subsequent purchaser is put on notice that the vendor is required to pay such outstanding charges together with any legal fees incurred in connection with the registration and discharge of the memorandum of charge.
In a typical deed of mutual covenant, a chargee/mortgagee is usually not within the definition of owner and is thus not liable for payment of the management fees and other charges as an owner unless and until he takes possession of the property. In the sale of property by a chargee/mortgagee, special attention should be paid to whether the chargee/mortgagee agrees to settle all arrears of management fees and other payments under the deed of mutual covenant on completion or whether they will be borne by the purchaser.
The potential liability of an individual owner of a property to contribute towards the costs of satisfying a judgment against the owners incorporation was held in the case of Chi Kit Co Ltd v Lucky Health International Enterprise  CPR 554 to be an encumbrance as the owners incorporation would ultimately seek to recover such costs from the owners of the building.
Purchasers should enquire before completion from the building manager or the incorporated owners if there are any matters which may give rise to liability on the part of the owner of the property such as outstanding management fees, pending litigation and unsatisfied judgments against the incorporated owners .