Property Law Outline - Covenants

  1. Definitions
    1. A real covenant is a promise to do or not to do something regarding the use of land.
      1. Usually an attempt to impose zoning by contract.
      2. Important for Common Interest Communities.
    1. It is enforceable at law (not at equity) by an award of money damages. Creates personal liability, not in rem liability.
      1. Equitable servitudes are enforceable at equity by specific performance or injunction.
    1. Distinctions
      1. Affirmative Covenant
        1. Promise to do some affirmative act, e.g., maintain a fence, for the benefit of the other landowner.
      1. Negative Covenant
        1. Promise not to do some act for the benefit of the other landowner.
    1. Important differences between real covenants and equitable servitudes…
      1. Implied v. Express
        1. Real covenants may not be implied, must be in writing.
        1. Equitable servitudes may be implied.
      1. Limitations on enforcement
        1. Ex. O sells lots to X and Y with restrictions in the deeds.
          1. If a real covenant, only O may enforce the restrictions against X.
          1. If an equitable servitude, O and Y may enforce restrictions against X.
      1. Remedy
        1. Real covenants provide damages.
        1. Equitable servitudes provide injunctions or specific performance.
  1. Creation of Real Covenants
    1. A real covenant must be in writing.
    1. A real covenant will not be implied (prior use or necessity) and cannot arise by prescription.
  1. Requirements for Enforcement of Real Covenants Against Successors
    1. Intent (Benefit, Burden)
      1. Original parties must have intended to bind the covenantor's successors.
      1. Original agreement need not expressly refer to successors; it is enough if a court can discern that intention from the circumstances surrounding the agreement.
        1. In practice, courts usually conclude intent exists if the covenant touches and concerns the land.  
    1. Vertical Privity (Benefit, Burden)
      1. Relationship between covenantor and the subsequent landowner.
      1. Exists if the covenantor's successor has succeeded to the same estate that the covenantor had.
        1. Can acquire by any means except adverse possession.
      1. Successor must acquire the same interest that his predecessor had.
        1. Ensures that the burden assumed is equivalent to the original burden.
      1. Ex. Neponsit v. Emigrant Bank (p.777) - problem is that homeowners association is not in vertical privity with the developer, does not technically own any of the common lands. Held that homeowners association is in vertical privity with developer in function if not in form. Association is good solution to collective action problem.
    1. Horizontal Privity (Burden)
      1. Relationship between original covenantor and the original covenantee.
        1. Old rule was very rigid.
          1. Required covenantor and covenantee to have simultaneous interests in the land.
          1. Included landlord/tenant, servient/dominant tenement owners.
        1. Most courts today require the covenant to be created simultaneously with a transfer of interest in the land.
          1. Also includes covenants created in connection with the conveyance of a fee.
          1. Ex: A conveys part of land to B and wants B to prune the trees on B's lot.
          1. Straw man can be used to get around this requirement.
            1. Sell your land to secretary, she sells it back the next day with the covenants you want.
      1. Horizontal privity is a doctrinal wrong turn.
        1. Sharply restricts the ability of fee owners to create real covenants because they don't want to transfer an interest in land at the same time.
        2. Many scholars argue for the abolition of this requirement.
    1. Touch and Concern (Benefit, Burden)
      1. Requires that the real covenant relate to the covenantor's use of his land.
        1. Originally, very restrictive, only actual uses/non-uses of land qualified.
        2. Now, generally has been expanded.
          1. Covenant not to engage in business that competes with another's business held to concern the land.
          2. Covenant to pay rent held to concern the land.
          3. Covenant granting option to purchase property held to concern the land.
          4. Covenant agreeing to enter into arbitration held to concern the land.
          5. Covenant to pay homeowner's association dues held to concern the land.
            1. Ex. Neponsit v. Emigrant Bank (p.777) - problem is that homeowner dues only pay for upkeep of common property, not homeowner's property; touch and concern? Held that the upkeep of the common land has a positive effect on property values; they therefore alter the rights accruing in your estate. Thus, touch and concern satisfied.
        1. Changed circumstances might invalidate touch and concern.
          1. Ex. Eagle Enterprises v. Gross (p.761)
            1. Original covenantor and Baum entered agreement where covenantor would provide water to Baum for a fee. Baum sold to Gross. Gross built a well, did not want to buy water, said that covenant did not run with land.
            2. Held that covenant did not run with land because touch and concern was not satisfied. Resembled a personal covenant, not one that concerned land. No indication that the land could not get water any other way. The covenant did not substantially affect the ownership/use of the land.
      1. View touch and concern is a murky balancing test weighing the benefit and the burden while maintaining a bias towards efficient uses.
    1. Notice (Burden)
      1. At common law, no notice requirement.
      2. Now, recording acts effectively impose a notice requirement since covenants must be recorded.
        1. If covenant is not recorded, BFP without notice may not be bound.
  1. Termination of Real Covenants
    1. Expiration
      1. Covenant expressly states that it terminates at a certain time or upon a certain condition.
      1. In some states, covenants automatically expire after a statutory period unless they are renewed.
    1. Merger
      1. Same person owns both the burdened and benefited property.
    1. Release/Rescission
      1. Written release by all benefited estates.
    1. Unclean Hands
      1. Court will not allow a benefitted estate to enforce a covenant against one burdened estate but not against another.
    1. Acquiescence/Abandonment
      1. A benefitted estate owner who allows multiple violations of covenant will eventually be estopped from enforcement because other parties may have relied on the lack of enforcement.
    1. Eminent Domain
      1. Taking destroys covenants on land.
    1. Changed Circumstances
      1. Conditions have so changed that the covenant no longer serves its intended purpose.
    1. Public Policy
      1. Covenants that run counter to public policy will be struck down as void.
      2. Ex. Shelley v. Kramer
        1. Negative covenant in deed said that homeowners could not sell to black buyers.
        2. Held this covenant void for public policy. Because the 14th amendment prohibits state action that is discriminatory, the state cannot enforce such covenants.