Servitudes Part 2

Property Law
 Real Covenants
A real covenant is a written
promise to do something on the
land (e.g., maintain a fence) or not
do something on the land (e.g.,
conduct a commercial business).
The difference between a promise
or contract and a real covenant
that “runs with the land” is that a
real covenant binds or benefits the
subsequent owners of the land.
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Requirements for a Real Covenant
under Common Law

1. Writing
2. Intent
3. Privity of Estate, both
a) Horizontal Privity and
b) Vertical Privity
4. Touch and Concern
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Requirements for a Real Covenant
under Common Law

Privity of Estate was difficult to establish, so courts,

using their equitable powers, developed a way to
get around the lack of privity:
 If the burdened landowner had notice of the
covenant, courts would enforce it as an
“equitable servitude” against the burdened
landowner, but could only give the benefitted
landowner equitable relief, i.e., an injunction,
but not money damages.
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 Requirements for an Equitable
Servitude under Common Law

1. Writing
2. Intent
3. Notice to burdened party, AND
4.Touch and Concern
Privity of Estate is not required

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 Requirements

Real Covenant Equitable Servitude

1.Writing 1. Writing
2.Intent 2. Intent
3.Privity of Estate
a. Horizontal Privity
3. Notice
b. Vertical Privity 4. Touch and Concern
4.Touch and Concern
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 Requirements: Writing

 The covenant must be in writing in compliance with

the Statute of Frauds.
 If the covenant is written in the original deed (or lease)
it does not also have to be included in the document
conveying the property to the successor in interest.
 “Declarations” or “CC&Rs” (“Covenants, Conditions
and Restrictions”) are often used for residential
neighborhoods

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 Requirements: Intent
The parties must intend for the
covenant to bind successors in interest
 By express language (e.g., to grantee and
“their assigns or successors” or “this
covenant shall run with the land” or “to
bind future owners”) OR
 By inference from the circumstances
surrounding the creation of the covenant.
If a covenant benefits the owner of neighboring
land, it is generally presumed that the parties
intended it to run with the land.
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 Touch and Concern
The covenant must be of a type that
“touches and concerns” or relates to the
land.
This means that the person seeking to
enforce the agreement must establish that
both the benefit and the burden of the
agreement affects both parties as owners of
the land and not merely as individuals.

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Touch and Concern– Example 1

Susan promised her neighbor Sam in writing that she will

(1) not build a house on her property blocking his view;
(2) build a fence along her adjoining property line;
(3) not smoke; and
(4) volunteer at the Humane Society.
Do these agreements “touch and concern”
Sam’s land?

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Touch and Concern– Example 1

The benefits of covenants 1 and 2 touch

and concern Sam’s land since his view
and privacy are improved and his land is
more valuable as a result.
The burdens of covenants 1 and 2 also
touch and concern Susan’s land because
they restrict her use of the land.
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Touch and Concern– Example 1

However, covenants 3 and 4 do not increase

Sam’s enjoyment of his land or increase its value;
they benefit only personal interests he may have
and do not touch and concern his land.
Similarly, covenants 3 and 4 have nothing to do
with Susan’s use or enjoyment of her land.
So, covenants 1 and 2 meet the ‘touch and
concern’ test but 3 and 4 do not.

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 Touch and Concern– Example 2
A, who owns adjacent lots 1 and 2,
agreed with B, the purchaser of lot
2, that she would not erect a
building of over two stories on lot
1.
Does the agreement touch and
concern lots 1 and 2?
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 Touch and Concern– Example 2

A, who owns adjacent lots 1 and 2, agreed with B, the purchaser

of lot 2, that she would not erect a building of over two stories
on lot 1.
Yes; the burden of the agreement touches and
concerns lot 1 because it diminishes A’s rights in
connection with her enjoyment of lot 1.
The benefit of the covenant touches and concerns lot 2
assuming A’s promise not to build enhances the value
or utility of lot 2, e.g., protects B’s view and privacy.
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Touch and Concern–Example 3

A owned lots 1 and 2, which were

several miles apart. A conveyed lot 2 to
B and agreed to keep the building on lot
2 in good repair. B sells lot 2 to C.
Can C enforce the agreement and force A to
continue to maintain the building on lot 2?

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Touch and Concern–Example 3

A owned lots 1 and 2, which were several miles apart. A

conveyed lot 2 to B and agreed to keep the building on lot 2 in
good repair. B sells lot 2 to C.
 The benefit of the covenant touches and concerns lot
2, but the burden of the covenant does not touch and
concern A’s lot 1 because it has nothing to do with lot
1. Thus, the promise by A to keep the building on lot 2
(now owned by C) in good repair is not a real
covenant and is not enforceable by anyone except B.

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Requirements: Privity of Estate

Under the common law rules, there

are two types of privity of estate, both
of which must be satisfied in order for
a covenant to run with the land:
Horizontal Privity and
Vertical Privity
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Requirements: Privity of Estate
Horizontal privity is a specified
relationship between the original
covenanting parties as promisor and
promisee. (Burden only)
Vertical privity is a specified
relationship between an original party
to the covenant and his successor.

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 Horizontal Privity
 Horizontal privity requires that at the
time the promisor entered into the
covenant with the promisee, the two
shared some interest in the land
independent of the covenant.
 This means that there must be some land
transfer (e.g., grantor-grantee) between
the original covenanting parties with
respect to which the promise is made.
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Horizontal Privity - Example 1

A and B, neighboring landowners,

agree in writing that neither will
tear down his house to erect a
new structure. B sells his property
to X, who tears down the house.
Can A sue X for damages?
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Horizontal Privity - Example 1
No -- A cannot sue X because there was
no land transfer between A and B
when the promise was made, thus no
horizontal privity between them. At
the time A and B made the promise,
there was no shared interest in land
independent of the covenant. Without
horizontal privity, the covenant does
not run with the land and does not
bind X as a successor to B.
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Horizontal Privity - Example 2

A owns two parcels, each with a house on it.

He sells one of the parcels to B. In the
transfer agreement, A and B each promises
the other that he will not tear down the
house to build a new structure. B then
conveys his parcel to X, who tears down the
house.
Can A sue X for damages?
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Horizontal Privity - Example 2

Yes, assuming the other elements of

a real covenant are met. A can sue X
for damages because there was
horizontal privity between A and B
(the transfer of land from A to B)
when the covenant was made.

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Horizontal Privity - Example 3

O, a developer, deeds lot 1 to A. One

week later, in a separate agreement,
A promises O that she will never use
lot 1 for commercial purposes. Two
years later, A sells lot 1 to B.
Is B bound by the covenant?
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Horizontal Privity - Example 3

No. The agreement does not

bind B because O and A were not
in privity of estate (they were
not in a grantor-grantee
relationship) when the promise
was made.
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 Horizontal Privity
So . . . no horizontal privity exists where
1. Agreements are between neighbors
but are not part of a simultaneous
conveyance
2. Agreements between grantor/
grantee are not made at the same
time as the conveyance of the
property burdened by the covenant
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 Vertical Privity

 Vertical privity exists to bind the

successor in interest when the
successor has acquired the entire estate
(duration) held by the predecessor who
made the agreement.

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 Vertical Privity
 The “entire estate” refers to the duration of
the property interest held by the promisor at
the time of the covenant, not the amount of
land
 This means that lessees (tenants) are never
in vertical privity with their lessors
(landlords), and are not bound by the
lessor’s covenant, because the lessor always
retains a right to get the property back at
the end of the lease (i.e., a “reversion”).
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 Vertical Privity - Example 1

A and B, owners of neighboring

parcels, each agree to maintain half of
a hedge between the properties. B
gives a long-term lease to X. X fails to
maintain his part of the hedge.
Can A sue X for damages?
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 Vertical Privity - Example 1

No; A cannot sue X for damages

because there is no vertical privity
between B and X. When X took a
long-term lease, he took only part
(in a durational sense), not all, of
B’s property interest.
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 Vertical Privity - Example 2
A, who owns lot 1 and lot 2, sells lot 2 to B
and, in the deed, covenants for herself, her
heirs, successors and assigns, to contribute
one-half of the expense of maintaining a
common driveway between lots 1 and 2. A
then transfers lot 1 to C “for 20 years,”
retaining a reversion after 20 years.
If C fails to contribute to the driveway,
can B sue C?
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 Vertical Privity - Example 2

No; B cannot enforce the

covenant against C because C
does not possess the entire
interest (in a durational sense)
held by A, her predecessor in
interest, at the time A made the
promise.
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 “Relaxed” Privity
In most jurisdictions, the rules for both
horizontal and vertical privity are relaxed
where the successor in interest is trying to
enforce the BENEFIT of the covenant against
the original covenantor.
 Horizontal privity is not required to enforce
the benefit of the covenant against the
original covenantor.
 Vertical privity is relaxed to include lessees
who do not have the entire possessory
interest.
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 Relaxed Privity - Example

A, who owns lot 1, covenants with her

neighbor, B, who owns lot 2, that “A,
her successors and assigns will keep lot
1 in good repair.”
Horizontal privity is missing because
the covenant was not made as part of a
conveyance of the lot to B.
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 Relaxed Privity - Example
 If B conveys lot 2 to C, C can still enforce
the benefit of the affirmative covenant
against A because horizontal privity is not
needed for the benefit to run to B’s
successor in interest, C.
 If, however, A conveys lot 1 to D, neither B
nor C can enforce the covenant against D,
because horizontal privity is required for
the burden to run and bind D.
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 Relaxed Vertical Privity
Similarly, the requirement of vertical privity
is relaxed if the successor in interest wants
to sue to enforce the benefit of a real
covenant.
Thus, if the landlord (A) covenanted with
another party (B) to benefit A’s land and
then A leases the land to C, C can sue B to
enforce the benefit of the covenant even
though C does not hold A’s ‘entire’ interest.
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 Relaxed Vertical Privity
But, if B leases the land to D, C, the lessee of
A, cannot sue D because vertical privity must
exist for C to sue B’s successor in interest
for breach of the covenant made between A
and B. C cannot sue D because D, as a lessee
of B, does not have vertical privity with B
and is not required to bear the burden of the
covenant made by B.

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 Equitable Servitudes
An equitable servitude, however, is a
promise enforced only by means of
equitable remedies, such as
 an injunction, or
 a decree of specific performance
One cannot receive damages for breach
of an equitable servitude.

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 Requirements for an equitable
servitude
1. A writing that satisfies Statute of Frauds
2. Intent to bind and benefit successors in
interest
3. Touch and concern the land
4. Notice (actual, inquiry, and constructive)
to the burdened party; notice is not
required for the benefit to run to a
succcessor
PRIVITY of ESTATE is NOT required.
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 Neponsit Property Owners’ Assn
Is there privity of estate?
Horizontal privity?
Vertical privity? “The plaintiff has not
succeeded to the ownership of any
property of the grantor” but the
plaintiff “is acting as the agent … of
the property owners.”

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 Neponsit Property Owners’ Assn

To ‘touch and concern’ the covenant

must affect the parties as owners of
land and not just as individuals.
 How can the mere payment of money do this?
The money is used for common improvements
(roads, parks, etc.) that benefit the landowners in
their use of the land. “The burden of the cost
should be inseparably attached to the land that
enjoys the benefit.”
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 Covenants in Subdivisions and
Common Interest Developments

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 Explosion of Real Covenants

With urbanization and development of cities,

the use of covenants by residential landowners
has greatly increased in the last century, raising
many questions:
What is necessary to bind unit owners?
What are the rights of unit owners to
enforce covenants against each other?
What are the rights of unit owners
against the developer?
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Implied Reciprocal Negative Servitudes

Restrictions on land use can be implied (need

not be in writing) from the establishment of a
common scheme of development. There are
three requirements :
1. Intent to create a servitude that applies to
all lots (the agreements must be reciprocal)
2. The agreement is a restriction (a negative
servitude to not do something on the land)
3. Notice (actual, inquiry or constructive) of
the restriction was given to the party
against whom enforcement is sought (the
burdened party). 44
 Implied Reciprocal Negative Servitudes
Intent to create a servitude that
applies to all lots is usually
demonstrated by a common
scheme of development – at
the time that sales of the parcels
in the subdivision began, the
developer had a plan that all
parcels would be subject to the
restrictive servitude. If the
common scheme arose after
some lots were sold, those lots
are not bound absent an
express covenant.
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Implied Reciprocal Negative Servitudes
- Example

A subdivides her parcel into lots 1 through 50. She

conveys lots 1-45 by deeds with express covenants
that the lots will be used for residential purposes. A
orally tells the 45 grantees that all 50 lots will be so
used.
Later, A coveys lot 46 to a company to build a
convenience store in a deed that contains no express
residential restriction.

Can the residents block the store?

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Implied Reciprocal Negative Servitudes
- Example

Yes; a court is likely to imply a negative covenant,

prohibiting use for other than residential purposes
on lot 46 because all requirements are met:
1. There was a common scheme establishing
intent (A’s statement to the first 45 buyers),
2. The servitude was a restriction, and
3. The store had inquiry notice of the restriction
because of the uniform residential character of
the other lots in the subdivision development.

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 Evans v. Pollock (Tex. 1990)

 Did the deed restriction on commercial

development apply to the non-lakefront lots?
 Can a common scheme of development
show intent to restrict some lots but not
others? YES – the grantor’s intent to leave a
tract or parcel out of the common scheme
controls.
So . . . The grantor’s intent is determinative of
what constitutes a common scheme of
development.
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 Sanborn v. McLean (Mich. 1925)

 Defendants were on notice (both

constructive and inquiry) that due to the
uniform residential character of the entire
neighborhood, their land was similarly
restricted to non-commercial use even
though there was no mention of this in their
deed.
 Majority rule: buyers of unrestricted lots are
on constructive notice of covenants in other
deeds in the vicinity sold by the same
grantor; contra California – see, e.g., Riley
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 Implied Reciprocal Negative Servitudes
Riley v. Bear Creek Planning Committee (Cal. 1976)
 No HOA restrictions were recorded against
Plaintiffs’ lot or included in their deed, but they
had actual notice that any modifications such as
their covered walkway had to be approved by the
HOA.
 Held: evidence that Plaintiffs actually knew of
restriction was inadmissible as parol evidence; the
deed had no restrictions and so they were free to
build the walkway without approval.
California rule: Reciprocal negative servitudes are
enforceable only if the restriction appears in the deed
(chain of title) or recorded CC&Rs.
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 Review of Covenants for
Reasonableness
Modern law enforces covenants under different rules,
generally allowing people to determine land use for the
good of everyone.

The Restatement (Third) requirements:

1. Writing
2. Intent
3. Notice (actual, inquiry, or constructive) and
4. Reasonableness – the covenant is enforceable unless
“unreasonable.” Generally “reasonable” means that
the covenant is not arbitrary, spiteful, capricious, and
does not burden constitutional rights, restrain
alienation or trade, and does not violate public policy.
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 Appel v. Presley Cos. (N.M. 1991)

Homeowners sued Developer for breach of

restrictive covenant when Developer (through
HOA committee) amended CC&Rs, as was
allowed, to lift restriction on development of an
undeveloped lot.
HELD: Even though the CC&Rs were properly
amended, they are subject to a rule of
reasonableness. The right of HOA to alter or
amend or repeal a restriction is valid so long as it
is exercised in a reasonable manner so as not to
destroy the general scheme of development.
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 Davidson Brothers, Inc.

 How did the court originally

decide the issue?
 Davidson won below, and court
of appeals affirmed, but why?
 CTA used the “traditional ‘touch and
concern’ analysis”
 What happened on Katz’s appeal
to the NJ Supreme Court?
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 Davidson Brothers, Inc.

NJ Supreme Court held that enforceability of the no

supermarket covenant (“covenant not to compete”)
depends on its reasonableness, with T&C, intent,
notice, writing just factors among several, including:
 The impact of the covenant on the consideration
paid,
 How long does the covenant apply
 Whether it unreasonably restrains trade, and/or
 Whether it interferes with the public interest.
HOLDING: The covenant was so contrary to public
policy that it should not be recognized as a valid
enforceable obligation.
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 Nahrstedt v. Lakeside Village Condominium Association, Inc. (Cal. 1994)

 Plaintiff’s Argument – the covenant was

unreasonable as to her
 Do we apply an objective or subjective
test of reasonableness?
* CCP sec. 1354: CC&Rs are enforceable
“unless unreasonable” – this creates a
presumption that the covenant is
reasonable and valid

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 Nahrstedt v. Lakeside Village

The restriction is presumed to be reasonable

and will be enforced uniformly against all
residents unless it is arbitrary, imposes
burdens on the use of land that substantially
outweigh the benefits to the residents, or
violates a fundamental public policy.
HELD: the pet restriction is rationally related
to legitimate health, sanitation, and noise
concerns held by the residents of a high-
density development.
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 Modifying and Terminating Covenants
– Changed Conditions
El Di, Inc. v. Town of Bethany Beach
D’s arguments why the covenant should be terminated:
 The Town had acquiesced to commercial development
contrary to the covenant since the 1920s
 Restaurant patrons could bring in alcoholic beverages and
consume at the restaurant, thus the Town abandoned the
covenant 20 years ago.
 The covenant caused a competitive disadvantage for the
restaurant and limited its ability to control the level of
alcohol consumption by its patrons, creating a public
safety issue.
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 El Di, Inc. v. Town of Bethany Beach

 Did the change in conditions in the town since

the covenant was made render it unreasonable
and therefore unenforceable?
 YES – the change in conditions over time
undermined the purposes of the covenant to
maintain a quiet residential atmosphere; 85% of
the town now allowed commercial development
and alcohol sales in areas near the restaurant
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Modifying and Terminating Covenants
– Changed Conditions

Under the Restatement test, covenants

will not be enforced if conditions have
changed so drastically that covenant
enforcement will be of no substantial
benefit to the benefitted land.
Very strict standard, seldom met
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 Modifying and Terminating Covenants
– Equitable defenses
 Relative hardship (covenant causes too great a harm
on the servient tenant)
 Acquiescence or Abandonment (dominant tenant has
tolerated violations by servient tenants)
 Estoppel (dominant tenant tells servient tenant that he
will not enforce the covenant)
 Laches (dominant tenant waits too long to enforce)
 Natural duration (the covenant expires by its terms)
 Merger (combination of servient and dominant
estates)
 Release (dominant tenant terminates the covenant)
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