Property
Class Notes
Real covenants and equitable
servitudes
Let’s
say A and B are neighbors and they mutually want to limit the use of their land
to residential purposes only. They make
a contract to do so. For example, A
might sell his land to C. Say B
threatens to build a gas station. Can C
enforce the covenant? Does the benefit
of the covenant run to C? C will say
that he’s the successor of interest to A and the beneficiary of B’s promise to
only use his land for residential purposes.
On
the other hand, suppose A keeps his land and B sells his land to D, who wants
to build a gas station. Can A enforce
the covenant? Does the burden of the covenant run to D? In other words, is D bound to respect the
covenant and use his land only for the stated purpose?
What
if both A and B sell their land and the parties are C and D? Let’s say D is still the one who wants to
build the gas station. Does the benefit
of the covenant run to C? Does the
burden run to D?
The
answer is that yes, the benefit runs and the burden runs if the requirements for a real covenant are satisfied.
The
court in Wheeler
refers to real covenants as “parasites” that attach to the land. That’s not the most complimentary
description. The court intimates that it’s
easier for the benefit to run than the burden.
Courts used to be concerned that these covenants reduced the alienability
of land. But Braunstein disagrees,
pointing out that these covenants are very, very popular. If developers are acting rationally to
maximize their profit then they think the land is worth more with the covenants
than without them. But courts were
concerned that any crazy thing you could contract for could become a real
covenant and restrict the use of land.
So
why are courts more likely to enforce the benefit than the burden? Courts would say that benefits increase the alienability of land but
burdens decrease the alienability of
land. But the benefit is the reciprocal of the burden. The benefit is not worth much if there is no
one to enforce it against. These are
often reciprocal promises, so we’ll often have to look at how the litigation
comes up to find out whether it’s the benefit or the burden that’s running.
The requirements for real
covenants
1. There must be intent on the
part of the parties to have the covenant be binding on successors and assigns. If the subject of the covenant doesn’t exist
at the time of the creation of the covenant, the intent must be laid out
expressly.
2. The covenant much “touch and
concern” land.
3. There must be privity of
estate.
4. The statute of frauds must
be satisfied.
The
most difficult concept here has to do with privity of estate. There are two kinds of privity of estate: “horizontal”
and “vertical”. These terms are based
solely on how law professors diagram these kinds of cases. Horizontal privity of estate exists between
the original covenanting parties. Vertical
privity of estate exists between one of the original parties and an assignee or
successor.
The
first form of horizontal privity of estate is tenurial, or in other words the relationship of landlord and
tenant. The second form is mutual.
That’s the situation where two people own an interest in the same land
at the same time. They are said to be in
privity of estate. The third form is simultaneous or successive privity of estate, where privity is entered into as a
result of a transfer of an interest in land.
So with the neighbors A and B mentioned above, there is no privity of
estate and therefore no real covenant is created. Horizontal privity of estate has been largely
eliminated in the
Vertical
privity of estate means that the successors have the same estate or at least an estate of the same duration. When you talk about same duration, we’re usually talking about the same
estate. This is the same thing we saw in
landlord-tenant law: there was privity of estate between the tenant and the
assignee for promises to the landlord that the assignee didn’t himself make.
The
Hurd group transfers a portion of the mill site to the Doescher group. Six days later, the parties enter into an
agreement whereby they agree to share the cost of constructing an aqueduct that
will convey water to their respective mill sites. They also agree for the future that they will
both be responsible for half the cost of maintaining the aqueduct if it needs maintenance
or repairs. That contract is perfectly
enforceable between the two parties.
The
Hurd group sells to Wheeler, and Schad becomes the successor to the Doescher
group by way of mortgage foreclosure. So
is the covenant enforceable by Wheeler against Schad? Neither of them are original covenanting
parties. Neither Wheeler nor Schad
agreed to pay half the price of fixing the aqueduct. It turns out that the covenant does not run with the land.
The
first argument that is made is that the two agreements were really one because
they were only made six days apart. What’s
the purpose of that argument? If this
argument were accepted, the plaintiff would be able to say that they were in simultaneous
privity of estate. The court says,
however, that at the time of the sale it hasn’t entered anyone’s mind to enter
into this covenant. If they had intended
at the time of the sale to enter into this covenant, that perhaps could have
satisfied the successive privity of estate requirement. What’s the issue here? Is it the benefit that is running here, or is
it the burden? It seems to be the benefit
to Wheeler of having help in fixing up the mill. What if only the benefit was running? Would Wheeler have been able to enforce the
agreement against Doescher’s group?
Doescher hadn’t agreed with Wheeler to maintain the dam! You must have horizontal privity of estate in
order for either the benefit or the burden to run, according to the court. It is said that even without privity of
estate, benefit might run in cases where the burden doesn’t run. But the court says that we don’t need to get
to that issue.
What
about the Coke example regarding the “chappell”? There is privity of estate because D has
given a freehold estate to the church.
The chapel is a portion of the manor, and the court says that’s fine
because it’s an example of mutual privity of estate because they both own an
interest in the estate at the same time.
But that has nothing to do with the relationship between Wheeler and
Schad in this case. That’s what mutual
privity of estate is all about. But the
most likely privity of estate to exist is simultaneous or successive. What purpose does horizontal privity of
estate serve? If we assume that if they
had done the agreement five or six days earlier that it would have run, then
all we’re left with is that successive privity of estate is basically a
roadblock set up by courts to keep covenants from running because the courts
distrusted them.
It
turns out that Wheeler pays the whole
cost of repairing the aqueduct. It
benefits Schad, but Schad doesn’t have to pay anything!
Creation of real covenants
You
can create these by express agreement if all of the requirements are
present. They are subject to the statute
of frauds (with an exception). Usually,
when you have real covenants affecting large parcels of land, they are creating
by recording a plat of a subdivision that divides up land into parcels. Attached to the plat is a description of all
of the restrictions on the land. If you
buy the land, then you take subject to the restrictions. Another way to do this would be to transfer
all the land to a straw and have the straw reconvey it with a deed containing
all the restrictions and covenants. The
third, and least reliable way to do it is to insert the restrictions in every
deed. But the problem is that people
forget! The restrictions may be in some
deeds, but not in others. This is what
happens in…
We
have a sloppy situation here. There are a
substantial number of unrestricted deeds in the subdivision! What was the restriction? The restriction seems to have been “for
residential purposes only”. Who was
restricted? The deeds contain covenants
restricting the use of the land that is being sold to residential purposes
only. The deeds do not restrict what the builder can do with his property. If we did, we would just have a contract
between the builder and the residents and it would be enforced. The developer wants to use some of his land,
which is not subject to an express restriction, for the purpose of building
duplexes. The developer says that
business conditions have changed. Some
of the purchasers in the area are upset and sue the owner to stop him from
doing that.
There
are two issues: (1) Was there a common plan or scheme for the development of
this land? The court says yes and bases
its answer entirely on parol evidence.
Such parol evidence can’t be used to modify the written covenants, but
it can be used to show a common plan or scheme.
(2) When there is such a common plan or scheme, the restrictions upon
the lot holders to the benefit of the developer, that restriction becomes
reciprocal by implication. The developer’s
use of his land is restricted too!