Real covenants enforced by private developer

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arvcondor
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Real covenants enforced by private developer

Postby arvcondor » Wed May 09, 2012 4:39 pm

Note: As I explained in my question on con law, this is from a practice exam (this one's from 2006). My section does not have take-homes.

Question is this: Tom Managhan is building Ave Maria, has 5,000 acres, and owns all of it. He's not using zoning, just "traditional property concepts" (which I'm assuming here refers almost entirely to covenants). It is being
organized around “Catholic principles” and “traditional family values.” Monaghan explains that non-Catholics
and even non-believers are welcome in Ave Maria, provided they are willing to live by certain common values.

Here's what he wants:
1. Strict demarcation between the residential and commercial districts.
2. Extensive rules regarding maintenance and upkeep for the residential areas.
3. Occupancy of all residential units (single-family homes, condominium units, apartments) will
be restricted to one “family” which is defined as “one individual or two or more individuals who
are related by blood, marriage, or adoption.”
4. All residents must agree to follow Catholic principles and traditional family values, and all
future sales and transfers must be made to individuals who agree to follow these principles.
5. In the commercial district, all stores must close on Sunday. Sales of alcohol, contraceptives,
pornographic materials, and drug paraphernalia will be prohibited. Certain activities, such as
exotic dancing and gambling, will also be prohibited. All customers must wear modest dress.

My issue is this: It seems like 3 is fine facially, 4-5 might be barred on policy grounds (except the restriction on alienability in 4). But it seems like ALL of these would just melt away after transfer, since Monaghan can't enforce the covenant once he loses privity. I think I'm missing some fundamental piece about how covenants are transferred. So, basically, couldn't he enforce all of these against the immediate grantee, but once the grantee transfers the property to another grantee, they don't have to enforce the covenants anymore and Monaghan is fucked?

Thanks for any help.

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DocHawkeye
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Re: Real covenants enforced by private developer

Postby DocHawkeye » Wed May 09, 2012 6:20 pm

At common law, for a covenant to be enforceable, it must meet three conditions 1) it must "touch and concern" the land, 2) the original covenanters must intend for remote purchasers to be bound by the covenant and 3) the covenanting parties must be in privity with each other.

Since Managhan is the original grantor of the parcels, he will be in horizontal privity with each of the purchasers. The subsequent purchasers will be in vertical privity with the original grantees, so privity is not a problem.

It seems that Managhan and his grantees intend for the covenants to bind remote purchasers, so this is not a problem.

The real issue lies with the "touch and concern" requirement. (1) clearly touches and concerns the land, as does (2). (3) may not be found to touch and concern since it has little to do with the use of the land itself and one might argue that it is in violation of public policy (a requirement under section 3.1 of the Restatement [Third] of Property). (4) and (5) are probably invalid for the same reasons as (3).

No one must enforce a covenant, but may choose to do so. If owners with a right to enforce it fail to do so or chose not to, courts may hold that the covenant has been terminated.

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Hodgy
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Re: Real covenants enforced by private developer

Postby Hodgy » Wed May 09, 2012 6:27 pm

Some of those items seem vague and would likely be unenforceable on those grounds. First, a real covenant is different than a covenant. Also, a land developer and anyone else bound by the covenants in a planning like this can enforce the covenant if it meets intent-notice-touch and concern-privity.

The notice is likely established in the subdivision and other planning documents and will also likely exist in the initial deed. The intent will be based on a factual test between the parties. Privity will be established upon the first sale (though there is both horizontal and vertical privity you will want to look at). These type of covenants also touch and concern the land, as basically anything does, because you can stretch it to say that the covenants affect the value of the land. Regular covenants, and also equitable servitudes, can be enforced based on the common theme of a subdivision and stuff as well.

I suggest you find a copy of Emanuel's Property and look through the chapter of Covenants and Servitudes. It does a pretty good job.

I can't really tell if you're looking for an answer about if this is constitutional land use or what.

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Hodgy
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Re: Real covenants enforced by private developer

Postby Hodgy » Wed May 09, 2012 6:31 pm

DocHawkeye wrote:The real issue lies with the "touch and concern" requirement. (1) clearly touches and concerns the land, as does (2). (3) may not be found to touch and concern since it has little to do with the use of the land itself and one might argue that it is in violation of public policy (a requirement under section 3.1 of the Restatement [Third] of Property). (4) and (5) are probably invalid for the same reasons as (3).

No one must enforce a covenant, but may choose to do so. If owners with a right to enforce it fail to do so or chose not to, courts may hold that the covenant has been terminated.


Was under the impression that only like 10 or 12 states have adopted that R3d of Property.

Also, I thought most covenants ran until 1) express termination between the parties 2) abandonment (which is a rare and difficult standard to prove) 3) there is a termination date set in the covenant or 4) all beneficial uses of the covenant no longer exist or the "times have changed" so much that a court may decide to remove the covenant.

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arvcondor
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Re: Real covenants enforced by private developer

Postby arvcondor » Wed May 09, 2012 6:53 pm

A couple questions:

1. I get that there's privity between Monaghan and the original grantees. But Monaghan can't then go and enjoin future assignees, right? The only way to enforce the covenants at that point would be A) by successive assignors, or B) through implied reciprocal negative servitudes (i.e., everyone else in the common interest community). So if the successive assignors or the rest of the community forgo the injunction, the covenants could just evaporate?

2. We didn't go into touch-and-concern that much, but I was under the impression that the bar wasn't very high. Essentially, as long as it somehow deals with the way in which you enjoy the land, it's valid. So, 4 might not fit for that reason (in addition to basic public policy reasons), but it seems like 3 and 5 would, since it's restricting what you can do on the land.

Thanks for the help.

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Hodgy
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Re: Real covenants enforced by private developer

Postby Hodgy » Wed May 09, 2012 7:08 pm

As to the first question, the first deed should mention it is subject to the CC&Rs and that should be good enough to bind subsequent purchasers as they would have notice to look to the master deed.

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DocHawkeye
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Re: Real covenants enforced by private developer

Postby DocHawkeye » Thu May 10, 2012 9:33 am

Hodgy wrote:
DocHawkeye wrote:The real issue lies with the "touch and concern" requirement. (1) clearly touches and concerns the land, as does (2). (3) may not be found to touch and concern since it has little to do with the use of the land itself and one might argue that it is in violation of public policy (a requirement under section 3.1 of the Restatement [Third] of Property). (4) and (5) are probably invalid for the same reasons as (3).

No one must enforce a covenant, but may choose to do so. If owners with a right to enforce it fail to do so or chose not to, courts may hold that the covenant has been terminated.


Was under the impression that only like 10 or 12 states have adopted that R3d of Property.

Also, I thought most covenants ran until 1) express termination between the parties 2) abandonment (which is a rare and difficult standard to prove) 3) there is a termination date set in the covenant or 4) all beneficial uses of the covenant no longer exist or the "times have changed" so much that a court may decide to remove the covenant.


I don't know how prevalent adoption of R3d of Property is, and frankly, I don't know why I included it here.

I think you might be confusing abandonment of an easement with acquiescence as a means of terminating a covenant. If the parties having a right to enforce a covenant chose not to do so, a court might later hold that the covenant has been terminated by acquiescence. Consider this: If A, B, and C live in a development covenanted for single family use only and A opens a law office is his garage and B does nothing to stop him. C later opens a dental office in his garage and B files suit to enforce the SFU covenant, a court might be held that B's failure to enforce the covenant against A estops him from enforcing against C.




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