“Touch and Concern”:
A real covenant is a promise that relates to the ownership or usage of land. Although covenants, in general, fall within the province of contract law, it is important to discuss various aspects of the law regarding real covenants within the context of property law.
Although covenants are similar to easements in that in both cases, the use of land is being restricted or enhanced by an obligation owed by the property owner to another party, real covenants differ from easements in that they are not considered ownership interests in land. Real covenants are promises. They can not be acquired by implication, necessity, prior use or prescription. They are agreements and thus can only be created by promises. Once in existence though, there is little practical difference between a negative easement and a real covenant. For example:
Audrey and Zach are neighbors. Audrey lives in a comfortable two story house. One day, she finds out that Zach is planning on building a supermarket on his property. Audrey is very worried that this will increase the flow of people and the noise level in the area. Therefore, she offers Zach $50,000 if he promises to never build anything other than a residence on his property. Zach agrees. In this case, there is a real covenant between Zach and Audrey. Although Audrey does not own an interest in Zach’s land, and thus does not have an easement, Zach is bound by the covenant to abide by the terms of their agreement.
Although a covenant is not an interest in land per se, it is nevertheless covered by the Statute of Frauds. Therefore, a covenant that is, by its terms, to last for more than one year, must be in writing to be enforceable.
Note that a covenant is a contractual phenomenon, not a condition to the use and ownership of the land. Therefore, if a real covenant is breached, the aggrieved party can sue for damages arising from the breach of the covenant. But, the breaching party does not automatically lose ownership of the land simply by breaching the covenant.
Enforcing Real Covenants against Successor Owners
The key element of a real covenant that distinguishes it from an ordinary promise is that a real covenant can sometimes be enforced against successive owners of the property. If a covenant can be enforced against successive owners, it is said to “run with the land.” This means that, like an easement, the covenant can remain effective even if the land is transferred to a third party. Of course, this distinguishes real covenants from ordinary contracts, as all ordinary contracts are enforceable only by and against people who are parties to the contract or intended beneficiaries.
As with easements, there are often two parcels of land that are involved in a real covenant. First, there is the restricted or “servient” land. This is the land that is burdened by the restriction placed by the covenant. The other land is the benefited land; the land that enjoys the protections afforded by the covenant. In our last example, Zach’s land is the burdened land, while Audrey’s land is the benefited land.
The most important question regarding successor owners is whether the burden runs with the servient land. In other words, if the owner of the burdened land sells or transfers the property, will the covenant still apply to the transferee? The rule is that the burden of the real covenant will run with the land if six conditions are met. Essentially, these six conditions boil down to one idea: if the transferee knew or should have known about the covenant and it’s fair to bind the transferee to the terms of the covenant, then the burden will run with the land. The six conditions are:
1. The covenant must have been in writing.
2. The intent of original parties must have been for the covenant to run with the land: This is usually satisfied with a term in the covenant that applies the covenant to the “successors heirs and assigns” of the burdened land owner. Even without this provision, such intent will usually be presumed by a court if the circumstances are such that this was the likely intent of the parties and in the absence of evidence to the contrary.
3. The covenant must “touch and concern” the land: In other words, the covenant must be in connection with the parties’ status as landowners. Examples of covenants that touch and concern the land include agreements to pay homeowners’ association fees or an agreement by condominium owners to abide by restrictions set forth by the governing body of the condominium complex.
4. Horizontal Privity: This is the element that is least likely to be satisfied. This element requires that the parties who made up the covenant must have shared some ownership or contractual relationship in the servient land. In other words, the original contracting parties must have shared some level of ownership or control in the land. This could be because the servient land was sold from one party to the other or because one party rented out the servient land to the other party, etc. However, if the two parties who agreed to the covenant were merely neighbors and one of the parties had no ownership interest in the servient land, then the covenant will not run with the land. For example:
- Big Bird owns two lots, side by side. He sells one of the lots to Oscar. As part of the sale, the parties agree to a covenant that guarantees that Oscar will not allow garbage to pile up on his land. This covenant can run with the land if the other elements are satisfied because there is horizontal privity. Since Big Bird owned both estates and granted one of them to Oscar at the time that the covenant was made, there was “horizontal” privity between the parties who agreed to the covenant. Thus, if Oscar later sells his lot to Slimy, Slimy could also be bound by the terms of the covenant.
- Big Bird owns two lots, side by side. He leases one of the lots to Oscar for five years. As part of the lease agreement, the parties agree to a covenant that guarantees that Oscar will not allow garbage to pile up on his land. This covenant can run with the land if the other elements are satisfied because there is horizontal privity. Since the two parties had a landlord-tenant relationship at the time that the covenant was made, there was “horizontal” privity between the parties who agreed to the covenant. Thus, if Oscar later assigns his interest in the land to Slimy, Slimy could also be bound by the terms of the covenant.
- Big Bird and Oscar are neighbors. Big Bird is frustrated by the amount of garbage that piles up on Oscar’s property. He and Oscar strike a deal under which Oscar guarantees that he will not allow garbage to pile up on his land. This burden cannot run with the land because there is no privity between Oscar and Big Bird. Big Bird has no ownership interest in the servient estate at all. Thus, if Oscar later sells his lot to Slimy, Slimy would not be bound by the terms of the covenant.
5. Vertical Privity: The owner of the servient land must have voluntarily transferred the land to the successor owner for the burden to run with the land. For example:
Big Bird owns two lots, side by side. He sells one of the lots to Oscar. As part of the sale, the parties agree to a covenant that guarantees that Oscar will not allow garbage to pile up on his land. Later, Slimy acquires the land from Oscar via adverse possession. The covenant will not run with the land. There is no privity between Oscar and Slimy because Oscar never transferred the property to Slimy. Slimy took it via adverse possession.
The difference between horizontal and vertical privity can be a confusing one. Horizontal privity is between the parties that made the covenant. Vertical privity is between the people who made the covenants and the people to whom they are transferring the property. See the following chart:
6. The transferee must have had notice, or reason to have notice, that the covenant existed at the time that the transferee took possession of the burdened estate.
The other question becomes whether the benefit can run with the land if the benefited land is transferred to a third party. In our above examples, suppose Big Bird had transferred his land to Snuffalufagus? Would Snuffalufagus be able to enforce the terms of the covenant that Big Bird had with Oscar. Thankfully, the rule here is quite simple. A benefit runs with the land if elements 1,2,3 and 5 above (writing, intent, “touch and concern” and vertical privity) are present. The elements of horizontal privity and notice are not necessary for a benefit to run with the land. The reason notice is not necessary is because the buyer of the benefited estate would clearly always want the benefit to run. Therefore, the fact that the buyer did not know of the benefit does not make it unfair for the benefit to run with the land. Conversely, it would be unfair if the burden ran with the land against a buyer of a burdened estate who had no notice of the covenant because knowledge of the covenant may have influenced his or her decision to buy the land in the first place.
An equitable servitude is similar to a real covenant. It is a promise that restricts the use of land in some way that is designed to be enforced with specific performance, rather than with monetary damages. In other words, while covenants are usually enforced by the awarding of monetary damages to the aggrieved party, equitable servitudes are enforced with an injunction preventing the use of the property in the manner that is proscribed by the servitude.
Since equitable servitudes are similar to real covenants, it does not pay to define them from scratch. Instead, we will discuss the differences between equitable servitudes and real covenants:
- Remedy: The key difference is the difference we have already discussed. A covenant is enforceable by monetary damages and a servitude is enforced by an injunction to comply with the servitude.
- No privity required to run with the land: For an equitable servitude to run with the land, no privity (horizontal or vertical) is required. Thus, for an equitable servitude to be binding upon the successor owner of the servient property, the only elements that are required are elements 1,2,3 and 6 (writing, intent, ”touch and concern” and notice) above. Note that the “notice” requirement is also satisfied, as in the case of a covenant, if the successor owner should have known of the covenant under the circumstances. For example:
Lisa lives in a house that is part of a complex of houses. Each house is completely and independently owned by an individual person. One day, all the owners of houses in the complex get together and agree, in writing, that henceforth, to increase the quality of life for all the people that live in the complex, no pets will be allowed in any of the apartments. Furthermore, they agree that any party who violates this agreement can be enjoined from continuing to do so by an action brought in court by the other parties to the agreement. Clearly, this constitutes an equitable servitude. Maureen, who knows of this restriction, nevertheless covets a house in this complex. So, she moves into Lisa’s house. Lisa fails to take any steps against Maureen and Maureen eventually acquires Lisa’s house via adverse possession. Maureen then brings her 17 cats into the house. The other parties to the agreement can enforce the equitable servitude against Maureen. Although there is no horizontal privity (the other house owners had no ownership interest in Lisa’s house) or vertical privity (she acquired Lisa’s house via adverse possession), the other elements are satisfied. The agreement was in writing. The parties clearly intended that everyone who shall live in the complex would be bound by the agreement. The agreement did “touch and concern” the land because it was meant to improve the quality of life for homeowners in the area. In addition, Maureen had notice of the servitude. Thus, Maureen is bound by its terms and if she violates them, the other owners can bring an action against her to enforce the terms of the agreement via an injunction from the court.
- Creation by Implication: Although a covenant must be created by a promise, an equitable servitude can be created by implication. The most common manner in which this can happen is when an entire development is built under a common plan or scheme. Courts will often infer an implied promise by all of the owners of tracts in that development to use their tracts in a manner that is consistent with the original plan or scheme. For an equitable servitude to be created in this manner, the buyer against whom it is being enforced must have had notice of the common plan or must have had reason to know of the common plan. For example:
Donald buys 100 acres of land with the intent to divide them into lots on which to build single family residences. He divides the property into lots and begins to sell them off, one at a time. At first, he inserts a provision into every deed that requires that the property be used only as a single family residence. However, later on, he forgets to insert this provision into the deed. Sheila buys one of these lots with the provision missing and decides to build an apartment building on her lot. Assuming that Sheila knew or should have known about the original plan, a court would likely infer an implied equitable servitude to prevent Sheila from building an apartment building on her lot.
Finally, covenants and servitudes can generally be terminated in the same manner as easements can be terminated (e.g. though expiration, merger, abandonment, etc.). For a discussion of the manner in which easements can be terminated, please see the previous sub-chapter, entitled “Termination of Easements.”