Covenant running with the land

A covenant running with the land, is a real covenant, in the law of real property. It is a nonpossessory interest in land in one form as an agreement between adjoining landowners to do something (affirmative covenant) or to refrain from doing something (restrictive covenant) with relation to the land. An example of an affirmative covenant is a promise to build a fence, while an example of a restrictive covenant is a promise not to develop land for commercial use. Another agreement form that is common is as a Covenants, Conditions, and Restrictions (CC&R) document as with a condominium.

Each covenant has two sides: the burden and the benefit. The burden is the promissor's duty to perform the promise and the benefit is the promisee's right to enforce the promise.

These covenants "run with the land" which means that subsequent owners or successors may either be able to enforce the covenant or be burdened by it.

Requirements for Burden to Run at Common Law

In order for the burden of covenant to run with the land, six requirements must be met.
* First, the covenant must be in writing to satisfy the Statute of Frauds.
* Second, the original parties to the agreement must have intended that successors be bound by the terms of the agreement.
** This intent is usually found in the language of the original agreement.
* Third, the subsequent owners must have had actual notice, inquiry notice, or constructive (record) notice of the covenant at the time of purchase.
* Fourth, the covenant must touch or concern the land. This means the covenant must relate to the direct use or enjoyment of the land.
* Fifth, there must be horizontal privity between the original parties.
** Horizontal privity requires that at the time the original parties entered into the agreement, they shared some interest in land independent of the covenant (e.g. landlord and tenant, mortgagee and mortgagor, or holders of mutual easements). Individual state statutes can alter the requirements of horizontal privity of estate.
* Finally, there must be strict vertical privity of estate.
** Vertical privity characterizes the relationship between the original party to the covenant and the subsequent owner. In order to be bound by the covenant, the successor must hold the entire estate in land held by the original party (strict vertical privity of estate). Note that because strict vertical privity is required for a burden to run a lessee could not have a burden enforced against them. However, a benefited party could sue the owner of the remainder of the estate, and the owner could possibly sue the lessee for waste.

Requirements for Benefit to Run at Common Law

In order for the benefit of the covenant to run with the land, four requirements must be met:
* First, the covenant must be enforceable. To be enforceable four elements must be met.
# The covenant must meet the requirements under the Statute of Frauds. According to the majority of jurisdictions the restriction must be in writing or there must be express notice with part performance. The minority of jurisdictions includes implied notice.
#The covenant must be clear and free from doubt. To save ambiguous restrictions make sure the language outlines the basic objective of the restriction.
#It must not violate the law
#And fourthly, it must not violate public policy
* Second, the original, covenanting parties must have intended the covenant to be enforceable by successive owners. In other words the covenant must have been intended to run with the land. Under modern law intent is inferred from the surrounding circumstances.
* Third, the covenant must touch or concern the land. In order to determine whether the covenant touches and concerns the land ask whether the burden or benefit deal with the land. A covenant to pay a sum of money is a personal affirmative covenant which usually does not touch and concern the land unless it effects the legal relations of the parties as owners of particular parcels of land not merely as land owners in general. There are four theories satisfying touch and concern:
#Land Retained - If the original developer retains some property they have a benefit and restrictions can run. Once all the land is given away however no benefit is retained. If the owner owns land nearby they will satisfy the land retained theory.
#Neighborhood Scheme - Buyers taking earlier in time can be bound by restrictions that promote neighborhood schemes. To show a neighborhood scheme you must show a recorded subdivision plat or the restrictions must be substantially uniform. If exceptions to the neighborhood scheme is granted, according to common law, the neighborhood scheme is forfeited and is no longer effective. According to the modern rule exceptions must be reasonable. To terminate a covenant promoting a neighborhood scheme the termination must be expressly stated, it must be cancelled out by a statute, or it must be terminated by changing conditions. The changing conditions must substantially and physically affect the basic purpose for the restriction. According to the majority rule the changes must take place inside the land, the according to the minority the change can be outside.
#Third Party Benefit - A primary and third party are benefiting from the covenant. Only a minority of jurisdictions accepts this.
#Promissory Reliance - Even if there is no neighborhood scheme or the owner has not land retained they can still invoke promissory reliance.
* There must be at least loose vertical privity of estate between the successor and the original party. There are two types of privity.

Court Interpretation of Real Covenants

Courts interpret covenants relatively strictly and give the words of the agreement their ordinary meaning. Generally if there is any unclear or ambiguous language regarding the existence of a covenant courts will favor free alienation of the property. Courts will not read any restrictions on the land by implication (as is done with easements for example).

A covenant can be terminated if the original purpose of the covenant is lost.A negative covenant is one in which property owners are unable to perform a specific activity, such as block a scenic view.

An affirmative covenant is one in which property owners must actively perform a specific activity, such as keeping the lawn tidy or paying homeowner's association dues for the upkeep of the surrounding area.

An agreement not to open a competing business on adjacent property is generally enforceable as a covenant running with the land.

England and Wales

At common law, the benefit of a restrictive covenant runs with the land if three conditions are met: [Gray et al, Property Law in New South Wales, second edition, p547]
* The covenant must not be personal in nature - it must benefit the land rather than an individual
* The covenant must 'touch and concern' the land - it must affect how the land is used or the value of the land
* The benefited land must be identifiable.

At common law, the burden of a restrictive covenant does not run [Austerberry v Oldham Corporation (1885) 29 Ch D 750] except where strict privity of estate (a landlord/tenant relationship) exists. The burden can be enforced at law in limited circumstances under the benefit/burden test - that is, whoever takes the benefit must also shoulder the burden. In Halsall v Brizell [1957] Ch 169, a covenant requiring the upkeep of roads was found to bind the successor in title to the original covenantor because he had elected to take the benefit. A positive burden can run in law, but not in equity.

The rule in Halsall v Brizell is limited to cases where the benefit can be linked to a specific burden and where the covenantor's successors in title can physically elect to take the benefit. For example, a restrictive covenant to contribute to the maintenance costs of a common area will not be binding if the covenantor's successors in title have no legal right to use them [Thamesmead Town Ltd v Allotey (2000) 79 P & CR 557)] .

The burden of a restrictive covenant will run in equity if these prerequisites are met: [Tulk v Moxhay (1848) 41 ER 1143)]
* The burden cannot be a positive burden (that is, it requires expenditure to meet it);
* The purchaser must have notice of the covenant
* The covenant must benefit the covenantee's land
* The covenant must be intended to run with the covenantor's land.

The leading case of restrictive covenants in equity is generally regarded as that of Tulk v Moxhay in which is was determined that the burden could run in equity subject to the qualifications listed above.

See also

*Equitable servitude
*Easement
*Restrictive Covenant

Notes and sources