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Restrictive Covenants (Negative Covenants)

Real Covenant: promise to do or to not do something related to land. Unlike an easement because it is not the grant of a property interest. Instead, the covenant starts out as a mere contractual limitation, or promise, regarding land. Becomes a “real covenant” when it is capable of running with the land at law, meaning that it is able to bind the successors to the originally contracting or covenanting parties.

Difference between real covenants and equitable servitudes:

1) real covenant - legal device - if plaintiff seeks damages, construe the promise as a covenant

2) equitable servitude - equitable device - if plaintiff seeks injunctive relief and wishes to enjoin the offender, construe the promise as an equitable servitude

Tulk v. Moxhay

Covenant runs with land with notice.o Purchaser bound to covenant by previous owner

Requirements of equitable servitude:o The parties intended the promise to run;o That a subsequent purchaser have actual and constructive notice;o That the covenant touch and concern the land

Eliminates horizontal privity to enforce equitable servitude

Implied Reciprocal Negative Servitudes

Sanborn v. McLean

Styled reciprocal negative easemento Runs with land sold by virtue of express fastening and abides with the land

retailed until loosened by expiration of its period of service or by events working in its destruction.

o Never retroactive.

Creation of an Enforceable Restrictive Covenant

Requirements to Run with Land

(1) The covenants must have been enforceable between the original parties, such enforceability being a question of contract law except insofar as the covenant must satisfy the SoF;

(2) The covenant must “touch and concern” both the land to be benefitted and the land to be burdened;

(3) The covenanting parties must have intended to bind their successors-in-interest;(4) There must be vertical privity of estate (privity between the original parties to the

covenant and the present disputants)

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(5) There must be horizontal privity of estate, or privity between the original partiesa. As long as the covenant is created in conjunction with the transfer of some

other interest in land, there is Horizontal privity of estate. Not otherwise.(6) Only enforceable against parties who are on actual or constructive notice

Adverse possession <> vertical privity.

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Five Elements Required for Burden to Run

-> W -> WRITING

-> I -> INTENT - must intend that successors are bound.

-> T -> TOUCH AND CONCERN - must affect the parties’ legal relations as land owners, and not simply as members of the public at large.

-> H -> HORIZONTAL AND VERTICAL PRIVITY -

Horizontal Privity (difficult to satisfy)

1) Requires that A and B, at the time the promise was made, were in “succession of estate”a. Succession of estate: A and B were in a grantor-grantee

relationship; landlord-tenant; or a mortgagor-mortgagee (debtor-creditor) relationship; or that they shared some other servitude. (Simulatenous)

Must also have Vertical Privity (if horizontal privity met):

1) Simply requires some non-hostile relationship between A and her successor. Can be a product of contract, blood relation, or devise. The ONLY time that vertical privity is absent is during adverse possession.

-> N -> NOTICE (AIR) -> actual notice, inquiry notice, and record notice.

Inquiry - “the lay of the land”; if the appearance of the premises should have given notice of the presence of a covenant, notice is present even absent an inspection by the grantee.

Record - attribute to parties on the basis of the publicly recorded documents. If its in the chain of title, regardless of whether a search was conducted, the successor had notice.

If there’s a promise from A->B, for it to run from B to her successor, you must establish W, I, T, and V. (Not H, because H is already established from A->B)

A few features of the Restatement approach are worth noting (covenant):

The first is that the common law’s requirement of “horizontal privity of estate”—that the covenant be created in an instrument that conveys some interest in real property between the original covenantor and the original covenantee1—is eliminated.

o Under the Restatement view, a contract containing the covenant is sufficient to bind successors, even if it passes no other property interest, so long as the

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parties intended the covenant to run with the land. (Under this view, a covenant intended to bind successors is itself a sufficient interest in land.)

Second, there is a deep connection between covenants that run with the land and “common-interest communities”—a property law institution that we will investigate further in a later chapter. Third, the Restatement elsewhere treats the common law requirement of notice as essentially a matter for the recording system, making the unenforceability of covenants for want of notice subject to the same rules as any other property interest. See Restatement §7.14.

Finally, the Restatement rejects, with heavy criticism, the common law requirement that a restrictive covenant “touch or concern” land. Restatement § 3.1 cmt. a. Nevertheless, many jurisdictions continue to apply touch-and-concern doctrine, sometimes explicitly declining to follow the Restatement approach. See Note: Touch and Concern, the Restatement (Third) of Property: Servitudes, and a Proposal, 122 HARV. L. REV. 938, 942-45 (2009)). It is worth comparing the two approaches.

Touch and Concern

Must affect the legal relationso The advantages and the burdens – of the parties of the covenants, as owners

What fails the test?o Covenant requiring condominium owners to become dues-paying members of

adjacent sports clubo Covenants not to competeo Racially restrictive covenants

Shelley v. Kraemer (1948)

Racially restrictive covenants were widespread in the United States in the first half of the twentieth century. See generally Michael Jones-Correa, The Origins and Diffusion of Racial Restrictive Covenants, 115 POL. SCI. Q. 541 (2001).

o Indeed, just two decades prior to its decision in Shelley, in the case of Corrigan v. Buckley, 271 U.S. 323 (1926), the Supreme Court had affirmed the enforcement of such a covenant (against the original covenantor) in the District of Columbia (on grounds that the Equal Protection Clause of the 14th Amendment was inapplicable to the federal government—a proposition the Court retreated from in Bolling v. Sharpe, 347 U.S. 497 (1954)).

Racial covenants are no good.

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Neponsit Prop. Owners’ Ass’n v. Emigrant Indus. Sav. Bank

“Age-old” essentials of a real covenant:o Must appear that the grantor and grantee intended that the covenant should run

with the land;o Must appear that the covenant is touching or concerning the land with which it

runs;o It must appear that there is ‘privity of estate’ between the promise or party

claiming the benefit of the covenant and the right to enforce it, and the promisor or party who rests under the burden of the covenant.

It has been often said that a covenant to pay a sum of money is a personal affirmative covenant which usually does not concern or touch the land.

Such statements are based upon English decisions which hold in effect that only covenants, which compel the covenanter to submit to some restriction on the use of his property, touch or concern the land, and that the burden of a covenant which requires the covenanter to do an affirmative act, even on his own land, for the benefit of the owner of a ‘dominant’ estate, does not run with his land.

EQUITABLE SERVITUDE: Writing, Intent, Touch and Concern, Notice.

IMPORTANT: PRIVITY IS NOT REQUIRED TO BIND SUCCESSORS TO AN EQUITABLE SERVITUDE:

The Third Restatement, following general trends in the caselaw, significantly relaxes this approach. Section 2.1 of the Restatement provides in relevant part:

A servitude is created:

(1) if the owner of the property to be burdened

(a) enters into a contract or makes a conveyance intended to create a servitude that complies with … [the] Statute of Frauds … or … [a recognized exception to the Statute of Frauds…; or

(b) conveys a lot or unit in a general-plan development or common-interest community subject to a recorded declaration of servitudes for the development or community; or

(2) if the requirements for creation of a servitude by estoppel, implication, necessity, or prescription … are met….

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R3P:

A servitude … is valid unless it is illegal or unconstitutional or violates public policy.

Servitudes that are invalid because they violate public policy include, but are not limited to:

(1) a servitude that is arbitrary, spiteful, or capricious;(2) a servitude that unreasonably burdens a fundamental constitutional right;(3) a servitude that imposes an unreasonable restraint on alienation…;(4) a servitude that imposes an unreasonable restraint on trade or competition …; and(5) a servitude that is unconscionable….

Modification and Termination of Covenants

Unclean Hands Acquiescence Estoppel Other Termination

o Written release, merger, condemnation

Changed Neighborhood Conditions (Changed Conditions Doctrine) - DEFENSE TO ENFORCING EQUITABLE SERVITUDE

One basis for modification or termination that is perhaps more likely to arise with respect to restrictive covenants than it is for easements is that conditions of the land have changed to such an extent that continued enforcement is inappropriate.

El Di, Inc. v. Town of Bethany Beach (1984)

A court will not enforce a restrictive covenant where a fundamental change has occurred in the intended character of the neighborhood that renders the benefits underlying imposition of the restrictions incapable of enjoyment.

Several types of events may constitute “changed conditions” sufficient to at least trigger an inquiry whether a covenant ought still to be enforceable.

o Typical examples include condemnation of covered through the power of eminent domain

(typically bringing with it dedication to some purpose outside the scope of the covenant);

zoning or rezoning (which may make the land incapable of legal use within the scope of the covenant);

and nearby redevelopment that otherwise frustrates the purpose of the covenant.

The rule of El Di would hold covenants unenforceable for changed conditions if those conditions “render[] the benefits underlying imposition of the restrictions incapable of enjoyment.”

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Third Restatement for finding changed conditions:o The test for finding changed conditions sufficient to warrant termination of

reciprocal-subdivision servitudes is often said to be:

Whether there has been such a radical change in conditions since creation of the servitudes that perpetuation of the servitude would be of no substantial benefit to the dominant estate.

However, the test is not whether the servitude retains value, but whether it can continue to serve the purposes for which it was created.

Test for changed condition:

o Fundamental change in intended character of neighborhood that:

Renders the benefits underlying imposition of the restrictions incapable of enjoyment.

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Takings (Intro and Public Use)

“nor shall private property be taken for public use, without just compensation”

o Has there been a taking?

o Is the taking for “public use”;

o Has “just compensation” been provided?

Rationale for takings

- An implied reservation in any land grant

- A natural consequence of feudal royal prerogatives

- An inherent attribute of sovereignty, necessary to the very existence of government

- Necessary to prevent hold up

Public Use

- Use that advantages the public

o Lets the government define

- The actual use or right to use of the condemned property by the public (post office)

o Narrower view

Berman v. Parker (1954)

- Washington D.C sought to condemn a large swath of land as part of a program of urban development.

- Common Approach to economic development at the time.

- Comprehensive use of slum areas to rebuild Washington D.C

- Authorized takings for public benefit (determined by congress).

- Holding: economic redevelopment was a legitimate use of the government’s police power, analogous in many ways to zoning.

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Hawaii Housing Authority v. Midkiff (1984)

- unusual distribution of land ownership tracing back to the early chiefs of Hawaiian islands.

o Created distorted land markets in Hawaii, inflating prices and “injuring the public tranquility and welfare”

o To remedy, Hawaii enacted a statute requiring property owners, to sell their property to residential tenants. Forced sales were effectuated through eminent domain.

- Statute was upheld by Supreme Court. “If the government has the power to act, if its actions survive substantive due process review, the public use clause does not impose an additional restriction.”

- State can use power of eminent domain from landlords to tenants. Courts traditionally defer to state police power.

- Must still pay just compensation.

Kelo v. City of New London, Conn. (2005)

- States can “take” for economic development.

- “Given the comprehensive character of the plan, the thorough deliberation that preceded its adoption, and the limited scope of our review, it is appropriate for us, as it was in Berman, to resolve challenges of the individual owners, not on a piecemeal basis, but rather in light of the entire plan. Because that plan unquestionably serves a public purpose, the takings challenged here satisfy the public use requirement of the Fifth Amendment.”

o Public use is now public purpose. (ISSUE)

o Who decides public purpose: defer to legislative determinations.

o Indirect public benefit, distinguishing from the Berman and Midkiff cases.

- Dissent: Warns the majority of the disproportionate effect on minatory communities and the poor.

“Just compensation” => Fair market value.

Doesn’t take subject attachment to property into account.

Doesn’t take into account future value. (higher or lower)

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Regulatory Takings

The idea that a mere regulation could amount to an unconstitutional taking of property — traced back to Pennsylvania Coal Co. v. Mahon

Pennsylvania Coal Co. v. Mahon

Holding: Private owner had only acquired surface rights and not the right to supporting property underneath the land. The Kohler Act went beyond a regulation and became a taking. The Court considered the magnitude of diminution of the value of property and found that when a diminution reaches a certain point the government must compensate for it. The Pennsylvania Coal Co. could not exercise the only valuable right it possessed which was to mine the property for profit. The Court acknowledged that the public may have use for the support, and an interest in their safety, however, the subsurface rights to a property could not be taken for the public without just compensation.

Dissent: Justice Louis Brandeis (J. Brandeis) thought the legislature should have the power to prohibit use of land that seriously threatens public welfare without any just compensation. According to J. Brandeis, restriction upon a particular use does not become inappropriate whenever it is not compensated, even though it could alternatively be prevented through such compensation.

Effect of Kohler Act - forbade coal companies from mining anthracite coal in a way that would cause the subsidence (sinking) of buildings on the surface.

- Surface Estate

- Support Estate

- Mineral Estate

Holmes -> while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.

Factors:

o Extent of diminution.

o Balancing Test

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Public benefits vs. private harms

Transferrable Development Rights

o Tradable, legal, entitlement that didn’t require compliance with zoning rules.

Penn Central Transportation Co. v. City of New York (1987)

o A “taking” may more readily be found when the interference with property can be characterized as a physical invasion by government, than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good

o More importantly for the present case, in instances in which a state tribunal reasonably concluded that “the health, safety, morals, or general welfare” would be promoted by prohibiting particular contemplated uses of land, this Court has upheld land-use regulations that destroyed or adversely affected recognized real property interests.

Zoning laws

zoning laws often affect some property owners more severely than others but have not been held to be invalid on that account

o “Taking” jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated. In deciding whether a particular governmental action has effected a taking, this Court focuses rather both on the character of the action and on the nature and extent of the interference with rights in the parcel as a whole—here, the city tax block designated as the “landmark site.”

o Balancing Test:

Economic impact of the regulation on the claimant, AND

“diminution in value”

one approach: substantially exceed 50% (be closer to 90%)

1% won’t work.

Compare pre-regulation and post-regulation value.

The extent to which the regulation has interfered with distinct investment-backed expectations

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Not a taking if it interferes merely with abstract or hypothetical expectations.

Penn Central demands that the expectation be supported by actual investments. Not future “Dreams”

Has changed from “distinct investment backed expectations” to “reasonable investment backed expectations”

Character of the governmental action

Most certainly a permanent physical occupation satisfies this prong.

Balancing vs. Categorical Tests

Loretto

- Any “permanent physical occupation” by or under the authorization of the government is a taking as a categorical, per se, matter.

- Occupation not permanent -> balancing test

- Physical invasion includes undue noise that interferes with the use and enjoyment of the surface of the owner’s land (Causby)

- Applies to third parties authorized by government to permanently occupy private property.

Hadacheck v. Sebastian (1915)

No taking where a city prohibited the operation of a brickyard within a residential area.

Rule: Under the police power, a state may validly declare a particular business to be a nuisance under the facts and circumstances, as it relates to public health.

The Petitioner, Hadacheck (Petitioner), was convicted of a misdemeanor violation of an ordinance prohibiting establishment or operation of a brick kiln within the City Limits of Los Angeles.

o At the time of purchase, the land was outside the city limits. The land was on a valuable bed of clay of fine quality that far exceeds the lands value for residential use. The owner had built a great deal of machinery on the property for the purpose of manufacturing brick. He claimed the ordinance was directed against him because such operations existed without regulation through out the area.

o Since the ordinance only prohibited manufacture of the bricks and not the removal of the clay itself, this was not a deprivation of property rights incident

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to ownership. Under the police power, the prohibition of manufacture could be justified relating to the health and comfort of the community. Not enough evidence was available to prove that the prohibition enacted was for the purpose of unjustly discriminating against the petitioner.

Lucas v South Carolina Coastal Council (1992) - wipeout rule.

- Petitioner purchased two residential lots in South Carolina with the intention of building single family homes on them. Two years later, the South Carolina legislature enacted a law barring Petitioner from building on the land. Petitioner sued.

- If a regulation deprives land of all economically beneficial uses, it is a taking unless the government can justify its actions as preventing a common law nuisance

o “While property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking requiring just compensation under the Fifth Amendment to the United States Constitution.

o If a regulation prohibits all economically beneficial use of land and the proscribed use could not have been prohibited under a given state’s nuisance law, the regulation is a “taking” which requires “just compensation” to be paid to the landowner.

o It is unreasonable for a state to prohibit the owner from using the land as he originally intended, unless it can be shown that this use results in a nuisance or that general property law prohibits such a use.

o The Supreme Court of the United State (Supreme Court) observed that mandated preservation of private land looks like a conversion of private property to public, a classic taking. Regulation of land use must account for owners’ traditional understanding as to the states power over their property rights. By way of example the Supreme Court stated that the owner of a lake bed is always aware that he may be stopped by law from flooding adjacent property to create a landfill. However, here, since a state’s common law principles would not prohibit the Petitioner from building on the land, then a taking has occurred.

- “Total Taking Inquiry”

o degree of harm to public lands and resources, or adjacent private propertyo social value of claimant’s activitieso relative ease with which the alleged harm can be avoided through measure

taken by the claimant and the government

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o (nuisance by common law, not by legislature) -> not a taking if you’re only preventing a nuisance

Categorical rules:

- Permanent physical occupation = taking (Loretto)

- Wipeout (no economic beneficial use) = taking (Lucas)

- … unless the government can justify its actions as preventing a common law nuisance (Lucas / Hadacheck)

Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency (2002)

Facts: This case involves two moratoria ordered by respondent Tahoe Regional Planning Agency (TRPA) to maintain the status quo while studying the impact of development on Lake Tahoe and designing a strategy for environmentally sound growth.  As a result of the two directives nearly all development on a substantial portion of the property subject to TRPA’s jurisdiction was prohibited for a period of 32 months.

Holding: The court found that the moratorium did not constitute a taking and rejected the petitioners per se rule, and held that a temporary taking “requires careful examination and weighing of all the relevant circumstances.”  The moratorium at issue is classified as a regulation of property from private use which does not require compensation. 

Discussion: The court does not hold that the temporary nature of a land-use restriction precludes finding that it effects a taking; simply recognizes that it should not be given exclusive significance one way or the other.  The extreme categorical rule that any deprivation of all economic use, no matter how brief, constitutes a compensable taking cannot be sustained (i.e. normal delays in obtaining building permits, changes in zoning ordinances etc.). 

Excerpts:

- When the government physically takes possession of an interest in property for some public purpose, it has a categorical duty to compensate the former owner regardless of whether the interest that is taken constitutes an entire parcel or merely a part thereof. Thus, compensation is mandated when a leasehold is taken and the government occupies the property for its own purposes, even though that use is temporary.… But a government regulation that merely prohibits landlords from evicting tenants unwilling to pay a higher rent, Block v. Hirsh, 256 U.S. 135 (1921); that bans certain private uses of a portion of an owner’s property, Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926); or that forbids the private use of certain airspace, Penn Central Transp. Co. v. New York City, 438 U.S. 104 (1978), does not constitute a categorical taking. “The first category of cases requires courts to apply a clear rule; the second necessarily entails complex factual assessments of the purposes and economic effects of government actions.” Yee v. Escondido, 503 U.S. 519, 523 (1992).

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“We merely hold that where the government’s activities have already worked a taking of all use of property, no subsequent action by the government can relieve it of the duty to provide compensation for the period during which the taking was effective.” (First English)

(Describing Lucas) The emphasis on the word “no” in the text of the opinion was, in effect, reiterated in a footnote explaining that the categorical rule would not apply if the diminution in value were 95% instead of 100%. Anything less than a “complete elimination of value,” or a “total loss,” the Court acknowledged, would require the kind of analysis applied in Penn Central.

Murr v. Wisconsin (2017)

o Owners or two contiguous parcels located along scenic river brought action against State and county, alleging that ordinance preventing them from separately using or selling parcels resulted in uncompensated taking.

o Held:

o merger provision in local minimum lot size regulation applicable to property along river was legitimate exercise of government power;

o parcels were required to be evaluated as a single parcel in determining whether the regulations effected a regulatory taking; and

o regulations did not effect a compensable regulatory taking.

o “no single consideration can supply the exclusive test for determining the denominator.

o (substantial weight) Treatment of the land under state and local law;

o Physical characteristics of the land;

o Prospective value of the regulated land.

Reasonable Expectations

o The endeavor should determine whether reasonable expectations about property ownership would lead a landowner to anticipate that his holdings would be treated as one parcel, or, instead, as separate facts.

o Objective inquiry.