## Facts

- A 1969 commercial lease required the tenant to post a $22,500 security deposit, refundable at lease end if the tenant did not default; the lease stated that all covenants “run with the land.”
- The original landlord later conveyed the property to North Pacific World Trade Center, Ltd.
- In 1974, the original tenant assigned the lease to Mullendore Theatres, Inc.; the security deposit was reduced to $6,000.
- In 1975, after North Pacific defaulted on secured obligations, Growth Realty Investors Co. acquired the property.
- Growth later sold the property to the City of Tacoma and agreed to indemnify the City for any liability concerning the $6,000 deposit.
- After the 1969 lease term expired, Mullendore entered a new lease with the City (1980), released the City from deposit claims, and expressly reserved claims against others.
- Mullendore sued Growth seeking return of the $6,000 deposit.
- The trial court ruled for Mullendore, reasoning that the refund covenant ran with the land and that Growth was bound in light of its indemnity agreement with the City.

## Issues

1. Whether a lease covenant requiring the landlord to refund a tenant’s security deposit at the end of the term runs with the land and binds successor owners.
2. Whether the tenant’s release of the City affected any liability Growth might have had based on its indemnity agreement with the City.

## Decision

- The Court of Appeals of Washington, Division Two, reversed.
- The covenant to refund the security deposit did not run with the land and therefore did not bind Growth as a successor owner.
- Because Mullendore’s theory depended on a running covenant to impose successor-landlord liability on Growth, Mullendore could not recover the deposit from Growth on that basis.

## Legal Principles

- For a lease covenant to run with the land and bind successors, it must “touch and concern” the land, meaning it must relate to the land’s use, value, or enjoyment as property rather than impose only a personal monetary obligation.
- A bare promise to refund a security deposit at lease end is generally a personal covenant, not a real covenant, unless the lease ties the deposit to the property in a manner that affects the land (e.g., restricting use of the funds for taxes, repairs, or improvements).
- Contract language declaring that “all covenants run with the land” is not controlling if the covenant, in substance, does not touch and concern the land.
- Absent express assumption of the obligation, a successor owner is not liable for a non-running covenant solely by virtue of acquiring the property.

## Conclusion

The court held that the landlord’s obligation to refund the tenant’s security deposit was a personal financial promise that did not touch and concern the land; therefore, it did not run with the land and did not bind a successor owner such as Growth, requiring reversal of the judgment awarding the deposit to the tenant.


Mullendore Theatres, Inc. v. Growth Realty Invs. Co., 39 Wn. App. 64, 691 P.2d 970 (Wash. Ct. App. 1984)